Reducing Employee Theft

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Ensuring due diligence in the hiring process and minimizing opportunities to steal can save businesses from sticky-fingered workers

By Brenda Wells

Employees are the most likely people to steal from a company. This is true in any type of business, whether you’re selling insurance, greeting cards or cannabis. Employee theft is not something most business owners want to think about, but it’s a reality they must face. A 2014 study by a University of Cincinnati doctoral student found that 64% of surveyed small businesses had been the victims of employee theft.

Combatting employee theft first requires understanding why and how it happens. For someone to steal from an employer, they must have three things: desire, opportunity and motive.

Desire

Face it — you have in your possession two of the most desirable commodities in the world: cash and cannabis. There will always be desire among the employees of a cannabis business. Even if they never touch cannabis, they can always enjoy cash.

Opportunity

Your employees, by virtue of working for you, have ready access to your valuable crops and inventory. They handle it, they process it, they package it. Access is a given. Opportunity occurs any time employees are left alone. The best chance for sticky-fingered workers is when there’s nobody there to see them do it. In a small business, this is particularly problematic because it’s sometimes just too expensive to have multiple staff members handling the workload.

Motive

What would drive an employee to steal? The answer to that question is motive. There are several motives that result in employee theft.

– Anger/Resentment: Some employees are resentful of their employers, and resentment occurs for various reasons. One such reason is they simply resent authority. If you see an employee with flagrant disregard and resentment for authority, be watchful.

Another source of resentment is they feel they don’t make enough money. This is particularly true in a cash-based industry where employees see large amounts of money changing hands. If an employee is being paid $15 an hour to handle weekly cash hauls of $50,000 or more, they are bound to wonder why you aren’t paying them more.

Resentment can also stem from poor employment practices. For instance, if you have embarrassed an employee, you may find that person wishes to exact revenge on you. Don’t underestimate how easily some employees are embarrassed. Merely passing someone over for a promotion may be enough to cause embarrassment, even if they didn’t deserve the promotion in the first place.

– Financial problems: Another common motive for theft is money trouble. Employees who are always broke and/or have creditors calling them may be in a tight predicament that they think theft could easily fix. Desperate people do desperate things, and that could include stealing from their employer.

You should also watch for behaviors that can lead to money troubles, such as drug, alcohol or gambling addictions. Those behaviors have the potential to create enough desperation to lead them to steal.

– They’re a rotten apple: Some people are just dishonest and deviant. They will steal for the simple fact that they can, and that’s reason enough from their perspective.

What Can You Do?

Let’s start by going over what you can’t do. You cannot do anything about desire — people are always going to covet cash and cannabis, and want to possess it for themselves.

How can you avoid people with motives to steal from you? That’s best handled when you’re hiring. There’s a reason employers do extensive background checks on new hires — especially checking their credit. Poor credit is a sign of financial woes. You should always check references and verify the information on the application. Accurate and honest information is an indicator of good personal character. Yes, this does cost money, but that expense should simply be a part of your comprehensive risk management plan. Risk management is more than just buying insurance — it involves taking every possible step to avoid or minimize loss, even in your hiring procedures.

You can also do “employment integrity testing” of prospective employees. There are several tests available that can be administered to employees that will determine their likelihood of committing theft or other counterproductive behaviors. Employers have to pay attention to the results. Some people tend to ignore the test results because their gut tells them they’ve found a good person to hire. Don’t do that! Those tests are designed to detect factors that can’t be sensed. Let the test speak for itself.

Once you have hired someone, you must practice good human resource management. Treat them fairly, with dignity and respect, and pay them a fair living wage that is competitive in your market. Employees want two things: to be treated well, and to be paid well. If you don’t give them those two things, ultimately they are going to resent you. And we’ve already discussed how resentment is a serious motive behind employee theft.

IMG_0009Minimize opportunities

Even after you’ve taken these steps to find the right employee, some factors will still be out of your control. The only elements you can control are access and opportunity. Preventing the occurrence of theft through good risk management procedures is your absolute best defense.

This starts with minimizing opportunity and installing systems that make it difficult, if not impossible, to steal from you without detection. Guard your valuables!

Here are just a few suggestions:

– Always have two or more employees work together to reduce the opportunity for theft.

– Have a precise inventory control system that measures the amount of inventory in stock, and the amount that’s sold each day. This is how big retail stores know exactly what is being sold and what is being stolen, and you can do the same thing. Make sure this system cannot be overridden or tampered with by an employee.

– Maintain the strictest cash management procedures you can possibly afford. Never allow an employee to be left with access to cash. At least two employees should always be present when cash is counted and reconciled.

– Consider a security camera system. Most state regulations require cameras for cannabis businesses. You have a lot of inventory at stake, and you can’t afford to have it stolen. Cameras put a watchful eye over everyone, and can seriously deter theft if installed properly and set up to capture all angles of the business. They are also a deterrent to outsiders who may want to rob your business.

– Use an armored car to transport cash. Taking it out of employee hands and entrusting it to a bonded professional security firm dramatically reduces opportunity.

– Establish a business culture of honesty and integrity. Set a good example for your employees with your own behavior and your own treatment of others. Be the role model of honest and fair dealings, because employees will mimic your behavior.

– Be willing to prosecute employees who are caught stealing. A vast majority of employee theft goes unpunished because small business owners do not want to go through the process of pressing charges. Thieves know this and can be emboldened by the minimal chance of prosecution. Send the signal to your employees that you won’t be a pushover on this subject, and that you will punish those who steal from you.

Conclusion

We all want to think the best of the people we work with. At the same time, you have a business to protect, and the most likely culprits of theft to your business are, unfortunately, the people who work for you. With proper vigilance and monitoring, you can effectively minimize the risk of employee theft.

Brenda Wells has a Ph.D. in risk management and insurance. She is the Robert F. Bird Distinguished Scholar of Risk and Insurance at East Carolina University and the owner of Risk Education Strategies.  Throughout her career she has taught numerous risk and insurance courses. She can be contacted at brenda@riskedstrategies.com.

 

Comment

One response to “Reducing Employee Theft”

  1. Susan Starring says:

    Would love to become a part of your family. I live in Everett, Washington. I’ve worked for Cannahand out of Seattle. Thank you. Susan Starring.

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