At F. A. Davis & Sons, employee theft is nothing to sneeze at. Last year, the tobacco and candy wholesaler in downtown Baltimore lost about $300,000 from employees walking off with merchandise, mainly cigarettes. This year, the company expects similar loss.
"Because there's such a large market for cigarettes, they're very easy to sell," explained Bill Kaiser, vice president of the company. "So they become an attractive item for people to steal."
To stem theft, the company has a security guard count boxes of merchandise as they are loaded onto trucks. And, about two months ago, the company ended a policy allowing employees to purchase merchandise at a discount -- they found that some employees were using the perk to smuggle out cigarettes in boxes labeled for cheaper items.
F. A. Davis & Sons isn't the only company struggling with employee theft. Nearly every business is affected by such crime, which can range from smaller offenses, such as padding expense accounts, to stealing thousands of dollars in cash, inventory or supplies, according to Neil Snyder, co-author of "Reducing Employee Theft" (New York: Quorum Books: 1991).
In fact, internal theft costs U.S. companies an estimated $40 billion annually -- and is increasing at a 15 percent annual rate, Mr. Snyder said. "This is not a problem that's getting smaller," he said, attributing the growth to such factors as declining morals -- and substance abuse.
Of the many ways to prevent theft, security measures such as video cameras have probably received the most attention. But these devices, while effective, must be bolstered by strategies that address employee attitudes, Mr. Snyder said.
Companies must establish a business environment that emphasizes honesty and integrity, and frowns upon any kind of deceit, he said. For example, owners and managers should encourage salespeople to refrain from promising customers things they can't deliver, such as telling them merchandise will arrive at a particular, but unlikely, date.
"You can establish honesty and integrity by telling your salespeople, 'We want to sell our product, but we will never lie to our customers, or mislead our customers,' " Mr. Snyder said. "They should know that if they say to someone, 'You'll have the product in your store by such-and-such a date,' it'll have to be there by that date."
To make this policy effective, owners and managers must adhere to it. That might mean giving up such regular practices as using the office postage meter for personal mail or taking office equipment home at night, if rank-and-file employees aren't permitted to do the same.
"If the owners and managers are not beyond reproach, this [policy] won't work," Mr. Snyder said. "They have to be symbols of honesty and integrity. If they're viewed as anything less than that, the employees will see the whole thing as a joke."
Your company also should speak out strongly against employee theft in policies, procedures and rules, as well as in the company newsletter, Mr. Snyder said. "It must be clear to everyone that theft is unacceptable and that it will not be tolerated."
The definition of theft varies among companies, so it's important for business owners to be specific about what characterizes stealing. For example, in one restaurant it may be considered acceptable for employees to eat food from the kitchen without paying for it; in others, it might be unacceptable. "Business owners think they know what right and wrong is, and that their view is what everyone else's is, but that's a naive assumption," Mr. Snyder said.
One of the strongest anti-theft messages you can send your employees is to prosecute anyone caught stealing.
Businesses are often reluctant to take this step. Either they don't want the publicity, or they feel it will cost them too much in money and time. But it's very important.
"When business people avoid the problem, thieves just go from one business to the next, and nothing ever happens," Mr. Snyder said. Prosecuting is "a good way to send a message to everyone in the company, 'Don't steal from me, because if you do, you're in trouble.' "
Other methods of cracking down on thievery:
* Prescreen employees thoroughly. Such measures as reference checks and credit checks can help weed out employees who might be more of a liability than an asset to your company, Mr. Snyder said.
Check all information on an application. Call past employers and find out if the person was terminated, asked to resign or left voluntarily, as well as the reasons for the departure.
* Use internal controls. Security guards and video monitoring can help reduce the incidence of employee theft. So can segregating accounting duties such as transaction authorization, asset custody and recordkeeping.