• Chegan SRM

Employee Theft

Employee theft is one of the most prevalent and costly problems confronted in today's organizations. Employee theft is an offense often regarded as "a white-collar crime," a term coined in 1939 during a speech given by Edwin Sutherland to the American Sociological Society. Employee theft is as a significant concern faced by management, which is understandable given the destructive consequences it holds for organizations. For example, it can even cause businesses to collapse.


Employee Theft

All definitions concerning under English law is covered in section 1 of the Theft Act 1968:

“A person is found guilty of theft if he dishonestly appropriates property belonging to another with the intention of permanently depriving another from it; and “thief” and “steal” shall be construed accordingly.”


Hollinger and Clark (1983) provide a widely accepted definition of employee theft often cited in publications as ‘the unauthorized taking, control, or transfer of money and/or property of the formal work organization perpetrated by an employee during the course of occupational activity which is related to his or her employment.’


Thus, employee theft is merely theft in a specific context, namely, the employee’s place of work. Employee theft is defined as any stealing, use or misuse of an employer’s assets without permission. The two major forms of employee theft, property deviance and production deviance.


Property deviance includes acts of theft involving goods, financial embezzlement, pilfering merchandise or production materials and cyber loafing –using IT equipment for non-work-related tasks, (social networking etc.).


Production deviance involves the waste and misuse of company property, for example, falsifying time records and getting paid for hours not worked. Franklin (2006) gives the (presumably common) example of an employee who extends his or her lunch break by 5 minutes beyond the allocated time. If the employee is entitled to 2 coffee breaks and 1 lunch break in an 8-hour shift, adding 5 minutes on each break time means 15 minutes of non-productivity at work per shift. Thus, even a few minutes of time extension means that the employee has committed production deviance.


Why Dishonesty Exists

Employees may engage in fraud for different reasons, and there are multiple, and diverse, reasons for their dishonesty. Disgruntled employees may feel entitled to steal because they believe their employers are disloyal, or because they are being underpaid. Others may steal from their place of work because they do not consider their actions as theft due to the insignificant value of the item, for example, stationary items such as pencils or paper clips.

Other reasons for deviant behavior include:


  • Low morale at the workplace: This is also a major reason why businesses suffer from low production.


  • Mismanagement: The employee feels that the business or company has wronged or mistreated them.


  • No recognition: The employee feels that they are under-appreciated for the “hard” work they do.


  • Under paid: The employee feels that the work they engage in is not reflected in their wages.


The consequences for theft are minimal. The Company may have no punitive procedures or policies regarding employee theft. If there are no set consequences for employee theft then employees will continue to steal, because they think that they won’t be punished.


Lack of control over inventory: It is easy to steal because the employer does not have preventive measures to stop them. Preventive measures are crucial to reducing the risk of employee theft. If preventive measures do not exist then the opportunity to steal is very high.


The most common explanation is simply that the opportunity is there.


Cash theft is especially problematic in businesses with loose inventory controls such as food or bar service. Research suggests that retail stores where staff and management have negative working relationships may have higher rates of employee thefts than stores where these relationships are positive (Greenberg & Barling, 1996). When relationships between retail management and staff are negative, offenders may legitimize employee dishonesty as ‘punishing’ the business.


Staff dishonesty should not be accepted as the cost of doing business.


Mitigation

Theft is a multifaceted problem manifesting from multiple sources. Often it can go unnoticed, especially in a busy department that has little oversight. No one solution can eliminate all theft in the workplace, but a layered approach can help prevent, reduce and stop these occurrences if a combination of systems is introduced to mitigate the threat.

One of the easiest ways to help identify integrity is by performing a thorough background check on all potential new hires. Often when businesses expand, demand for additional staff may quickly increase. This demand may cause background checks to be overlooked in order to avoid losing potential earnings because of insufficient capacity. Conducting a thorough screening of potential employees will help filter those candidates with a verified history.


Checks and balances. An additional measure is to ensure adequate accountability for every position in the organization so that no position has too broad an authority to authorize things without the consent of another individual. Additional measures to limit exposure access to areas or excess inventory can greatly reduce theft in the workplace. An employee who frequently handles cash or expense accounts will know the loopholes in the system and can easily siphon even small amounts that add up over time. Set up a system for employees to provide anonymous tips about theft. Employees are much more likely to come forward with information about employee theft if they believe their identity will remain anonymous.


Conducting inventory checks more frequently can help identify when certain items are missing and help breed a culture of awareness. A cavalier attitude toward rules and regulations by management will soon be reflected in the attitude of employees. Inventory management issues should be addressed during regular staff meetings, reiterating anti-theft policies will help deter fraudulent activity by reminding staff that you take security seriously.

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The work environment matters and the work culture begins with management and the owners. Maintain an open line of communication with employees, create incentives, praise or recognize quality performance so that employees feel valued and understood. The more valued employees feel, the less likely they are to rationalize a theft, and the more likely they'll want to help the owners succeed. Even a small increase over surrounding competitors can be enough to cut theft. Creating a positive environment will increase efficiency, build a sense of community and deter dishonest activity. If losses occur, keep track of the frequency, rotate employees through different shifts and record patterns or trends to see if these losses follow a particular employee. Increasing transparency with your staff by letting them know you’re monitoring unusual activity will also help deter illegal acts.


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