Have You Experienced Employee Theft?
If you are like me and millions of others you have personally witnessed one of the costliest and most devastating issues facing any company today and that’s the blatant theft of a companies assets by its employees. As a former contractor with over 20 employees I myself have fallen victim to each and every one of these at one point or another, and to succeed, I had to overcome all of these challenges. In this article we are going to address 5 of the worst types of employee theft and how to put systems, software & solutions in place to prevent or stop these thefts before its too late.
1. Stealing Cash
Clearly one of the most tempting and common types of theft is cash. Companies that use cash as a means of selling their goods or services are constantly at risk. Whether it’s a direct swipe from the register or a simple under reporting of sales so staff can pocket the difference, there are numerous ways which many companies fall victim. Here are some ways to help prevent cash theft by employees.
Insure Receipts Are Created & Given
If you have walk in customers, one successful practice employed by many companies is to ensure that every customer gets a receipt to prevent cashiers from not entering (or canceling out) the sale and pocketing the cash. This is why it’s common to see signs at registers such as. “If you did not get a receipt with your order, your product is free” This is a great technique that puts pressure on the cashier to not only create an accurate receipt but I hand it to the customer. Once a receipt is created it’s much more difficult to steal the cash since the total receipts must match the cash balance in the drawer. A good POS (Point Of Sale) Software, with proper security rights will go a long way in tracking cash sales, preventing voids and cancellations without manager approval, and assigning specific staff to specific sales so they can be tracked down to the original transaction. Here are some popular POS Sales Applications.
Spread Out Responsibility
While each employee has to be responsible for the cash they handle, spreading out the responsibility of accounting for that cash to two or more people, or levels of management, also lessens the risk that a single individual with sole responsibility for the correct balance. By involving others, each one with their own set of responsibilities puts pressure on the others involved to also maintain correct reporting & accountability. If one employee has the responsibility of sales while the another is required for refunds and voids, as this increases accountability on both and lessens the amount of risk when a single employee has a large amount of control. A clear and concise Policies & Procedures Manual should dictate this responsibility which keeps any one staff from having the ability to steal cash and cover up the ability from others to find out.
Minimize Cash On Hand
In the event that an employee does decide to walk off with cash, you always want to make sure that you have no more than you actually need. Have a safe drop in which only trusted managers have a key or pass code and make sure you have regularly scheduled cash pick ups or deliveries to the bank. This minimizes your risk and ensures that no thief can walk off with too much cash. You can set up a semi-regular cash deposits and different intervals so that employees are always kept guessing.
Random Cash Counts
Predictability is a thief’s best friend. If a dubious staff member sees a crack in your foundation, a loophole in your policies, or an open window or opportunity in which they feel they can steal cash, then they may take advantage of that. One way to ‘catch’ an employee who has gone to the dark side is to make unscheduled and unannounced cash counts, in which all of the cash they are responsible for, must be accounted for at that very moment. If you have just one register at your business then you may want to choose a slow time, otherwise just take a few minutes out and let the other register(s) take the customers. Employees who know their cash can be counted on any day, at any time, are much less likely to try to game the system.
2. Stealing Time
One of the most expensive, yet least controlled types of theft is time. The theft of time by employees is one of the most expensive and yet one of the hardest to control. Billions of lost revenue annually is caused by stolen and lost time.. Whether its as simple personal business on company paid time, padding their time-cards, or a more involved scheme of adding hours for non-worked shift or time, the theft of this valuable resource is a serious issue and must be address and stopped immediately. Here are some ways to measure and stop stolen time.
Learn Your Actual Costs
Once we have an understanding and we actually put an amount to this lost time, we are more likely to take action to stop it. While there are many great tools out there, the Labor Burden Calculator is a great application, in which I have personally created, that allows you to enter non-productive time, as well as all of the other Employer Costs, Benefits, Taxes & Overhead to get a True Hourly Cost of the Employee. As you enter this non-productive time, in Hours Per Year, you can actually see how high the cost (or Labor Burden) is to you on an Hourly Basis. You can download a FREE Trial of the Labor Burden Calculator by clicking here.
Electronic Time Cards
A great way to cut-down on time-card abuse is to create an electronic system in which employees are required to Sign In and Sign Out of their shifts via either a Company ID Badge or even their fingerprint. There are many great applications on the market in which owners and managers can view, control and update Daily, Weekly and Monthly Electronic Time Sheets which make it difficult for the Employee to pad extra time onto their shifts. Random Checks to make sure Employees are using the system properly without trying to game the system is also important. Here is a great round-up of Time-Card-Software.
When left alone at a computer, its quite easy, and yet often against company rules & policy, to use the computer for personal business (AKA: Doing other work or jobs, not related to your company, spending time on their personal Facebook, or just browsing the web with non company-related sites) such as Detective Dominator Keylogger, or PC TattleTale. Both excellent products for tracking employees movements on your work computers.
3. Theft of Employees
This next one could be far more expensive then the theft of Cash and yet is often overlooked, and that is the theft of an actual employee. No, I am not talking about kidnapping. There are many ways an employee can be stolen and we are going to go over them here. Employee’s are being stolen each and ever day in every type of company While Cash and Products can be replaced if they are stolen, a great employee often cannot, or is extremely difficult and expensive to replace. That is why I personally feel that this is the most detrimental type of theft and should be taken extremely seriously. While headhunting, in which a recruiter lures employees from one company to work for another, is a problem that many companies face, it’s not the kind of employee stealing we are going to focus on here. We are going to discuss a theft that is far more preventable when you know what to look for and see the early signs. One of the most expensive and damaging heists can happen when employees are stolen by other employees of yours. Yes that’s correct, and in fact it happened to me back in 2002. I hired an employee who at first did a great job and got along well with customers and co-workers alike. He unfortunately had other plans and in just a few short months he managed to convince 3 of my top employees to leave along with himself and start their own company. While they failed quickly the damage was already done and it took me years to recover. Because I believe this is a common problem that happens to a lot of companies I wanted to discuss some solutions on how to intercept this theft before it happens to you.
Do Your Homework
Bad Apples just don’t suddenly turn rotten. They usually have some sort of past indications where things have gone awry. Before an interviewee ever enters your door for an interview it’s imperative that you follow up on a prospects complete employment history. That’s a given, however I would take things much further than that. At a bare minimum complete a check of social profiles if you can, including LinkedIn, Facebook, Twitter and any other information you can gather via a Google search. Many companies hire services to do complete background check on the individual you are looking to hire such as Background Searcher. This is a great idea and should be done before every hire although it may not reveal information about an employee that would cause them to do harm to your own company. Past employment is your best indication of issues that may repeat themselves. Make sure you call previous employers and ask them as much information as they are willing to reveal about their past employee. While they may not give you an outright “Don’t hire this person”, check for any discrepancies in reasons for leaving, hiring & termination dates or job titles and descriptions than what the prospect has given. Sizable differences in information should be a glaring indication that something is wrong and just might be enough to disqualify them entirely.
Catch Them Off Guard
If the prospect does make it to the interview stage this is a chance for you to not only ask the standard questions but some they may not be expecting. There are signs that people will demonstrate when asked some non-standard questions and it’s here you can see if their answers and body language revert to a defensive style or if they freely and willingly answer your questions with honesty and integrity. Direct questions on what the prospect wants for the future, not only in business but for themselves personally will help determine if they are a right fit. Employees who become a negative influence on other staff often feel they have been ‘wronged’ by their employer and thereby feel justified in their campaign to turn other employees over to the dark side, so some well placed “what if…” questions could be very helpful to ascertain what type of character this prospect has.
One more significant point on hiring. Trust your instincts. Even if everything on paper, background checks, and in-person interviews checks out, if you have a bad feeling or something inside you is saying “No” then simply Don’t hire them. You dont need more of a reason than that. We often know already when an employee is not going to work out as we develop our instincts and gut feelings. Mistakes are generally made when we dont trust or follow these feelings. Trust Yourself.
Hire Slowly, Fire Fast
I sure wish I followed this when I ran my business. In fact more times than not I did the opposite and often regretted it. Nothing can be more important than quickly getting rid of a cancerous employee before he/she steals the minds, and sometimes bodies, of your other staff.
Buy not immediately firing a staff who is demonstrating behavior that is actually counter productive to the company and its well being you are actually sending a clear message to all employees that you not only tolerate this behavior but that it is acceptable for others to act this way.
It’s also showing everyone in your company that your standards and expectations of others, and the standards of the company itself, are falling. This creates a downward spiral effect that if allowed to continue can have devastating effects to the entire organization. Fire Fast. Don’t Wait for employee theft or something else bad to happen, dont wait for a specific event to happen. Trust your instincts and let anyone go you feel is not right for your company. I can’t stress that enough. You might argue about wrongful termination lawsuits, and unemployment insurance rate hikes, and those are valid arguments however they both pale in comparison to the damaging effects of keeping an employee within your organization who may be turning your good employees from good to bad, or worse, planning a mass exodus. While my stance may not be politically correct, this is about business, and good employees will shine and thrive in your organization, and when they see that you tolerate nothing but they best for your company, they will respect and appreciate your commitment to its core values.
Regular One-On-One’s With All Staff
One great way to not only connect with your staff, but to find out what is really going on within the company is regular one-on-one meetings with all staff. If you can, try to get away from the office environment, maybe for a coffee or lunch, where your staff may feel more comfortable, as opposed to you be being behind a desk. People generally will let down their guard when away from the office or job site and may share things that they would not normally. One of the goals of this meeting is to not only find how things are going with them and their job but how things are with other employees and what they are hearing and seeing on the job. You can use this opportunity to determine if there are any bad seeds starting among the staff. Keeping your eyes and ears on the workroom floor will really help weed employees who may be starting trouble well before they can have a permanent and negative influence on others. During your meeting, please assure the employee that your conversation will be kept completely private and not shared with anyone else. It’s essential that you keep your word in this case. If the information that the employee has shared with you becomes public information you have destroyed your trust with that employee and this trust may never be regained. If the information supplied by these meetings, from employee theft or any other reason, results in another employees termination or reprimand its critically important that its handled extremely discreetly and that details of how this information was obtained must be kept confidential.
4. Stealing Products
Companies lose billions of dollars a year on product theft. For many companies this itself can be the difference between a profit and loss. When I ran my company it was one of the biggest challenges I faced as I had a warehouse full of products. Whether its merchandise that is set to be sold, or office supplies from the store room closet, when employees take these materials beyond the office or store, for personal use or gain, its theft. Here are some ways that this type of pilfering can be eliminated or considerably reduced.
One of the best ways to reduce theft is to install a complete surveillance system with at least a 72 hour backup recordings on a secure server in a locked room. Not only do we want to be able to record videos of the entire floor where employees could possibly take merchandise, we also want to install cameras on the outside if possible so we can track incoming and outgoing events. To avoid employees tampering or removing the actual video data we have to make sure that the video feed is held in a secure environment such as a locked closet or server room. You may want to go one step further and have this feed backed up on a secure online server so that you can view and track the feed from anywhere in the world (I sure wish I had this when I went on vacation and my employees had their own ‘garage sale’ with my products) You can find an entire selection of surveillance systems here. Even if you dont’ quite have the budget for a full surveillance system, just the sight of a camera can do a lot of good and prevent your products from walking out the door. I have known a few business to have fake cameras, however I believe there might be a legality issue with fake cameras as they can create a false sense of security so please check with your attorney before choosing this option. Surveillance Cameras are an excellent way to prevent and catch employee theft.
Get a Mole
While highly controversial, but also highly effective, a mole, or someone hired to specifically report the activities of other employees, can be a great way for an owner or manager to know the actual thoughts and actions of the employees on the floor or field of the establishment. Mole placement, when done correctly, can be extremely useful in weeding out property theft, and a whole lot of other issues with employees that an owner or manager may not be aware of. It should be warned however that if the identity of the mole is found out it could be dangerous for them which is why its a very controversial method and should be chosen with extreme caution. The mole’s real motives should be protected at all times and never revealed. It’s perhaps an agreement that should be made and known by just two individuals only (the owner & the mole) and no others to reduce the risk of the mole being exposed. The mole option is best used in short intervals in which the mole is hired, gets all of the information required and then is ‘fired’. Only after the mole is gone should any action be taken based on the report from the mole.
Tight Product Controls
While sometimes expensive and labor intensive to set up, having a comprehensive system of stock & material counting with proper software to keep track of materials purchased, sold, damaged & lost is critical to any company serious about minimizing product theft by employees. A physical count must be done by trusted staff, and should not be the same staff who handle the products on a daily basis. Counts must be done often enough so if there is employee theft going on, it can be minimized and the offending staff located and removed.
Secure the Premises
Many businesses hire security to check employee belongings as they leave the office or store which can be an effective method for stopping theft. They also make sure that any garbage being removed is watched and often lock the garbage container on the outside, as employees have been known to hide product inside the garbage, only to rummage through the trash after hours to pick up their stolen merchandise.
Post Severe Warnings
Clear and stern Employee Warning Signs like these, within employee areas are a great way to let employees know that you are serious about theft and you will take quick and decisive action when an employee is caught stealing. Staff must be made aware that you are well prepared to handle theft, regardless of who they are or how important they are to your organization.
5. Theft of Company Data
Company data such as Customer & Financial Records, Private Employee information and Company Intellectual Property are at considerable risk in any company in which an employee has access to computers. Theft of this type of data is often never found out and is very difficult to catch since employees can often copy the data without leaving much of a trace. There are, however, some great policies, applications and systems that you can institute that can make this type of theft very difficult for any staff member. I will go over a few of the common approaches
Most data breaches can occur when a USB port is unlocked, allowing the employee to plugin his/her own USB flash drive, and copying data from your computer to their flash drive. There are a few ways to handle this, however some software solutions, and some hardware solutions. If yo are technically inclined and are able to edit the computers registry you can lock your computer’s USB ports by way of editing the registry (Only try this if you understand how to edit the registry). Some simple hardware solutions allow you to insert a USB lock into the physical drive, which is pretty handy as its easy to unlock with the right key as you can see here. There are also some software solutions, that help prevent data loss by locking USB ports, in which you can see a list of applications here.
Strict Folder Protection & Permissions
There may be company data that is more sensitive than others on your company computer or server. Setting up proper security so that only the right people have access to the right data is imperative. There is no reason for your staff to have access to data that they do not need or require. Files should be separated based on their security level into separate folders. As an example you may setup one folder in which is a “Public Folder” for those items in which a security level may not need to be set. Another folder might be named “Secured Data” in which a handful of staff have access to, and then perhaps a third “Admin” folder in which just top administrators have access to. For each of these folders you can set specific Read, Write, Modify, etc. To Password Protect and/or Encrypt Windows PC folders you can read a great article here, and for Mac users, an article here. Also having backups of all your files is critically important. I recommend a Free DropBox Account if you dont already have one as its a great way to backup and access your data.
Physically Lock Down Computers
Now that we have protected data from being electrically viewed and taken we also have to make sure that someone cannot physically walk off with your data. Preferably your company data should be stored on a single (or multiple) servers in a locked server room. This is the ideal situation, however if you have computers and data outside of a locked room, its best to make sure those computers are locked or bolted down to the premises so that they cannot easily ‘walk off’. There are a few great products that can hep you keep your computers in place. If you have a PC Tower you and try one of those PC Station Locks, and if you have laptops you can try one of these
Employee Theft Prevention
While it may be difficult to entirely eliminate all forms of employee theft, taking the right steps to protect all of your company assets as laid out before should help eliminate the majority of it, potentially making the difference between a profit and a loss. Being prepared and informed of the types and ways in which employees can steal from your company is already a great start. Hopefully this article has helped you in that understanding. I would love your feedback and comments below so please take a moment to write about your experiences with employee theft and how you dealt with it, as we can all learn together.