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SPECIAL REPORT

Employee Theft

Statistics, Interviewing Techniques and


Tips to Optimize Your Employee Theft Policy
F
rom taking a watch straight out of the case to Interview and interrogation practices have been
walking out with an armful of $3,000 party relied on for decades by federal law enforcement
gowns, the ever-constant problem of employee agencies. The application of these same procedures
theft is motivated by an ever-growing sense of and specialized training in dealing with employee
entitlement, as well as a blatant disrespect for the theft often brings quick results. This approach of
employer and the law. The same practices used in uncovering the facts takes far less time than using
fighting drug dealers apply to tracking down thieves undercover agents.
inside the workplace. Professionally conducted With so much at stake, it is essential to use
interview and interrogation tactics and procedures private investigators who are able to conduct an
play a critical role in identifying the prime suspects interview and interrogation session that parallels
and solving this costly problem. federal investigative standards and is acceptable in
Corporate theft, occupational crime, dishonesty any court of law. This level of expertise is found
and workplace deviance are on the rise in the retail among former supervisory agents who have worked
industry. Based on research by Martin Investigative for the FBI, DEA, IRS and Secret Service.
Services, the employee theft rate held steadily at 15 Supervisory agents are an elite group of law
percent from 1969 to 2006. This figure skyrocketed enforcement officials who have taught academy level
during the third quarter of 2006 to an alarming 75 courses and prepared the curriculum for the latest
percent. In his article, Retail Crime Cost U.S. practices in law enforcement training.
Retailers $41.7 Billion in 2011 published in
Retailing Today, Michael Johnsen reported $18.4 The Interview and Interrogation Process
billion of this staggering amount was attributed to The interview and interrogation approach to
employee theft. uncovering employee theft begins by meeting the
president or CEO to gain his or her perspective on the
Driving Factors and Red Flags problem. This first step is followed by a series of
There are four types of employee thieves actively interviews in the areas where the theft is occurring.
engaged in stealing time, money or products from Conducting thorough interviews of employees about
their employers: scheduling, accounting and inventory activities can
Thieves by naturethose who enjoy stealing bring to light a host of suspicious problems that yield
Employees who feel entitledthe world owes a significant amount of evidence in as little as four
them more than what they earn hours.
Employees stealing out of desperationthey are By articulating the seriousness of the crime and
either in extreme debt or have a drug/gambling the determination to solve it, two private
problem. These problems are often compounded by investigators with exceptionally strong interview and
a weak economy. interrogation skills are usually able to elicit a
Theft by a target of opportunity. Money in plain confession from an employee in minutes. This
sight will be taken. confession can lead to the identification of either one
Many executives do not grasp the full magnitude or dozens of employees engaged in theft regionally or
of theft in their company until they see the results of nationally. Once the employees are identified, they
an investigation. To the untrained eye, a retail store are subject to the policies of the companys human
or warehouse might be operating normally. To resources department. If charges are made, they can
someone with significant investigative experience at face criminal prosecution.
the federal level, the work environment can be rife
with theft. This problem can be remedied by private Independent Evaluations
investigators who ask probing questions, An independent evaluation or review by a third-
identify/confirm the facts and corroborate allegations party private investigation firm provides companies
of costly and reputation damaging acts of theft. with an objective look into solving employee theft
problems. An investigation from outside
Finding Thieves professionals with career backgrounds in federal law
For many private investigation and corporate enforcement is an effective course of action for
security firms, the first plan of attack in uncovering meeting companies legal and corporate mandates.
an employee theft may be to plant an undercover An independent evaluation also directly targets the
agent in a store or warehouse. A more effective source of disappearing merchandise on the retail floor
approach is to conduct a series of interview and or warehouse, where an internal review might
interrogation sessions using former supervisory possibly be hampered by managers blaming each
federal agents who work independently in the private other and not disclosing all the facts. The main
investigation industry. objective of the private investigation firm is to help

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protect the companys retail stock, assets and revenue above. Thirty-five percent of employees responding
stream through the identification of employees to this survey admitted to having stolen goods or
suspected of theft and providing recommendations to services from their employer at some time in the past.
enhance security in retail outlets, warehouses and Moreover, 45 percent reported that they were aware
throughout the supply chain. of or had witnessed other employees at current or
In a press release from April 26, 2013, Kessler former places of work stealing goods and services
International, a forensic accounting and investigative from their employers.
firm, released results from an anonymous survey of
500 employees sampled from a variety of retail and Perceived Inequitable Treatment
service companies. The headline of the press release Employee theft is still very prevalent in many
reported that an astonishingly high 95 percent of different workplacesnot just the retail store.
employees reported stealing from their employers, Unfortunately, the negative impact of theft by
which was up significantly from a previous study dishonest employees is still very significant and not
they conducted in 1999 that found that only 79 yet close to being under control. Explaining why
percent of employees reported stealing. employees bite the hand that feeds them has many
A quick review explains why the percentages different causes. However, this study, along with
were so high. In short, the researchers included theft many other examples of past research, seems to show
of time and theft of office supplies in their dependent that the heart of the solution still involves convincing
variable. While one could argue that these forms of employees that they will be equitably rewarded and
theft are not serious, in fact, they add up to fairly compensated for the contributions that they
significant losses in the workplace. make at work.
Otherwise, it would appear that employees who
Theft of Time and Supplies perceive inequitable treatment by their employers
In the Kessler survey, more than 30 percent of will take matters into their own hands by means of
respondents admitted to falsifying the actual time that theft, dishonesty, and counterproductivity. In other
they worked. This behavior seems to be exacerbated words, pay your employees well, or they will find a
by heavy cell phone use, such as texting friends while way to pay themselves at a much greater cost to the
at work, and by the use of workplace computers to profitability and success of the company. Perhaps this
update personal social media websites, such as fact should be considered as our nation once again
Facebook and Twitter. While social media was considers the costs and benefits of raising the
virtually non-existent when Kessler first conducted minimum wage.
this survey in 1999, now it is ubiquitous, and the
many minutes spent checking and updating personal 20-Year Trends
accounts now add up to hours of unproductive time at The National Retail Security Survey (NRSS)
work unwittingly paid for by their employers. collects data on the sources, causes and solutions for
Remarkably, 63 percent of those surveyed admitted retail shrinkage. The survey has been conducted since
to checking their social media sites regularly during 1991 by Read Hayes, Professor Bart Weitz, and
the work day. Richard C. Hollinger, Ph.D. While there is not
Theft of office supplies for personal use is also enough space to summarize all the findings from
just as high as it was more than 30 years ago, when 20-plus years of data, it is safe to make the following
John Clark and Richard Hollinger conducted a generalizations:
landmark survey for their book, Theft by Employees. Scope of Loss. The level of economic loss that
Pens, paper, notepads, and even toilet paper are still occurs in retail stores is far larger than any other form
regularly taken from the workplace to use at home by of property crime in the United States: larger than
employees, spouses, family members, and children. auto theft, bank robbery, burglary, and personal
robbery. The $35 billion in loss due to retail crime is
Theft of Corporate Intelligence the single largest category of property crime each
Other forms of larceny that were admitted by year.
employees responding to the Kessler survey included Retailers are the most victimized by property
theft of corporate intelligence. While stealing crime, according to survey results. Most people
corporate secrets and intelligence was reported at would not expect that this is the case. Retailers need
much lower levels, it can be argued that these forms to do a better job of communicating this message,
of employee dishonesty, such as unauthorized taking since ultimately the cost of retail loss either causes
lists of clients, marketing information, and businesses to fail or is passed along to the consumer.
proprietary information, can be even more harmful to Neither of these is good for the economy.
the company than the other forms of theft reported

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Impact of Internal Theft. Despite what most from losses of all types will not only benefit the
citizens and some nave retailers would believe, the company, but will benefit the employees as well.
greatest economic damage is caused by dishonest
employees, not shoplifters. In the store the most Risk versus Gain Theory
visible countermeasures are directed at shoplifting, Managers frequently convey the wrong message
including EAS tags, cameras, and security personnel. when addressing associates about theft. These
However, since the beginning of this survey, retailers managers say things like Dont steal, or you will get
have reported that between one-third and two-fifths caught or We have a good loss prevention guy, and
of their losses are believed to be the result of he catches everything, so dont steal. Dont steal
dishonest employees stealing from the firm or by because it is not worth it is a loss prevention clich.
letting others steal from the store through behaviors Do we ever take time to explain why it is not
like sweethearting. worth it?
Clearly, organized retail crime and amateur Some companies dont like to talk about internal
shoplifting remain a significant problem; however, theft because of the uncomfortable feelings it
every year, major retailers report that their levels of produces. A better way to convey the risks of
internal theft are bigger problems than external theft. employee theft would be to explain to the associates
This means that, as the comic strip character Pogo the risk versus gain theory.
once clearly stated, We have seen the enemy and he Discussing with associates the risks of theft and
is us. Despite the major efforts at screening and comparing them with the potential gains greatly
monitoring employees, they still find a way to bite reduces their potential to steal from their employers.
the hand that feeds them. Most associates do not consider the punishments and
This is a sad commentary on the nature of the risks when they steal from their employerthey steal
relationship been the retail store and its employees. A a $100 pair of shoes and risk losing their $20,000 to
significant number of retail employees still do not $30,000 salary.
feel equitably rewarded and compensated for the The concepts of risk and gain are common sense
work that they provide. As such, they obviously feel but the wrong messages are sent out to associates
justified in taking from their employers to alleviate regarding employee theft. It seems to me that the
this perceived inequity. This phenomenon takes place message is Dont steal, or you will get caught,
in retail stores, manufacturing plants, food service, when it should be Dont steal because it is not worth
and manufacturing. It is not just a retail problem. the risk. Employees risk so much when they become
This is probably why the two best predictors of a dishonest. Here are the risk factors that can be
stores shrinkage level have been employee turnover discussed with employees:
and job dissatisfaction. In short, while bad people Employment: The national unemployment rate is
are occasionally hired who are inevitably going to somewhere between 9 and 10 percent. Surely a
steal regardless of what is done in the way of person would not want be unemployed right now.
prevention, our own employees whom we have Many of those who do find employment are under
screened, trained, and worked alongside of for years employed because they cant find jobs that pay equal
remain the greatest theft and shrinkage threats. Until to what they were making.
the problems of employee dissatisfaction and Reputation: When things go bad, our reputation
perceptions of marginality are solved, the retail can be all that we have left. Imagine being fired from
industry will continue to suffer multi-billion dollar a store that employs 50-100 people. Every one of
loss levels and suffer shrinkage levels that negatively them will soon know what happened to you and why
affect the profitability of the entire industry. and that reputation will spread.
No Silver Bullet Solution. Each time a new Salary: Without steady income, your life can
technology or loss prevention system is introduced, turn upside down. Most states will not award
there are always problems and deficiencies that unemployment benefits if there is a theft issue at
prevent optimal implementation until the bugs are hand. You could lose your car, house, or even fall
worked out. The most effective solution to behind on payments like child support or alimony.
eliminating employee dishonesty and deterring Your choices affect tomorrow. Success for
shoplifting is in convincing our own staff that today means success for the future. Failure at one job
protecting the property of the store from theft is in can lead to the same issues at another job. Most
the best interests of both the employees and the people are terminated from different jobs for the
owners of the retail corporation. In short, people do same reason (tardiness, harassment, drug use, etc.).
not steal from themselves. Sales associates must The risk versus gain theory should be used by
recognize that protecting the assets and merchandise loss prevention professionals to help employees

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better understand the risks being taken when issue of the Journal of Marketing. Following is the
dishonesty presents itself in the workplace. The next abstract from the article:
time you close an interview with a dishonest Sweethearting is an illicit behavior that costs
employee, grab a sheet of paper and detail everything firms billions of dollars annually in lost revenues.
that the employee has lost. Ask him or her if it was Sweethearting occurs when frontline workers give
worth the risk and listen to their response. Their unauthorized free or discounted goods and services
sadness and realization should motivate you to better to customer conspirators. The authors gathered
convey the stakes during your next orientation. dyadic data from 171 service employees and 610 of
their customers. They then compared questionnaire
The Dark Side of Good Customer Service responses to relevant items that determined the
One of the most commonly held principles of relationship between the customers and staff plus
shrinkage reduction, especially for shoplifting their attitudes toward the store. The results from the
deterrence, is achieved by giving good customer employee data reveal that a variety of job, social, and
service. This idea is predicated upon the assumption remuneration factors motivate sweethearting
that if potential thieves enter the store, they will be behavior, and several measurable employee traits
deterred from stealing if sales associates quickly suppress its frequency. The results from the customer
make contact with them by offering immediate data indicate that although sweethearting inflates a
customer service. The thief will then know that they firms satisfaction, loyalty, and positive word-of-
have been recognized by staff, and their behavior is mouth scores by as much as 9%, satisfaction with the
now being observed in person or by camera. The confederate employee fully mediates these effects.
hope is that if they have criminal intentions, they will Thus, any benefits for customer satisfaction or loyalty
soon leave the store and decide not to steal because initiatives are tied to a frontline worker that the firm
the LP and sales employees have recognized their would rather not employ. Marketing managers can
presence. In short, the good customer service use this study to recognize job applicants or company
dictum sends an indirect message that we know you settings that are particularly prone to sweethearting
are here. Moreover, if the thief has a desire to steal and as the basis for mitigating a positive bias in key
from the establishment, there is a significant customer metrics.
likelihood that they might not get away with the theft Without getting too deep into the details of this
while sales associates and LP staff are watching. complex research study, it is clear that the hypotheses
One of the very first things that a sales associate that the researchers examined were based upon the
in retail is taught on their first day on the job is to existing literature on employee theft and workplace
promptly approach all customers as they enter the deviance. To summarize the results, they found that
store and welcome them by offering a verbal results indicated that sweethearts had significantly
welcome and excellent service. A recent article more favorable assessments of and intentions toward
published in a marketing journal, however, raises the both the employees and the firm. In other words,
possibility that customer service can be so good that those customers who have developed sweethearting
it actually encourages crime. The argument suggested relationships with your employees who really liked
is, if the relationship between the sales associate and coming to your stores to get free or discounted
the customer is pre-existing or becomes too strong, it merchandise.
is possible that this close personal relationship could The results suggest that not accounting for
eventually lead to sweethearting. sweethearting in the customer experience could
These marketing scholars who are joining hands significantly inflate customer satisfaction scores,
with both psychologists and criminologists have loyalty levels, and positive word-of-mouth opinions.
empirically examined for the very first time the In other words, this study suggests that one of the
nature of the employee-customer dyad relationship in principal reasons why customers like comingand
order to determine what might be the antecedents and returningto your stores to shop may involve the
consequences of providing such good service and substantial discounts that they are receiving from
satisfaction that customers are getting the product for your dishonest employees.
free.
Screening for Sweethearting Characteristics
Service Sweethearting We all recognize that positive customer-
The research article is entitled Service employee relationships are known to increase
Sweethearting: Its Antecedents and Customer customer satisfaction and stimulate positive word-of-
Consequences by Michael K. Brady, Clay M. mouth opinions about retail stores, hopefully
Voorhees, and Michael J. Brusco in the March 2012 increasing sales. However, this paper considers the

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idea that some liked shopping in a store because Can Wages Buy Honesty? The Relationship
employees were regularly hooking up customers between Relative Wages and Employee Theft
with merchandise and discounts that were directly concluded that employees who felt equitably paid
inflating the levels of shrinkage and thus reducing the were significantly less likely to steal from their
profitability of the firm. employers. The article was written by Professors
As the authors of this article puts it, In a worst- Clara Xiaoling Chen of the University of Illinois-
case scenario, managers might reward the very Urbana and Tatiana Sandino of Harvard University.
employees responsible for up to 35 percent of the In 1983, John Clark and Richard Hollinger
profit losses. The authors further suggest that examined the self-reported responses of over 9,000
perhaps we need to redouble our efforts to identify employees in three different industries and found that
the trait profile of the ideal frontline worker. employees who felt equitably paid were significantly
Pre-employment screening tests can head off less likely to steal from their employers.
sweethearting if we add measures that look for high Alternatively, employees who were not satisfied with
scores on personal ethics and, alternatively, low their wages were more likely to commit employee
scores on the need social approval from others. theft.
Minimizing the frequency of sweethearting should Chen and Sandino used two complementary
also be enhanced by avoiding applicants at the very store-level datasets provided by the convenience
high end of the risk-seeking scale. store industry to test whether relative wage levels
were negatively associated with employee theft.
Using three different measures of employee theft,
including shrinkage and cash shortages, high relative
wage levels were found to be consistently negatively
related with employee dishonesty. This means that
the more people were paid in comparison to others in
relatively similar work settings, the lower was the
occurrence of employee theft. Not surprisingly, they
documented that better-quality employees were
less likely to steal.
They also discovered that higher store manager
turnover could result in less monitoring and thus,
produce higher employee theft. The link between
above-average managerial turnover and high
shrinkage is a finding that has been consistently
observed over the twenty-year history of the National
Retail Security Survey.
Moreover, Chen and Sandino went on to
examine whether or not there is a relationship
between high property crime in surrounding
neighborhoods and employee theft. They confirmed a
negative relationship, meaning that high property
crime predicts lower employee theft. A potential
explanation for this finding is that firms use better
This revealing and counterintuitive research
control systems in high property crime areas, which
study on sweethearting is especially important as we
seem to reduce both shoplifting by customers and
enter the holiday season. We know that some
employee theft.
employees work at our stores during the holiday
season for the primary reason to steal products for
Cost-Benefit Analysis
themselves or to give away products to friends and
The two authors went on to conduct an actual
family. Better preventative screening steps might
cost-benefit analysis of increasing employee wages.
provide an effective buffer that circumvents the
They predicted that increasing employee wages
need to implement oppressive security measures that
would translate into a benefit of recovering 39
alienate all front-line workers.
percent of the cost of the wage increase in terms of
lower levels of employee theft. While this does not
Wage Levels and Employee Theft Research
cover all of the cost of the wage increases, Chen and
A recent article published in the Journal of
Sandino speculated that higher employee wages will
Accounting Research (50, 2012: 967-1000) entitled,
also result in higher employee effort levels as well as

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produce a reduction in turnover. These indirect not disappear once an individual enters into the
benefits would likely cover the remaining 61 percent workplace.
of the wage increase, clearly recovering the The purpose of this study was to provide answers
remaining costs. In short, increasing wages can be as to:
justified on the bottom line, since the cost of raising Who is being caught committing theft
employee wages would result in higher profit The characteristics of store locations that lead to
margins and essentially pay for itself. loss
The authors also conclude that these results How much loss is occurring annually
suggest that overpaid employees do reciprocate to The cost of internal theft
their employers for generous compensation. This What prevention techniques are being used in an
means that they work harder, are absent less, and are attempt to control and prevent loss
more productive. In addition, the lower inventory The motivations to commit internal theft as
shrinkage relationship with higher wages when more provided by those individuals who admitted to
employees are present also suggests that relatively fraud at the specialty retailer
higher wages in the workplace mitigates against The results of the study add to the current
potential collusion among coworkers. literature, inform future research, and guide policy
With the real possibility that U.S. minimum changes within retailers in regards to total loss,
wages might be increased in the near future, many employee theft, and what may be done to prevent it.
have speculated that these higher wages would have a
negative effect on the profitability of many retail Three Phases
businesses. If the findings of this research are correct, This study was an analysis of three different
exactly the opposite might be true. In summary, an forms of data from one specialty retail chain with
increase in employee wages, especially in the retail 1,000-plus stores with an emphasis on the variables
industry, might actually reduce shrinkage losses and that predict loss in stores. Baxter collected data in
thus increase, not decrease, profits. three different phases from 2005 through 2012.
The initial phase was a total population design
Other Explanations for Internal Theft where nine independent variables were examined in
Another quality employee-theft study was terms of their impact on both dollar loss and
recently published as a doctoral dissertation. The shrinkage percentage.
author, Dana N. Baxter, completed her research while The second phase was a nonprobability sample
studying under Dr. Dennis Giever at Indiana of case files of former employees who had been
University of Pennsylvania. Baxter is presently an caught committing a form of internal theft. This
assistant professor at Davis and Elkins College in phase also included a review of the confession
West Virginia. The title of her copyrighted study is statement provided by the employee at the time of
Who is Taking the Shirt Off Your Back? A Multi- their termination interview.
Method Analysis of Theft at a Specialty Retailer. Finally, Baxter conducted eight interviews with
members of the loss prevention department to flush
Purpose of the Study out themes about both external and internal loss and
Baxters study examines the causes and cost of to garner information about the types of prevention
theft, both internal and external, at one particular techniques used at this particular retailer in an
specialty retailer chain and offers an explanation of attempt to deter crime.
motivation for those caught committing internal theft. Baxter examined the effect of store location,
Historically, crime has been perceived as an activity store location type, store location environment, cash-
of the nonworking or lower-class members of and-wrap location, and use of camera surveillance. In
society. Some still may not even consider illegal addition, she was allowed to examine the personal
actions that occur during the course of business to be statements made by apprehended dishonest
crimes at all. employees. The shrinkage for this chain was 1.62
Employee theft is one of the most rampant and percent, which was slightly higher than the national
costly issues faced by todays public and private average.
business owners. Recent research estimates that
business crime costs the U.S. approximately $186 Expectations versus Findings
billion annually. Most individuals spend the majority Baxter expected to find that employee turnover
of their adult lives at their workplace, which makes and manager turnover were highly correlated with
the study of occupational deviance and theft critical, shrinkage, but did not find that this was a strong
because the inclination towards criminal activity does relationship. Instead, she found that the highest losses

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were found in those stores with the largest number of older individuals took money for gambling debts,
managers. Clearly managers do not cause theft, but divorce, and medical bills.
this finding indicates that theft is highest in the larger Another LP respondent surmised that younger
stores, especially in malls located in urban areas individuals commit theft because they are trying to
experiencing higher levels of social strain. maintain an image, and use the brand (and
High levels of loss were also noted in lifestyle subsequent theft from the brand) to maintain that
centers located in the wealthier suburban areas. image, whereas older individuals are taking because
Many of these stores had more doors and cash-wrap of necessity due to financial responsibility, drug
locations, which allow quick exit from the stores problems, or debts.
adjacent to major highways. Alternatively, rural It is clear from the responses that most loss
stores had lower levels of loss. prevention personnel believe that younger individuals
Finally, only 20 percent of the stores had CCTV, are motivated by fun, maintenance of an image,
which did not have a clear deterrent effect. credit card debts, and a general contention against
Interestingly, the higher loss stores were more likely hard work.
to have public-view monitors, which raise the
question of their deterrent effect on shrinkage. Analysis of Confessions
When Baxter looked at demographic Baxter found that a common theme throughout
characteristics of the dishonest employee, not the reviewed literature was dissatisfaction among
surprisingly, she found that males, younger, and low- employees leading to a greater likelihood of theft.
tenured associates were more likely to steal. She Surprisingly, this was not a common theme in the
states, The majority of employees caught present research project. Baxter reports, Although a
committing theft were male, young (1825), marginal few individuals identified a level of dissatisfaction in
(sales associates), and short-term employees their statements, the majority of respondents did not
(employed for less than one year). expressly state a lack of satisfaction with their
workplace. In fact, a great majority of individuals
Assessments of LP Personnel expressed remorse for their actions and adamantly
Baxter was also given access to case reports and indicated that the employer was not to blame for their
confession statements that were made by employees participation in theft.
who were apprehended. In addition, she was allowed A few factors could explain this general lack of
to interview loss prevention personnel to get their dissonance expressed by theft participants. It is
perspectives on the causes of theft. For example, one possible that the employees at this organization feel
typical respondent wrote in the statement, I knew I that they are treated fairly and equitably, therefore
was worth more, indicating that he or she was making it harder to steal from the organization, or
unhappy with their level of compensation for the rather making it difficult to blame the organization
duties performed. Another indicated that there was for the pilferage.
conflict with the management team at the store. Another consideration for this lack of expressed
These statements support the notion that marginal, organizational dissatisfaction may be that the
young employees with short tenures are likely to individuals who were disgruntled did not compose
express frustration with their compensation and statements for the loss prevention department. The
benefits. demographic characteristics of those who chose to
Baxter wrote, Some of the individuals from the complete statements versus those who did not were
loss prevention department, including the director, similar, but one must still consider that the
echoed this information. The respondents felt that motivational differences for these individuals could
younger individuals had a poor work ethic, believed vary.
that they are not being compensated fairly for the Instead of dissatisfaction, Baxter found that
tasks they are being asked to perform by the confessions contained a financial theme for theft.
organization, and that these same individuals are The financial theme had six sub-categories for
bringing college and credit card debt to the individuals who further elaborated on life details that
workplace. In order to compensate themselves for led to participation in occupational theft. In addition
perceived injustices and to pay for these pre-existing to the statements, several loss prevention members
debts, young people took short-term marginal also discussed the financial pressures that lead
positions and quickly began to steal. employees into theft from work. Some members of
Other LP associates believed young people the loss prevention department felt that some
tended to steal for extra fun money, believing they individuals are motivated by a personal financial
would never be caught by the organization, while need, such as sickness, family issues, or even

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death....These individuals discussed life events such managerial financial authorizations within the store
as siblings with drug addictions and parents who are (suitable target).
unemployed and in need of extra help. Six of the While analyzing the statements for the
letters were personal medical issues or family motivations provided, Baxter also noted that
medical issues, such as overpriced medications, numerous statements contained phrases and
parents having cancer, and grandparents who have descriptions that could be categorized into some of
numerous medical conditions like heart disease and the techniques of neutralization.
diabetes. One respondent explained the difficulties of
life after the death of a grandparent. This grandparent
had a lot of debt from medical bills, and this debt fell
onto the grandchild. The suggested motivations of the
loss prevention members do appear to coincide with
the justifications provided by some respondents, she
wrote.
In general, these individuals did not appear to
express remorse in their written statements at the
time of the interview. One loss prevention
department member felt that the employees just do
not believe they will be caught committing these acts,
so the benefit outweighs the cost in their mind.
Sixteen of the employees caught for theft
participation did indicate that their reason was simply
The appeal to higher loyalties neutralization
an opportunity arose within the store, and they made
materialized in several different statements. One
the decision to take it. Employees saw various
respondent explained that the refund fraud was not
incidents within the store as an opportunity for easy
occurring because of a need for money; rather this
money. Opportunities such as a deposit bag full of
associate was attempting to improve the conversion
cash being left unattended or a reprint of a charge
rates within the store and help out the management
approval slip for a customer. Others may have had
team in increasing numbers. The associates claim
the opportunity present itself in the form of a
thereby rationalizes that the deception was all for the
manager or co-worker explaining how to commit
greater good of the store, not for personal gain.
fraudulent returns, or a friend pressing the employee
Several other former employees claimed in their
into overriding prices on items to create larger
letters that the theft was not occurring for their own
returns. Once these initial opportunities presented
personal gain, but rather in an effort to help out a
themselves and the employee was not caught right
friend or a loved one. Once again, these individuals
away, they seemed to rationalize that the behavior
are insisting that the theft was not for them or about
was acceptable and continued to participate in
them, but for the greater good of someone they care
the theft.
about.
The denial of responsibility was also alluded
Indications of Theft Motivation
to in multiple letters. A poignant example of this
Although the Baxter did not test any one specific
neutralization came from one letter in particular. The
criminological theory in this study, some of the
writer of this letter expresses right from the
motivations provided in the case-file confessional
beginning that this crime is a result of the bad
statements aligned with both the routine activities
economy, citing that desperate times call for
theory and techniques of neutralizations. The
desperate measures. This respondent continues on
components of the routine activities theory can be
with the denial of responsibility by explaining that
seen in the motivations coded as opportunity.
my parents, when I was young used my social
A few respondents really narrow down onto the
security number to get by either getting loans or
elements in their letters needed for crime to occur per
filing their taxes. The associate claims that by the
the routine activities theory. An example from one
time this infraction was realized, the debt was already
letter has a former employee describing his familys
piled up with no sign of relief. Now, the individual is
poor financial situation creating a need for money
unable to ascertain a loan either from a reputable
(motivated offender), a management staff that often
bank or from a friend. Therefore, this individual is
takes unauthorized breaks away from the store (lack
not responsible for their subsequent actions while at
of a capable guardian), and subsequently leaves their
work; that perhaps there was no choice in the matter,
register keys with the sales associates to make
making the theft inevitable.

9|Employee Theft Special Report


Implications for Future Study There were a few other findings of interest.
Baxter states in summary, The data collected in Alcohol use was related to admitting stealing at work.
this study has implications in both the world of Public intoxication, but not drug use, predicted
academia and in the business world, especially within admitted workplace theft. College students who
loss prevention departments of specialty retailers. reported that they have been drunk in public were
This is a relatively under-studied topic in the field of 1.56 times more likely to admit to stealing while at
criminology and has the potential to be explored in work. Finally, the more jobs that a student has had in
further detail. Hopefully, this study is the catalyst for the past and the more often these jobs involved cash
further research into other types of employee theft, handling was also related to workplace theft, but at a
employee deviance, workplace cultures and norms, lower level of predictive power.
and workplace ethics. It is important to remember that this study was
She adds, The results from this study could be conducted with college students and used self-
used to create policies that greatly increase the reported indicators of workplace theft. Nevertheless,
effectiveness in the prevention of internal theft within even with this caveat about the sample, the policy
specialty retail. This study could also provide implications are significant.
tangible information for loss prevention personnel in First, drug testing may be a good indicator of
specialty retail to use when establishing hiring current and future drug use, but may not be the best
practices, and when trying to work with human indicator of theft behavior.
resources on improving the culture of the business. Second, criminal background checks that screen
out applicants with prior convictions that resulted
Student Employee Research in incarceration are obviously supported by this
Workplace Theft: An Analysis of Student- screening practice.
Employee Offenders and Job Attributes, authored by Third, as we know in social science, the best
Elizabeth Ehrhardt Mustaine (University of Central indicator of future behavior is past behavior,
Florida) and Richard Tewksbury (University of especially considering that stealing in non-
Louisville) and published in the American Journal of employment situations is a good predictor of
Criminal Justice 27:1 (pages 111-127, 2002), workplace theft.
surveyed a large population of college students The principal paradox of this study is the finding
attending a number of major universities. Since that with the exception of the above factors, most of
existing research suggests that many dishonest which retailers screen for already, the average college
employees are younger, part-time, untenured, and student who does not steal is not dramatically
dissatisfied, the two researchers concluded that different from the one who does. Since we rely on
college students would make an ideal sample of these young people for a substantial proportion of the
employees to survey about their occupational retail workforce, there is clearly no silver bullet that
criminal behavior. can distinguish those who will steal at work from
They conducted a self-report survey of 1,531 those who will not.
students in the fall of 1996 asking them to report
personal demographics, opportunity, and previous Correlating Motivation and Opportunity
theft activities. The findings are consistent with a Dishonest Associates in the Workplace: The
number of other studies, but with rather unique Correlation between Motivation and Opportunity in
results. The authors found that three factors Retail among Employee Theft(s) is an excellent
differentiate between those who admitted stealing at masters thesis written in May 2009 by Edith Marie
work from those who did not. Some of these Fikes, who studied at the University of Texas in
predictors included theft behaviors that occurred in Arlington. This study reviews the characteristics of
other settings. associates who were terminated for instances of
For example, most impressive was the fact that employee theft by a single anonymous retailer. All of
students who have admitted that they recently have these cases were detected between the first of July
broken into a motor vehicle were almost fourteen 2007 and the end of June 2008. The study employed
(13.87) times more likely to steal from their the classic theoretical theft triangle of motivation,
employers. Moreover, students who have recently opportunity, and rationalization first introduced by
stolen something from a stranger were over four the renowned white-collar crime and embezzlement
times (4.35) more likely to steal at work. Also of scholar, Donald Cressey.
significant interest was the fact that ex-convicts were Fikes was granted access to the files of all 502
nearly four times (3.59) more likely to admit stealing employees apprehended for theft during this one-year
from their place of work than those respondents who period. She reports that the most common associate
have never been sent to prison. apprehended was a white male (59%) between the

10 | E m p l o y e e T h e f t S p e c i a l R e p o r t
ages of 18 to 22 years old (48%), employed on an support your organizations zero-tolerance policy
hourly basis (88%), who worked on average no more toward internal theft. Many of todays top retailers
than six months before being caught (36%). The rely on their loss prevention departments to give
amount stolen averaged $523, usually occurred at the them a competitive advantage by controlling their
point of sale (38%), and was discovered by operational costs through reducing shrinkage and/or
management (53.5%), but not reported by a fellow accident claims. Some of these retailers have made
associate (only 15.4%). Not surprisingly, termination loss prevention executives officers of the company.
without criminal charges filed was the most typical
final disposition of these cases (87%).
What really makes this study unique is that the
researcher also inquired as to whether the employer
inadvertently created an opportunity for the crime to
occur by not creating a credible set of control policies
and procedures designed to reduce the opportunity
for dishonesty. She found that theft increased
significantly under the following circumstances:
Damaged merchandise case not secured
Entering or exiting the building alone allowed
Failure to check returns for contents
Failure to inspect trash
Failure to process non-receipted returns
Failure to inspect refund report
Failure to scan product
Failure to secure case pick-up
Failure to secure customers credit cards
While most retailers have proactive loss
Failure to secure merchandise
prevention programs, a few view theft as a cost of
Failure to secure product per merchandising
business. These retailers may or may not have
guidelines
resources dedicated to detecting and referring
Improper or unauthorized use of company funds
dishonest employees to prosecution. However, it is
Incorrect register access
the absence of a proactive loss prevention program
Poor key controls
that is the most concerning.
Lock-up door propped open
Many times, these retailers have very relaxed
Bag checks not conducted
merchandise and cash controls, which can provide
Manager not present at the front lanes
opportunity to an employee that, in different
Password integrity problems
circumstances, would not steal. In some cases, the
Unauthorized associate in lock up
retailer may employ investigators to do nothing but
Unauthorized price overrides
identify internal-theft cases. All too often, these
In short, if the loss incurred was partially the
retailers do not dedicate any resources to preventing
fault of the actions or lack of action by management,
dishonest behavior. At first, this may seem like an
the incident was coded as such. Using these well-
issue that involves only the retailer. However, the
used criteria, the author found that 77% or 369 of
decision to ignore generally accepted cash and
the associates terminated for theft had an opportunity
merchandise controls has far-reaching implications.
created for them by management to steal.
While this research does not intend to blame the
A Moral Obligation for Prevention
victim for the dishonesty of retail associates, it does
Proactive loss prevention programs are designed
raise valid questions about the role that inadequate
to prevent employees from stealing, which can be a
controls and poorly implemented asset protection
life-changing mistake. Many employees investigated
policies play in creating the ideal opportunity for a
for theft are in their late teens or early 20s.
motivated offender to act on various temptations to
Essentially, these are our sons and daughters. Dan
steal.
Faketty described this perfectly in his article Six
Steps to a Successful Loss Prevention Program, Part
The Moral, Societal, and Legal Obligation for
3 published in LP Magazine in November 2005.
Prevention
Faketty explained that his message to employees was,
As a loss prevention professional, it is likely that
We care about you and We do not want you to
you have responsibility for detecting, investigating,
make the wrong choice. If your child worked for a
and resolving internal-theft cases. Doing so may

11 | E m p l o y e e T h e f t S p e c i a l R e p o r t
retailer, would you want operational controls and conduct (i.e., have clean hands) regarding the
awareness in place to prevent them from making a subject matter of their claim. Put another way, civil
life-changing mistake? Even if you dont have courts will recover damages for a plaintiff. However,
children, it is generally agreed-upon that we have a if that same plaintiff continues to bring similar
moral obligation to take some measures to prevent lawsuits, it will face increased scrutiny. The clean
these incidents. hands doctrine asks, Why does this keep happening,
Such mistakes can follow a person throughout and what is being done to prevent it from happening
his or her life. A criminal record can eliminate career again?
options, which reduces future salaries. If a criminal As an example, if a lawn service mistakenly
record affected the salary of a young person by an mows the wrong lawn, and the homeowner knew of
average of $10,000 annually, this would add up to the mistake and allowed it to occur, the lawn service
$300,000 in lost salary over thirty years. could collect damages. However, if the same mistake
Additionally, the future value of court penalties, fees, was made a week later by the same lawn service, the
and restitution could have a significant impact on court may assume that the lawn service did not have
retirement. Spending just $10,000 of retirement clean hands.
savings today may result in a loss of nearly $50,000 This doctrine is applicable to the civil recovery
by retirement because of compounding interest. aspect of the theft incident. Since the retailer made a
These life-changing consequences are daunting. decision not to include operational controls in its
Its easy to see how someone could lose ambition and business, it may not have clean hands. This may be
become depressed. In some cases, the person may especially true if the retailer had similar theft
contemplate hurting themselves or someone else. incidents in the past. In this case, the retailer may
Statistics on depression and suicide rates are not have foreseeability into future theft incidents. If the
available for theft cases. However, there is anecdotal retailer is found not to have clean hands, it may be
evidence to suggest that there are people who have unable to collect civil restitution. If this was
been impacted in this way. determined to be the case, it could make a proactive
loss prevention program a prerequisite to collecting
A Societal Obligation for Prevention restitution.
In addition to the moral obligation to prevent
theft, there is also a societal cost in referring cases to Different Classifications of Theft
prosecution. If the theft could be prevented, the case Preventative operational controls require
is an unnecessary burden on the criminal justice conscious effort to organize a premeditated plan to
system. Since the system is funded by taxpayers, steal and avoid detection. Absent these controls, an
everyone contributes to this retailers lack of employee could easily steal on impulse without
controls. Not only has this retailer chosen to absorb thinking the action through. Alternatively,
theft as a cost of doing business, it has chosen to pass manipulating records or systems (controls) would
some of those costs to taxpayers. Additionally, the demonstrate that the employee understood what
criminal court system is frequently used to recover he/she was doing. While stealing is a crime
damages, therefore becoming the retailers taxpayer- regardless of what conscious thought led to the
funded recovery service. incident, thought may determine how serious the
If the event has life-changing financial crime is.
implications, the employee could also become reliant For example, many crimes vary in severity by
on government assistance, such as welfare and food the effort needed to perform the crime. Loss
stamps. Absent a proactive loss prevention program, prevention departments are familiar with some of
some retailers may be adding to the growing number them. For example, a shoplifter using a tool to
of people relying on government assistance remove security tags from merchandise before
programs. Since these programs are funded by leaving the store is charged with burglary instead of
taxpayers, it could be another example of society shoplifting in some jurisdictions. The EAS tags
picking up the tab for retailers that refuse to represent a control put in place to prevent theft,
implement controls in their business. which this person took additional effort to defeat.
Another example is ORC legislation, which carries
A Legal Obligation for Prevention tougher penalties for the act of shoplifting.
Retailers may have a legal obligation to prevent One could argue that operational controls could
theft. The retailer may violate the clean hands be considered in the same manner. Like the EAS tag
doctrine, which, defined by law.com, is a rule of law example, a broken control point may demonstrate
that a person coming to court with a lawsuit or that an employee clearly understood what he/she
petition for a court order must be free from unfair was doing.

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Encouraging Prevention
We can all agree that eliminating unnecessary decision to steal in spite of controls. Some may argue
theft incidents is a good thing. Only a sadist could that this should be a difference of a misdemeanor and
enjoy the thought of someone facing criminal a felony. If we are to believe that increased penalties
prosecution, not to mention the associated lifelong prevent theft, this would further reduce internal-theft
financial penalties. There is also a real possibility of instances. Furthermore, this could be another ROI
depression and hopelessness for the affected person. opportunity for proactive loss prevention programs.
Even if you didnt have an ounce of sympathy for a Taking these steps would hold retailers
person who stole from his employer, it is doubtful accountable for preventing theft by not allowing them
that you would agree to finance an unnecessary to use the criminal justice system as their recovery
prosecution with your tax dollars. If you add the service. Additionally, stiffer penalties for stealing
possibility that this person could become part of from a proactive retailer could enhance theft
government assistance programs, a needless prevention. This may create an increased demand for
prosecution could become expensive for taxpayers. loss prevention talent, as retailers look to add
In order to encourage retailers to prevent theft in proactive loss prevention programs to their
their operations, courts may remove the ability to operations. It may also add to the value that retailers
recover civil damages if retailers cannot demonstrate with proactive loss prevention departments
a preventative control for behavior. This could create already bring.
ROI opportunities for proactive loss prevention
programs. Additionally, courts could reduce penalties Contributors to this special report include Thomas
for theft incidents in which a control was not in place, Martin, Richard Hollinger, Ph.D., Herman O.
and increase penalties for employees who make the Laskey, Jr., Adam Smith, and Ernie Deyle.

13 | E m p l o y e e T h e f t S p e c i a l R e p o r t