The Threat of Employee Theft and How to Avoid It
with Aaron Stokes
with guest Aaron Stokes #MakingBank S4E25
News of Jeff David, former GM of the Sacrament Kings, recently took the sports world by surprise when revelations surfaced that he had siphoned nearly $13 million out of his employers’ bank account and right into his own. But what you may not have known is how prevalent this problem is in American society. Almost $200 billion is lost annually in the US to employee theft, and small and midsize businesses are disproportionately affected, accounting for nearly 70% of total cases in 2016.
Protecting your business against theft from employees is tricky… if you are overbearing and constantly snooping, you risk alienating your employees and creating a toxic working environment. This may not lead to more theft, but if your employees resent you and don’t like their job, your company will suffer. Nonetheless, you still need to take measures to safeguard yourself from what could potentially implode everything you have worked for.
How can you protect your business, your livelihood and your future without crossing any boundaries and instilling resentment? Being present in your business, hiring people you trust and having a basic level of security (i.e. cameras in key locations) are all obvious first steps. Beyond that, there are two areas to focus on.
1. Building a Culture Where Employees Feel Respected and Value Their Jobs
A 2012 study by Harvard Business School supported the ideology that smart employers have known this for years: the higher you pay your employees, the less likely they will be to do anything that would put their job in jeopardy, including steal. This is not the only thing you need to do, but having well paid employees significantly reduces the likelihood that they will steal from you.
However, there are many ways you can increase the job satisfaction of your crew without opening the tap on their paychecks to an unnecessarily high level. One of the most important things you can do for your employees is, if possible, give them some level of autonomy over their schedules. The more power your employees have over their hours, the more respected and free they will feel.
Does starting at 10 instead of 9 give them extra time in the morning to drop their kids off at school? Do you have employees who can spend 1-2 days per week or more working from home? These small changes can significantly increase the quality of life for your workers and can set your company apart from others who have refused to adapt to the times.
Are you giving your staff space to voice their opinions and give you feedback? Not only will this build a level of trust and provide an outlet for everyone to feel like a stakeholder, you may just find a gem of an idea from time to time. Employees who are well paid, have some control over their hours and feel a real sense of ownership of their work are happy employees, and happy employees are much less likely to look for ways to undermine that source of happiness.
Profit sharing or stock ownership programs that provide employees a literal level of ownership, even if it’s small, can also increase loyalty and can be used in place of increasing wages. The more ownership your employees feel, the more pride they will take in their job, and the less likely they would be to ever think of stealing. After all, they would be stealing from themselves as well.
Fostering a non-threatening, social work environment where employees feel they are among friends is also crucial to reducing stress and increasing job satisfaction, as well as providing each of your employees a picture of a career arc that will give them goals and a future to look forward to.
These are just a few ways to increase employee well-being, and ultimately you have to find what works for your business, but the simple act of taking this seriously and making your employees’ lives a priority will be a net positive. Combine this with our second tactic, and your risk will be significantly reduced.
2. Build a System Around Finances That Simply Makes Stealing Tough
There’s a reason why restaurants and other service industry businesses are at the highest risk for employee theft… it’s just too easy. It’s impossible to oversee every transaction or even every encounter in your establishment. One disgruntled employee can pilfer a significant amount of money over time. A network of disgruntled employees could tank your business in under a year. However, there are a number of methods that can make it extremely difficult for employees to successfully steal money from most businesses.
First, the less you rely on cash, the better. Eliminate it completely if you can. Accept credit cards, use purchase orders and business checks (preferably using software that keeps track of everything for you) and keep a strict record of receipts that can be used for occasional, unannounced internal audits.
Second, divide responsibilities among more than one person. The first point of contact at the cash register should not be the same person to balance the check books, and ideally more than one person should be aware of every transaction.
Third, but maybe most important, make sure you understand the software your business uses. Certain tricks, including stealing miniscule amounts over a great number of years, are very hard to catch and can cost you a fortune. Don’t leave yourself exposed, if you can’t handle this yourself, hire an expert.
It is important here not to instill a culture of dominating or distrusting your employees. Audits should be kept quiet; your employees don’t even need to know they are happening unless evidence of wrongdoing is uncovered. Even then, accusations cannot be leveled unless there is definite proof without risking a lawsuit.
Although employee theft is a huge problem in the United States and abroad, the truth is that most of it can be prevented. Keeping your employees happy and creating a system with multiple checkpoints will significantly reduce your risk, and may even positively affect your company’s overall production.