Experts recognise that employee theft accounts for a much larger percentage of loss within organisations that most employers realise or admit. Frequently problems are blamed on other factors and so the real issues never get dealt with. Rather than focus on the issues surrounding employee honesty, I have instead listed a few ideas to help prevent employee theft:
1. Initial Employment . Whilst this is not any easy task, it is very important to use all methods to ensure that your potential employees are honest. In an immigrant led employment market, this is particularly difficult as the reliance on references and other forms of checks maybe unavailable or unreliable. One good indicator is to look at the length of time people have remained in their previous employment, or unexplained gaps in their employment. Short employment durations and gaps can be an indication of an underlying problem. Where alternative methods of checking are unavailable, I personally favour the use of pre-employment “honesty tests”. These Psychometric tests are a tool in identifying the dishonest candidate or those who are most likely to be tempted if the opportunity arises. Whilst not fool proof and should not been used alone as a reason to hire or not hire an individual, they are good method, in the absence of other checking procedures. One thing to remember when using these questionnaires, is that they work best when the employee is feeling relaxed and so they are best used as the final process, once a candidate has been provisionally accepted and the employment visa process is being initiated.
2. Keep employees happy. By this I mean create a positive environment. Treat people fairly and with respect and actively involve them in the rules, procedures and issues that affect them directly. Make sure that employees feel they have a relationship with the organisation and also create strong bonds within the teams. Ensure that there is clarity in regard to job descriptions and objectives, company rules and procedures.
Ensure you run employee recognition schemes and make it easy for people to discuss issues or problems with management. In this way you reduce many of the “self justifications” for theft in relation to not understanding how stealing affects their colleagues or wanting to punish the company or alleged wrong doing or poor treatment.
3. Internal Protocols: Make sure that the processes and procedures have been designed with the potential for theft and fraud in mind. Generally systems are designed for maximum efficiency or perceived cost effectiveness without any real consideration of how the systems can be bypassed or subverted to allow theft.
Separate duties. No employee should be responsible for both recording and processing a transaction.
Restrict Access . Restrict access to important data, financial records, stock and any other sensitive matters to authorised employees only. Keep a record of access by using electronic access controls, CCTV and log keeping.
Authorisation. Develop and implement policies to control how transactions are initiated, authorized, recorded, and reviewed. Internal controls will reduce opportunities for theft and fraud. Run intermittent reviews and audits to ensure the procedures are being maintained and are effective.
4. Employee awareness. Make sure that your employees are fully aware and regularly reminded about the department and company’s policies and procedures related to theft, as well as the internal controls that are in place as well as how breaches of these procedures are dealt with, within the disciplinary code. A booklet containing these rules, procedures etc should be presented to every employee and they should sign to say they have received and understood the contents. This is a good topic to go through in the employees initiation process, when they first join the organisation. Making people aware of the what the company does to avoid theft and how they deal with it will help reduce temptation, where the employee wrongly perceives that no one will find out and also helps to balance create a negative balance away from the potential rewards of stealing towards the likely repercussions for doing so.
5. Encourage employees to discuss problems. Organise regular team meetings and ensure that “security and fraud prevention” is always discussed at every meeting. This gives people an opportunity to openly discuss any concerns employees may have but also reminds them of the importance of the rules and how the fraud affects them and the company. Another option is to provide an anonymous reporting system for employees, vendors, and customers to tell you about anything they feel is suspicions or concerning to them. You need to encourage people to use this and whilst it can have variable results they are a worthwhile tool.
6. Random Checks - Apart from your regular checks, exception reports and audits, you should also run irregular and spot checks. Don’t just assume that because you have developed a great system and you have followed all the rules that this is all you need to do! You need to run regular and unannounced checks and audits to ensure that the system rules are being followed and also that they are working. Some should be announced and other should be done behind the scenes and the results announced afterwards. This sends a strong message out to employees that you are both visibly checking but also that they can never know when or where you will check and so the high risk of detection should act as a strong deterrent. It also enables you to see if processes are different when people know they are being checked compared to when they don’t.
Another good option is to run audits and checks when key employees are on vacation and also to rotate staff into different locations and run comparison checks.
7. Don’t ignore breaches. The secret with any breach of procedures is to act quickly and decisively. The longer you leave it to thoroughly investigate the problem, the harder it will be to resolve, the more likely it is that the activity will be repeated and the more damage it will do to the reputation of the organisations anti-fraud credentials with its employees thus increasing the likelihood of further fraud in the future.
8. Make strong examples of Perpetrators. If any form of fraud takes place and is proven and the proper legal and institutional procedures have taken place, then strong and decisive action must be taken immediately. The employee in question should be dismissed immediately and the details should be made known to all the staff so they can see, in action, what happens to those who attempt to defraud the organisation. Sweeping the issue under the carpet or dealing with it “quietly”, will significantly increase the likelihood of it happening again. Seeing someone get caught and dealt with firmly, is a strong deterrent to others.
9. Same rules for all. Managers should lead by example and show that rules apply to everyone. I once went on a tour of an electronics company and the MD was showing my colleagues and I around their factory and took us to the store areas. Unfortunately he did not have his official identification / security card and so the security guard would not allow him into the stores areas. The security officer was called but he would not allow entry to the stores either, although he was more than aware that our guide was the company MD and his boss! The MD got quite upset and angry but we did not get into the stores. Later I spoke to him and explained that he should be grateful to the security officer for doing such a great job in a very difficult situation and that it was good to say a company where the rules applied to all. A few weeks later I received an email from our host, saying that at their recent company staff meeting, he had used the story as an example of how company rules should apply to all and presented the security officer with a certificate of thanks and a small cash bonus for doing such a great job!
This is by no means a comprehensive list of measures and processes but the key to reducing and eliminating employee theft is always prevention, constant awareness and immediate response.
1. Initial Employment . Whilst this is not any easy task, it is very important to use all methods to ensure that your potential employees are honest. In an immigrant led employment market, this is particularly difficult as the reliance on references and other forms of checks maybe unavailable or unreliable. One good indicator is to look at the length of time people have remained in their previous employment, or unexplained gaps in their employment. Short employment durations and gaps can be an indication of an underlying problem. Where alternative methods of checking are unavailable, I personally favour the use of pre-employment “honesty tests”. These Psychometric tests are a tool in identifying the dishonest candidate or those who are most likely to be tempted if the opportunity arises. Whilst not fool proof and should not been used alone as a reason to hire or not hire an individual, they are good method, in the absence of other checking procedures. One thing to remember when using these questionnaires, is that they work best when the employee is feeling relaxed and so they are best used as the final process, once a candidate has been provisionally accepted and the employment visa process is being initiated.
2. Keep employees happy. By this I mean create a positive environment. Treat people fairly and with respect and actively involve them in the rules, procedures and issues that affect them directly. Make sure that employees feel they have a relationship with the organisation and also create strong bonds within the teams. Ensure that there is clarity in regard to job descriptions and objectives, company rules and procedures.
Ensure you run employee recognition schemes and make it easy for people to discuss issues or problems with management. In this way you reduce many of the “self justifications” for theft in relation to not understanding how stealing affects their colleagues or wanting to punish the company or alleged wrong doing or poor treatment.
3. Internal Protocols: Make sure that the processes and procedures have been designed with the potential for theft and fraud in mind. Generally systems are designed for maximum efficiency or perceived cost effectiveness without any real consideration of how the systems can be bypassed or subverted to allow theft.
Separate duties. No employee should be responsible for both recording and processing a transaction.
Restrict Access . Restrict access to important data, financial records, stock and any other sensitive matters to authorised employees only. Keep a record of access by using electronic access controls, CCTV and log keeping.
Authorisation. Develop and implement policies to control how transactions are initiated, authorized, recorded, and reviewed. Internal controls will reduce opportunities for theft and fraud. Run intermittent reviews and audits to ensure the procedures are being maintained and are effective.
4. Employee awareness. Make sure that your employees are fully aware and regularly reminded about the department and company’s policies and procedures related to theft, as well as the internal controls that are in place as well as how breaches of these procedures are dealt with, within the disciplinary code. A booklet containing these rules, procedures etc should be presented to every employee and they should sign to say they have received and understood the contents. This is a good topic to go through in the employees initiation process, when they first join the organisation. Making people aware of the what the company does to avoid theft and how they deal with it will help reduce temptation, where the employee wrongly perceives that no one will find out and also helps to balance create a negative balance away from the potential rewards of stealing towards the likely repercussions for doing so.
5. Encourage employees to discuss problems. Organise regular team meetings and ensure that “security and fraud prevention” is always discussed at every meeting. This gives people an opportunity to openly discuss any concerns employees may have but also reminds them of the importance of the rules and how the fraud affects them and the company. Another option is to provide an anonymous reporting system for employees, vendors, and customers to tell you about anything they feel is suspicions or concerning to them. You need to encourage people to use this and whilst it can have variable results they are a worthwhile tool.
6. Random Checks - Apart from your regular checks, exception reports and audits, you should also run irregular and spot checks. Don’t just assume that because you have developed a great system and you have followed all the rules that this is all you need to do! You need to run regular and unannounced checks and audits to ensure that the system rules are being followed and also that they are working. Some should be announced and other should be done behind the scenes and the results announced afterwards. This sends a strong message out to employees that you are both visibly checking but also that they can never know when or where you will check and so the high risk of detection should act as a strong deterrent. It also enables you to see if processes are different when people know they are being checked compared to when they don’t.
Another good option is to run audits and checks when key employees are on vacation and also to rotate staff into different locations and run comparison checks.
7. Don’t ignore breaches. The secret with any breach of procedures is to act quickly and decisively. The longer you leave it to thoroughly investigate the problem, the harder it will be to resolve, the more likely it is that the activity will be repeated and the more damage it will do to the reputation of the organisations anti-fraud credentials with its employees thus increasing the likelihood of further fraud in the future.
8. Make strong examples of Perpetrators. If any form of fraud takes place and is proven and the proper legal and institutional procedures have taken place, then strong and decisive action must be taken immediately. The employee in question should be dismissed immediately and the details should be made known to all the staff so they can see, in action, what happens to those who attempt to defraud the organisation. Sweeping the issue under the carpet or dealing with it “quietly”, will significantly increase the likelihood of it happening again. Seeing someone get caught and dealt with firmly, is a strong deterrent to others.
9. Same rules for all. Managers should lead by example and show that rules apply to everyone. I once went on a tour of an electronics company and the MD was showing my colleagues and I around their factory and took us to the store areas. Unfortunately he did not have his official identification / security card and so the security guard would not allow him into the stores areas. The security officer was called but he would not allow entry to the stores either, although he was more than aware that our guide was the company MD and his boss! The MD got quite upset and angry but we did not get into the stores. Later I spoke to him and explained that he should be grateful to the security officer for doing such a great job in a very difficult situation and that it was good to say a company where the rules applied to all. A few weeks later I received an email from our host, saying that at their recent company staff meeting, he had used the story as an example of how company rules should apply to all and presented the security officer with a certificate of thanks and a small cash bonus for doing such a great job!
This is by no means a comprehensive list of measures and processes but the key to reducing and eliminating employee theft is always prevention, constant awareness and immediate response.
