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Are Your Employees Stealing From You?

The average business loses 6 percent of revenue from employee theft. How to make sure it doesn't happen at your company.

Your employees wouldn't steal, would they? How can you be sure?

One morning, a manager at a ServiceMaster in Wichita, Kansas, was checking the inventory for a recent cleaning job. He did a double-take when he noticed a DVD/VCR was missing. The company checks items brought in for cleaning and must reimburse clients for any missing items.

Sam Lazarus, a partner in the company, says he trusts his employees. This time, though, he suspected foul play, so he called an all-hands meeting and reported the stolen item. When he mentioned the missing gear, he purposefully said it was a CD player and not a DVD player. One of the employees spoke up and corrected him. Coincidentally, this same employee had been confronted about a prior incident.

At the time, Lazarus says he could not prove the employee had stolen the items. When another item went missing, they confronted him and he fessed up to the thefts. While the technique may sound unusual, it worked as a deterrent–word spread about the stolen items, the employee was fired, and there have been no incidents since.

Many small companies have a hard time dealing with employee theft, but a few have found novel ways of confronting with the issue.

That’s true of Janice Walters-Taylor, the owner of BSASS, a company that does background screening for employees. Walters-Taylor says she marks every office supply, pen, and even printers and computers with the words “STOLEN FROM BSASS LLC” in bold letters. (She etches the words on more expensive items.) So far, she has viewed the inscription as a coy marketing tactic.

“When your pen is found out in the marketplace, it is invaluable,” she says. “But this has really cut down on the speedy attrition of office supplies. Luckily, I have not had to address larger stolen items.”

Professional advice
Timothy Dimoff, a security consultant, speaker and author who addresses workplace theft issues, says small companies need to perform more detailed background checks of employees. Not hiring employees with a history of delinquent behavior is the best deterrent. He says another good deterrent is a clear and well-communicated policy about employee theft and the repercussions. Managers should be trained on how to look for behavior that is contrary to the company policies.

“Investigate all negative, suspicious, potential, and real actions in the workplace,” he says. “Treat your employees equally and try not to show favoritism. Disgruntled employees can justify stealing in their minds because they feel entitled or wish to retaliate due to the way they are treated.”

Emily Frost, an employment law attorney at Emily Frost Law, says one of the best tips for any small company is to develop a reward system for good behavior and whistleblowing. Altruistic employees often will be the first to report stolen items.

Steven Wolf, the Executive Director at Capstone Advisory Group, says employee theft can involve more than just stolen physical equipment. He has dealt with cases of misappropriated funds, duplicate payments, kickbacks, and re-selling inventory owned by the company.

“The Association of Certified Fraud Examiners (ACFE) estimates that the typical business will lose an average of six percent of revenues from employee theft,” says Wolf, who advises companies to devote more funds to combatting theft in the workplace and developing policies. Employee theft, he says, accounts for one-third of all bankruptcies, according to the US Chamber of Commerce.

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IMAGE: iStock
Last updated: Jan 24, 2012

JOHN BRANDON | Columnist

John Brandon is a contributing editor at Inc. magazine covering technology. He writes the Tech Report column for Inc.com.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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