October 2008

Everyone likes to think that they can trust all their employees especially the ones that you have entrusted security codes, keys, and safe combinations to but sadly the reality is that some of these same employees may be helping themselves to your companies’ inventory. Unfortunately in some cases it is only when you receive your balance sheet that you begin to suspect that your poor financial performance may be linked to a theft problem.

Usually shrinkage issues are concentrated in two main areas, either customer or staff theft. As a rule people tend to focus the majority of their security budget on the retail area and forget the other potentially more financially damaging areas, the office, and the back door or receiving dock.

Employee theft is an insidious crime and there is no one profile that determines who will steal and who won’t and each person will be driven by different motives and personal circumstances. A dishonest employee will know how good your systems are and where the weak points exist and will exploit them to the full. On a brighter note most of your employees will be honest but to minimize even the most opportunistic temptations a lot of shrinkage can be lessened through implementation of good systems which not only protect you but safeguard the employee from accusation.

One of the simplest most cost effective actions is to walk through your business from the front office to the back door and assess how easy it would be for someone to steal cash or product. What systems have you in place to reconcile all cash from receipt to banking? Similarly when was the last time you viewed your payroll to check to see that there were not some extra employees on it?

One of the hardest areas to police but the one that is potentially the most lucrative for your employees is where they “sweetheart” their friends or relatives, your goods are sold at mate’s rates or for nothing at all, in return for the favour from their mate’s workplace, resulting  in two businesses becoming less viable. Take an interest and observe clients or family members who will only go to one cashier.  If you are in a business where there is a lot of cash handled and you operate point of sale equipment good checking procedures need to be in place especially around how many no sales and voids are recorded and there should always be a comparison check on all cashiers with a running record of incorrect balances.

If you are still not convinced that this could be happening to you a National Retail security survey undertaken by the University of Florida in 2005 reported that employee theft accounted for 47% of store inventory shrinkage that represents about 17.6 billion dollars per year. The study found that the average dollar loss per employee theft case to be $1,762 compared to $265.40 for the average shoplifting incident.

Good overt and covert CCTV coverage, robust systems, and several step by step checking procedures done by different staff members are a big step forward towards combating dishonest staff.

By Murray Schofield - Ology Coach, Dunedin City, NZ

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