Combating Theft in Tough Economic Times

A recent article in The Wall Street Journal stated: “In the wake of the recession, more businesses are facing a growing financial threat: employee theft.”

The unfortunate reality is that employees are increasingly feeling financially squeezed. Many are downright scared, and fear causes even the most loyal employees to make rash decisions that can result in theft and misconduct. This trend is having an alarming impact on retailers.

According to the National Retail Security Survey (NRSS), annual loss for the retail industry was a staggering $40.5 billion last year. And when you look at the estimates for 2009, the numbers are just frightening.

In order to combat the rising threat, smart retailers will revisit and revamp their LP efforts. Taking a holistic approach to loss prevention includes gathering data about loss, employee beliefs and perceptions and using the information to shape LP program components — specifically intake, communications and analytics.

Utilizing benchmarking data can provide valuable insights for LP programs, so it is imperative to ensure that your program captures and analyzes detailed and high-level information.

If you haven’t already done so, establish a baseline by which to measure program developments. Make sure that you have full access to your data and that you can run reports specific to your organization, rather than just canned reports that may not apply to your unique situations. Determine if seasonal changes impact theft, and whether certain store managers experience more theft. Understand management’s role in promoting a culture that is not conducive to theft.

Once you have established baselines, conduct internal and external comparisons to determine the impact theft is having on your organization. It is one thing to compare store to store and region to region, but to gain true insight into theft you need to compare your information to that of other companies. This can be done with a reporting program that shows your top level data compared to organizations within your same industry or of the same employee size.

Hotline, reporting tools
An LP hotline coupled with a back-end reporting and analytics tool can provide both types of information. The hotline collects the details surrounding a specific incident; the reporting tools provide the high-level overviews that help identify trends.

Employee theft rarely goes unnoticed: If one associate is stealing, another has probably witnessed or learned about it through the grapevine. Therefore, it is important to provide employees with various reporting methods. A confidential hotline is a highly effective tool for collecting tips. In fact, according to the Association of Certified Fraud Examiners’ 2008 Report to the Nation, organizations without reporting mechanisms suffer median losses that are more than twice the rate for organizations with confidential reporting mechanisms.

Anonymity is critical; whether the reporting mechanism is phone- or web-based, employees must trust it and know that their confidentiality will be protected. When establishing a reporting program, also consider implementing an incentive program. Offering rewards to employees who provide useful information about theft in your organization greatly increases participation, and the cost of the incentive is usually minimal relative to the theft of goods.

Custom scripting
The ideal LP reporting mechanism allows for custom scripting so your organization can capture the details that are important to you. Depending on the information collected, the phone interview or web script should change dynamically to ensure that all pertinent information is collected.

An LP program cannot be effective if your employees and other stakeholders don’t know it’s available, so communicating the availability of a hotline should be an ongoing concern. Planned activities that promote ethical behavior and the reporting of theft also will yield the best results, as employees are most likely to report theft soon after they see or hear about it.

LP managers are advised to evaluate every aspect of the existing program to ensure that best practices for intake, analysis and communications are in place to uncover existing issues and prevent future loss.