Workers' Sticky Fingers Are Costly

A department store is short a suit. A warehouse loses a handful of TV sets. Money is missing from a checkout-line cash drawer.

Who's to blame? More often than not, an employee.

The longstanding problem of worker theft may be getting worse, some observers say, and employers are still searching for solutions.

Companies often turn to high-tech means like surveillance cameras or special cash registers, which have had some success in recent years.

But changes in corporate culture and communication by management also need to be part of the equation, some experts increasingly argue.

"The traditional approach has been technology," says Jerald Greenberg, a professor of business ethics at Ohio State University in Columbus. But his recent research suggests that "the way you treat people" is also important. Especially, he says, since it appears people can learn to work around fancy gadgets.

Also, others say, top managers need to let employees know what is acceptable and not acceptable behavior - by setting an example and creating well-supported ethics policies.

This increased attention comes at a time when internal theft, ranging from impulsive petty acts to elaborate fraud by executives, continues to affect the balance sheet of American businesses.

While it is impossible to pinpoint the total amount of money American companies lose every year to such theft, evidence suggests that the sums are substantial. In the retail industry alone, thieving employees cost companies about $10 billion in 1994.

"It's a tremendous problem," says Bruce Van Kleeck, a National Retail Federation official in Washington.

Apprehensions on the rise

The number of apprehensions of internal thieves rose almost 16 percent from 1994 to 1995, according to a study of about 9,800 stores done by Jack L. Hayes International Inc., a loss-prevention and security consulting firm in Standfordville, N.Y.

This increase stems partly from better technology and more focus on the problem by loss-prevention personnel, the company says. But Jack Hayes, the firm's president, says that the increase is also due to "a decline in honesty" in general, and a loss of loyalty to employers.

Employees steal for many reasons, including dissatisfaction with or lack of commitment to their jobs, experts say.

Workers also must have the attitude, opportunity, and need to steal, notes David Zulawski, vice president of Wicklander-Zulawski & Associates, a security consulting firm in Downers Grove, Ill. "If one of those components is missing," he says, people generally will not steal.

Research by Greenberg indicates that the desire to steal may be connected to how employees perceive pay inequities and how they are treated by management.

He examined three plants owned by a single company. At one, there was no pay cut, and the theft rate remained the same. At another plant, the reason for a temporary pay cut was thoroughly and thoughtfully explained, and the theft rate grew from about 3 percent of inventory to about 4.5 percent. At another plant, where the same pay cut was explained in vague terms and delivered without much sensitivity, the theft rate more than doubled - to 8 percent.

After the pay was reinstated, Greenberg says, the theft rates returned to 3 percent.

Management's attitude toward stealing, and participation in it, can also influence what the rank-and-file workers think is acceptable, experts say.

Mr. Zulawski recalls a case his firm worked on where a trainer of managers at a drugstore chain was caught stealing - and then six of the seven managers trained by that individual were also found to be stealing.

In addition, managers sometimes turn a blind eye to employee theft or implicitly condone it because they "often have limited amounts of power to reward people," Greenberg says. Such an approach has been used to get workers to take less-desirable night shifts, for example.

Ideas for deterrence

With this in mind, experts say that approaches to theft deterrence need to include the following:

*Ethics policies and codes of conduct that are outwardly supported at high levels and clearly spell out what actions are not acceptable. The punishment for violations like theft should be stated, and training programs and follow-ups should accompany the policies, so employees are constantly clear on what is expected.

*Provide a hot line. Many companies now have an internal hot line that employees can call and anonymously report suspicious activities. Experts say companies need to bring theft figures to the attention of all employees so that they too can help solve the problem.

*A positive work environment. If announcing pay cuts or layoffs, for example, explain the basis of the move as much as possible to employees, Greenberg says.

*Don't let one person handle financial transactions from start to finish, especially in smaller companies, says Joseph Wells, chairman of the Association of Certified Fraud Examiners in Austin, Texas. Another ACFE tip: Periodically check bank statements for unusual patterns.

*Be more careful when hiring. Check applicant references thoroughly, and avoid hiring people out of desperation.

Some companies require potential employees to take "honesty" or "integrity" tests to measure a person's likelihood of stealing. These tests have become more widely used since 1988, when the polygraph "lie detector" was outlawed as a source of job pre-screening.

Questions have arisen about the validity of such tests and their freedom from unintentional discrimination; they are banned in Massachusetts and Rhode Island.

Experts note that approaches like these should be considered by a company even before buying pricey surveillance systems or other technology. Says Mr. Hayes: "We're talking about things that don't cost a great deal of money to do, but they are necessary."