Employee theft, such as petty cash “borrowing,” embezzlement, and check tampering, is a growing problem for businesses across the globe. In the U.S. alone, employee theft has been shown to cost businesses $50 billion a year, which translates into up to 7 percent of all annual company revenues lost. With so much money being lost, you’d think employee dishonesty would be easy to detect. Sadly, that is not the case. Statistics show it can take up to two years to uncover a dishonest employee.
When it comes to employee dishonesty, prevention is a far more efficient approach than detection. Here are six ways to prevent employee dishonesty in your organization.
Background Screening
Employee dishonesty prevention starts with your hiring process. It’s critical to ensure that the people you’re bringing into your organization don’t have a criminal past. Consider including a criminal background screening as part of your hiring process. Although not all dishonest employees have a criminal record, it’s prudent not to hire those that have a record of dishonesty. Background screenings can be a cost-effective way (with some tests starting around $35) to decrease the likelihood of employee theft in your organization.
Code of Conduct
Employees should be aware of and have a complete understanding of how they are expected to conduct themselves in the workplace. Be sure to include a “code of conduct” in your employee handbook, outlining the rules, principles, values, expectations, behavior, and relationships that you consider fundamental to a successful operation. While many of the items laid out in your code of conduct may seem like common sense, it’s often valuable to get their agreement that “borrowing company money is not allowed.” As part of every new hire orientation—and even for existing employees—every worker should be required to read and sign off on your code of conduct.
Employee Dishonesty Policy
Written policies ensure that there is a set of rules for everyone to follow. You’ll also want to include employee dishonesty rules and policies in your employee handbook that outline exactly what your business deems as stealing or fraud. This will not only educate your employees but will also provide the documentation needed to make a claim against a dishonest employee. Keep in mind, though, that simply writing it down is not enough. You’ll want to supplement these rules by providing ongoing employee training and reviews to be certain your employees fully understand the proper processes and policies.
Compliance Audit
It’s critical that you “trust but verify.” Conducting regular compliance audits demonstrates to employees that even the small details of your business are important and regularly inspected. It will give you the opportunity to grade employee compliance on operational policy and procedure. Compliance audits also provide opportunities to train employees who lack understanding, address employees who ignore policies, and identify potential dishonesty. Such attention to compliance will give employees more of an incentive to practice honesty.
Business Abuse Line
Employees aren’t always certain whether or not you’re aware of dishonesty in your organization. Especially when it involves a higher-ranking employee, like a manager or executive, employees may not always feel empowered to speak up and report a dishonesty issue. In fact, the higher up the ladder an employee ranks, the more serious the loss damages will likely be. A worldwide report by the Association of Certified Fraud Examiners found that the total dollars lost from dishonest executive-level employees is 68 percent greater than that of managers and 89 percent greater than that of employees.
Consider implementing a business abuse line that employees can use to report any suspicions of dishonesty. Make sure this line is easy for employees to access, its purpose is fully communicated, and that employees are reminded on a regular basis that the line is available to them.
Corrective Action
As you conduct audits and measure loss, take the time to analyze the results and plan out next steps for correction and improvement. For example, if a point-of-sale (POS) review shows high frequency of high-risk transactions, address it with the employee and find the cause. Or, if you see something on the closed-circuit television (CCTV) system—good or bad—discuss it with the employee right away. Having these conversations in a timely manner sends a clear message that even when no one is around, you’re aware of the activities taking place. This will not only improve the performance of good employees a la the Halo Effect but will also dissuade dishonest employees from stealing.
Loss Prevention Services
Although it’s nearly impossible to prevent all losses, employee dishonesty prevention can be the difference between a few issues and many issues, the loss of $5 or the loss of $5,000. HS Brands’ loss prevention services are designed to take an objective approach to combating employee theft and dishonesty across the globe. We’ll work with you to build a complete loss prevention program—from audits to program and policy development—to meet your goals and protect your brand.
In addition to loss prevention, HS Brands offers mystery shopping and royalty assurance services to provide holistic assessment and verification of your expectations.
Contact HS Brands today to see how we can prevent employee dishonesty in your organization.
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Raymond Esposito
Director of Business Development & Marketing
HS Brands Global
Raymond Esposito has over 28 years of loss prevention experience, working within the department store, specialty, and grocery segments of retail. He has developed loss prevention programs for over 125 retailers in the U.S., Canada, and the United Kingdom. He holds a bachelor’s degree in psychology from the University of Connecticut and is an expert witness.
