| Methods of identifying employee theft. | | | | security-management consultant in Norton, Mass., says |
| Here's a chilling prospect: "If you own a growing | | | | that "well-thought-out background screening is your |
| company and spend most of your time preoccupied | | | | best tool." With a candidate's permission, you may do a |
| with developing new products and markets, you're | | | | legal check, which costs from $50 to $500. Be careful, |
| especially vulnerable to employee theft and fraud," | | | | though. In many instances you cannot legally |
| warns Thomas Creal, managing director of | | | | discriminate against an applicant based on an arrest |
| investigation and litigation support at the Chicago | | | | record. |
| accounting firm of Checkers, Simon & Rosner. Among | | | | Establish checks and balances. In 1992, after suffering |
| the problems: "Your company could minimize its risks in | | | | a serious shrinkage problem, Joe Murphy restructured |
| its financial department by organizing a system of | | | | his staff so that different employees handled |
| safeguards and double checks, but that's probably | | | | purchasing, receiving, and accounts payable. "When |
| way too expensive." So instead, to identify and reduce | | | | you're small, you tend to place those functions in the |
| your risks Creal suggests running random comparative | | | | hands of one person," says Murphy, president of Jim |
| checks -- trend analyses -- going back three to five | | | | Hjelm's Private Collection, a $6.5-million wedding-dress |
| years, focusing on these likely hot spots: Excessive | | | | maker in New York City. "You save in salaries, but you |
| reimbursement of expenses. "An employee who | | | | set yourself up for theft." Control inventory. Murphy |
| wants to break the system will identify the threshold at | | | | instituted a perpetual inventory system: his staff |
| which his boss starts paying attention -- maybe $25 -- | | | | checks finished goods and raw materials every day |
| and file false invoices below that number." You should | | | | instead of only once at the end of the month, and an |
| require backup documentation on all expense filings, | | | | outside firm does a year-end audit. Levinson suggests |
| even the small ones. | | | | that you also consider rotating inventory responsibility. |
| False invoices. To subvert employees who set up | | | | Retail chains, he says, should have managers from |
| dummy corporations and then submit fraudulent bills, | | | | different stores take inventory for one another. |
| analyze all payments to new or unfamiliar suppliers by | | | | Educate employees. Show them how bottom-line |
| running Dun & Bradstreet credit checks or otherwise | | | | repercussions of theft affect the company, and |
| verifying each new company's authenticity. You may | | | | encourage their help. |
| also want to conduct random spot checks of | | | | Outline procedures for reporting theft, ensure |
| deliveries from new suppliers to make certain the | | | | confidentiality, and lay out the consequences of |
| goods received match invoice descriptions. | | | | dishonesty. Murphy, for instance, stated in a memo to |
| Inventory theft. "Maybe someone on one shift in your | | | | employees that no dress would leave the factory |
| warehouse is selling inventory out the back door," | | | | without an invoice and that "any violation would be |
| Creal warns. "Look for trends that don't make sense, | | | | grounds for immediate termination and legal action." |
| like a de-crease in inventory during a month when | | | | Levinson adds that employees who deal with |
| revenues go down as well." Some tips to protect your | | | | customers, vendors, and the public should have a good |
| company from employee theft, including a book on | | | | understanding of the company's policy on gifts -- and |
| checking workers' backgrounds. | | | | when they're considered implicit bribes. |
| You'd be hard-pressed to find an employee who | | | | Take a preventive approach. An employee-assistance |
| hasn't occasionally slipped at least one or two yellow | | | | program can help prevent workplace theft. (See |
| sticky pads into his briefcase. But what about those | | | | Managing People, July and September 1994, Doc. |
| workers with perpetually sticky fingers? They can | | | | Nos. 07940952 and 09941223.) Sure, plain |
| wreak havoc with your bottom line, not to mention | | | | old-fashioned greed is a prime motivator, but financial |
| employee morale. And chances are, you're helping | | | | difficulties, substance abuse, and even mental-health |
| them -- by making dishonesty easy. A little foresight, | | | | problems can also lead to theft. Provide a |
| though, will help you put an end to employee theft | | | | problem-solving forum for your workers and you may |
| without turning your company into a police state. | | | | be helping to defuse their impulse to steal. |
| Don't hire problems. Howard Levinson, a | | | | |