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Preventing Employee Theft

Methods  of  identifying  employee  theft.security-management consultant in Norton,
Mass., says that "well-thought-out background
Here's a chilling prospect: "If you own ascreening is your best tool." With a
growing company and spend most of your timecandidate's permission, you may do a legal
preoccupied with developing new products andcheck, which costs from $50 to $500. Be
markets, you're especially vulnerable tocareful, though. In many instances you cannot
employee theft and fraud," warns Thomaslegally discriminate against an applicant
Creal, managing director of investigation andbased  on  an  arrest  record.
litigation support at the Chicago accounting
firm of Checkers, Simon & Rosner. Among theEstablish checks and balances. In 1992, after
problems: "Your company could minimize itssuffering a serious shrinkage problem, Joe
risks in its financial department byMurphy restructured his staff so that
organizing a system of safeguards and doubledifferent employees handled purchasing,
checks, but that's probably way tooreceiving, and accounts payable. "When you're
expensive." So instead, to identify andsmall, you tend to place those functions in
reduce your risks Creal suggests runningthe hands of one person," says Murphy,
random comparative checks -- trend analysespresident of Jim Hjelm's Private Collection,
-- going back three to five years, focusinga $6.5-million wedding-dress maker in New
on these likely hot spots: ExcessiveYork City. "You save in salaries, but you set
reimbursement of expenses. "An employee whoyourself up for theft." Control inventory.
wants to break the system will identify theMurphy instituted a perpetual inventory
threshold at which his boss starts payingsystem: his staff checks finished goods and
attention -- maybe $25 -- and file falseraw materials every day instead of only once
invoices below that number." You shouldat the end of the month, and an outside firm
require backup documentation on all expensedoes a year-end audit. Levinson suggests that
filings,  even  the  small  ones.you also consider rotating inventory
responsibility. Retail chains, he says,
False invoices. To subvert employees who setshould have managers from different stores
up dummy corporations and then submittake  inventory  for  one  another.
fraudulent bills, analyze all payments to new
or unfamiliar suppliers by running Dun &Educate employees. Show them how bottom-line
Bradstreet credit checks or otherwiserepercussions of theft affect the company,
verifying each new company's authenticity.and  encourage  their  help.
You may also want to conduct random spot
checks of deliveries from new suppliers toOutline procedures for reporting theft,
make certain the goods received match invoiceensure confidentiality, and lay out the
descriptions.consequences of dishonesty. Murphy, for
instance, stated in a memo to employees that
Inventory theft. "Maybe someone on one shiftno dress would leave the factory without an
in your warehouse is selling inventory outinvoice and that "any violation would be
the back door," Creal warns. "Look for trendsgrounds for immediate termination and legal
that don't make sense, like a de-crease inaction." Levinson adds that employees who
inventory during a month when revenues godeal with customers, vendors, and the public
down as well." Some tips to protect yourshould have a good understanding of the
company from employee theft, including a bookcompany's policy on gifts -- and when they're
on  checking  workers'  backgrounds.considered  implicit  bribes.
You'd be hard-pressed to find an employee whoTake a preventive approach. An
hasn't occasionally slipped at least one oremployee-assistance program can help prevent
two yellow sticky pads into his briefcase.workplace theft. (See Managing People, July
But what about those workers with perpetuallyand  September  1994,  Doc.
sticky fingers? They can wreak havoc with
your bottom line, not to mention employeeNos. 07940952 and 09941223.) Sure, plain
morale. And chances are, you're helping themold-fashioned greed is a prime motivator, but
-- by making dishonesty easy. A littlefinancial difficulties, substance abuse, and
foresight, though, will help you put an endeven mental-health problems can also lead to
to employee theft without turning yourtheft. Provide a problem-solving forum for
company  into  a  police  state.your workers and you may be helping to defuse
their impulse to steal.
Don't hire problems. Howard Levinson, a



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