Theft — whether from employees or customers — can destroy your business. Here’s what you can do to prevent it.
Turning a business plan into a successful endeavor takes time, money, effort, and dedication. Theft, which can happen in ways you may not expect, can hamper your success if it is not controlled. To protect your business and bottom line against theft, you need to stay vigilant and take proper precautions.
The Inside Job
Surprisingly, businesses take the biggest hit not from customer theft, or “shoplifting,” but from employee theft. It is estimated that employees alone steal $1 billion a week from American businesses. In fact, nearly one-third of bankruptcies in the U.S. are caused by employee theft, explains John Case, who is with EmployeeTheft.com and is the author of several books on employee theft and shoplifting.
Among the common methods of employee theft are embezzlement, common pilferage, and abuse of discount privileges. Another method that can result in substantial losses is employee collusion with customers, in which the two work together in a theft attempt. In some cases, an employee has the opportunity to obtain and isolate material for a customer, and the customer has the means to remove it without raising suspicions. Employee/ customer collusion can also take place at the cash register, where a customer brings several items to the register, but the cashier does not charge the customer for all of them.
According to Case, motives for employee theft include revenge against the company, temptation, opportunity for dishonest behavior, financial need, and boredom. To help deter employee theft, Case says, start with pre-employment screening, which can include criminal, prior employment, and credit checks.
“Most employees who steal have stolen before,” Case says. “They have a pattern in dishonesty. If you don’t conduct a thorough employment check, you are getting the people who are rejected by other companies that do.”
To deter employee theft among existing employees, Case says, “The key is to remove the opportunity.” A breakdown in business procedures, such as failure to conduct ongoing inventory counts, monitor item refunds, and personally supervise employee performance, can facilitate employee theft.
After discovering that one employee was committing credit-card fraud through the item-return process, Corinne Pinsof-Kaplan, owner of the 18,000-square-foot Chicago Tennis and Golf in Chicago, changed store policy, allowing only managers to handle returns. “Too many people had their hands in there,” she says.
Other signs of employee theft can be easy to see, such as inventory placed in dumpsters or at exits near employee parking. “There’s no substitution for the owner being present as many days as possible and putting in as much time as possible,” says Mark Mason, owner of Mason’s Tennis Mart in New York City. “When that happens, there’s less of an inclination for employees to steal.”
Often, Case explains, other employees are knowledgeable that a peer is stealing from the business but have what he calls an “anti-snitch attitude.” Case suggests implementing an “anonymous tip” program to which employees can report a co-worker’s dishonesty without concern for disclosure of their identity. The program can be an informal, in-house set-up, although some go through services where employees can report incidents by calling a toll-free number.
Addressing suspected employee theft can expose a business to liability to such issues as slander, defamation, false imprisonment, or infliction of emotional distress. An attorney or your local police department may be able to advise you on how to handle such an employee-theft situation.
Shoplifting by customers amounts to more than $10 billion per year. In tennis retail, one of the most targeted items is clothing.
Shoplifters engage in such behavior to fulfill a desire to get “something for nothing,” and because there is a lack of fear of getting caught. Some signals that employees should look for that could indicate customer theft is a patron who refuses help and/or handles merchandise without looking at it, instead looking around to see if they have been noticed. Wearing bulky clothing where merchandise can easily be hidden is another sign of possible intent to steal.
Employees should also take notice if a group enters the store together and then spreads out to different areas, forcing employees to monitor several departments at once.
“The most effective deterrent of customer theft are well-trained salespeople who are attentive and trained to notice suspicious behavior,” says Case. In his 1,000-square-foot shop, Mason commonly keeps three salespeople on the floor in the store’s main departments. “There’s nothing like hands-on service, which is good in terms of increasing your sales, but it’s also very good because it prevents theft,” he says. “An owner should make every employee aware that stealing is a reality.
“You want to keep a very relaxed, cordial atmosphere in your shop, but at the same time you want customers to know that you are in control.”
Further protection is offered by security equipment. Widely used devices include cameras and security tags on merchandise. According to Harry Greenberg, business counselor for SCORE, which offers training and advice to small businesses, some factors that businesses consider when choosing whether or not to invest in the equipment is the worth of the merchandise and the business’s history with theft and subsequent losses.
Another way in which to discourage customer theft is to plan your shop’s layout with adequate lighting in all areas, and to keep the most expensive products where they can be monitored. “We are very conscious of security and how we set up the store,” says Pinsof-Kaplan. “For us, the fewer the blind spots, the better.”
Protect your business
Business owners, managers and employees should be thoroughly trained in shoplifting detection, apprehension, and prevention, and should also be knowledgeable of state and local laws on shoplifting. Before you implement a loss-prevention program, however, review the program with an attorney and coordinate whenever possible with the local police department.
But, as any retailer would certainly agree, “The best thing is just to prevent it in the first place,” says Pinsof-Kaplan.
See all articles by Kristen Daley
About the Author
Kristen Daley is a contributing editor for RSI magazine.