Employee Theft in the Retail Industry

A Review of Current Research

Honors Thesis Ashley E. Foerst University of Florida

Thesis Advisor: Richard J. Lutz, Ph. .

! Table of Contents ". "ntroduction: #hrin$a%e and E&'loyee Theft in Retail A. The #co'e of E&'loyee Theft ). The *ro+in% "&'ortance of E&'loyee Theft , -. Thesis .vervie +/ "". Factors -ontri0utin% to E&'loyee Theft A. 1hy E&'loyees #teal i. 2onsocial a''roach ii. #ocial a''roach ). Ho+ E&'loyees #teal i. Traditional theft 34 34 35 35 / (

ii. -urrent trends """. Financial -osts and #ocial "&'lications A. -ost to -onsu&er 3/

3, 3/

). -ost to Retailer

36

-. #ocial -ost "7. Preventin% E&'loyee Theft A. 2onsocial a''roach to theft 'revention ). #ocial a''roac h to theft 'reventi on !5 ishonest E&'loyees A. Ho+ to handle dishonest e&'loyees ). The investi%ation 7. !/ !/ !6 36 38

( -onclusion A. .''ortunities and -oncerns ). Final Thou%hts -. References 7". !8 !8 54 53

I. Introduction: Shrinka e and Employee Theft in Retail The Scope of Employee Theft Retail and theft %o hand in hand. This 'a'er focuses on e&'loyee or internal theft in the retail industry in 2orth A&erica. E&'loyee theft is a for& of deviant 0ehavior that %reatly contri0utes to retail shrin$a%e. Each year, U.#. co&'anies lose a0out 95/ 0illion to shrin$a%e.

, Shrinka e refers to inventory losses caused 0y sho'liftin%, e&'loyee theft, &erchandise 0ein% &is'laced or da&a%ed, and 'oor 0oo$$ee'in% :Levy and 1eitz, !446;. Althou%h sho'liftin% &ay receive &ore &edia e<'osure and attention, e&'loyee theft accounts for ((.!= of retail shrin$a%e :-hain #tore A%e;. "t is i&'ortant to differentiate inventory shrin$a%e versus cash loss. 1hen an e&'loyee steals inventory, the ne%ative difference 0et+een +hat is su''osed to 0e there and +hat actually re&ains is called inventory shrinka e. Ho+ever, +hen an e&'loyee fraudulently discounts an ite& or steals fro& a safe, this does not affect inventory and is a cash loss. -ash theft can also affect inventory shrin$a%e, such as voidin% transactions :Hayes, 3>>5;. "t is also i&'ortant to note that there are different ty'es of theft. Embe!!lement refers to a 0reach of trust +here0y e&'loyees ta$e &oney or 'ro'erty that has 0een entrusted in their care? on the other hand, pilfera e refers to e&'loyees +ho steal in s&all @uantities. "n the retail +orld, 'ilfera%e often results in &uch %reater losses than e&0ezzle&ent. Therefore, this 'a'er +ill &ainly address e&'loyee 'ilfera%e, not e&0ezzle&ent or other lar%eAscale for&s of theft. For e<a&'le, accordin% to the 2ational Retail #urvey !44!, the avera%e loss fro& a dishonest e&'loyee +as 93,5(3 versus a &ere 9!46 avera%e loss resultin% fro& a sho'lifter. This is e<'lained 0y the fact that e&'loyees +ill tend to steal &ore often and in lar%er a&ounts fro& a sin%le e&'loyer than sho'lifters, +ho sto' or &ove on to another location.

/ The "rowin Importance of Employee Theft Retail theft has al+ays 0een a 'ro0le&? ho+ever, retailers are finally 0e%innin% to understand the i&'act dishonest e&'loyees &a$e.
The financial i&'act of these cri&es is 0i%%er than the financial i&'act of all street cri&es 'ut to%ether for a sin%le year. This, cou'led +ith the fact that a &aBority of the losses are attri0uted to e&'loyees and not outsiders, &a$es dishonesty in the +or$'lace the sin%le &ost si%nificant cri&e 'ro0le& in A&erica :Hollin%er, 3>8>;.

Althou%h there are &any statistics and nu&0ers, no one really $no+s ho+ &uch e&'loyee theft is really res'onsi0le for the noticea0le shorta%es of inventory. Cana%ers rarely catch e&'loyees stealin% or e&0ezzlin%? rather it is discovered durin% inventory or audits, at +hich ti&e &ana%ers donDt $no+ +hether the shorta%e +as caused fro& internal, e<ternal, or 0oo$$ee'in% error. Cana%ers +ould rather e@uate losses to e<ternal theft and 0oo$$ee'in% errors than ad&it that their trusted e&'loyees are stealin% fro& the co&'any :Hollin%er, 3>8>;. 2o+ that retailers are finally ad&ittin% the i&'ortance of e&'loyee theft, cou'led +ith the onset of an econo&ic recession, ac$no+led%in% and 'reventin% e&'loyee theft has 0eco&e of ut&ost i&'ortance. Accordin% to a study 0y -hain #tore A%e, 58 of (3 countries have seen an increase in the a&ount of shrin$a%e, &ost 'ossi0ly attri0uted to 0y the recession. "n addition, as stores see an increase in shrin$a%e and decrease in 'rofits, they are often cut security costs, &a$in% the issue +orse. #verview

6 1here does all this o&inous infor&ation lead usE .ne of the $eys to co&0atin% e&'loyee theft involves understandin% +hy e&'loyees steal. o e&'loyees steal si&'ly 0ecause they FneedG or +ant so&ethin% they canDt afford, or is it &ore co&'licatedE Also, " +ill e<a&ine literature discussin% ho+ e&'loyees &ana%e to esca'e +ith so &uch inventory or &oney 0efore or +ithout ever 0ein% cau%ht. Later, +e +ill loo$ at the costs and financial i&'lications of internal theft. Finally, +e +ill e<a&ine the 'ractices and +or$ environ&ent that can hel' 'revent or hinder e&'loyee theft. As thieves e<'loit technolo%y to sell stolen &erchandise, utilizin% and develo'in% technolo%y to 'revent internal theft is 0eco&in% &ore co&'le< and essential to retailer success. II. $actors Contributin to Employee Theft %hy Employees Steal Althou%h 0illions of dollars are lost each year to e&'loyee theft, researchers have not 0een a0le to definitively order the chain of events that lead to theft. "n fact, there are &any conflictin% vie+s on this issue. Accordin% to )au&er and Rosen0au&, &ost research indicates that deviant acts are caused 0y a co&0ination of 0oth 'ersonal and situational factors. .ther research classifies theories 0ased on social and nonsocial a''roaches to theft. Hollin%erDs 3>8> theory states that three conditions &ust 0e 'resent 0efore e&'loyee theft can occur: &otivation and Bustification for deviance, the o''ortunity or access to steal, and the lo+ 'erce'tion of ris$.

8 This theory +as ada'ted 0y Hayes :3>>5; to fit the retail industry. Hayes refers to his theory as the e&'loyee theft trian%le.

First, everyone +ho steals needs to consciously &a$e the decision to do so. 1hat allo+s nor&al e&'loyees, those not nor&ally deviant, to decide to ta$e fro& their or%anizationE Hollin%er e<'lains &otivations and Bustifications for deviance 0y focusin% on four factors. The first factor is the tar%et attractiveness? the e&'loyee $no+s a0out so&ethin% +orth stealin% that the co&'any o+ns :Hayes, &otive to steal. Accordin% to can 0e either or%anization or 3>>5;. 2e<t, there needs to 0e a
QuickTime and a Hollin%er, TIFF (Uncompressed) decompressor are needed to see this picture.

factors influencin% theft internal the +or$ as a result of

'ersonal 'ro0le&s e<ternal to +or$. #ur'risin%ly, Hollin%er indicates that e&'loyee theft is unrelated to an e&'loyeeDs 'articular econo&ic situation. E&'loyees, +ho +ere 'aid hi%her than others too$ Bust as &uch fro& the co&'any as lo+er 'aid e&'loyees. 2or&ally the &otive has to deal +ith 'ersonal or resale 'ur'oses :Hollin%er, 3>8>;. The third as'ect is contri0utin% factors. "f e&'loyees vie+ the co&'any as an inani&ate o0Bect +ith unli&ited funds, they are &ore li$ely to steal. Also, e&'loyees +ho are not

> co&&itted to the or%anization and do not feel that their &ana%ers are co&&itted to the& are &ore li$ely to steal :Hayes, 3>>5;. Another contri0utin% factor is Bo0 dissatisfaction. This theory states that e&'loyees +ill steal fro& their e&'loyers in order to resolve feelin%s of ine@uity :Hollin%er, 3>8>;. The final factor is the Bustification of the act, +hen the thief Bustifies his or her actions in order to neutralize hisHher %uilt. These include techni@ues such as denial of res'onsi0ility :itDs not &y fault they leave the dra+ers unloc$ed;, denial of inBury :the a&ounts are so s&all, itDs no 0i% deal;, denial of victi& :this co&'any &a$es so &uch &oney any+ay;, conde&nation of the conde&ner :the co&'any shouldnDt 0e sur'rised after +hat they have done to &e;, a''eals to hi%her loyalties :" need this &oney to ta$e care of &y &other;, and the &eta'hor of the led%er :e&'loyee feels they have earned the ri%ht to 0e deviant;. As Hollin%er 'oints out, F1hen su0stantial nu&0ers of the +or$ force have a reservoir of easily invo$ed e<cuses for their dishonesty, +e can see ho+ theft can @uic$ly 0eco&e +ides'read in an or%anizationG :Hollin%er 3>8>, '. !/;. The ne<t le% of the theft cycle is the access and a0ility or o''ortunity to steal. Retail e&'loyees fre@uently have access to the &erchandise, and de'endin% on the security, often the o''ortunity. The thief also needs to 0e creative enou%h to 'ull off the Bo0, $ee'in% cool under 'ressure and 0ein% 'atient. 2evertheless, re&e&0er that al&ost all e&'loyees have an

34 o''ortunity to steal, and not all are involved in these activities. Finally, Hollin%er says, FThe de%ree of 'ersonal autono&y that Bo0 offers, alon% +ith the s'ecific influences of the +or$ %rou', deter&ines an e&'loyeeDs 'ossi0le level of theft :Hollin%er 3>8>, '. !6;.G The last 'art of HayesDs Retail Theft Trian%le is the lo+ 'erce'tion of ris$, i.e., +hether the thief thin$s he or she +ill %et cau%ht. There are t+o 'arts to this? the first is the li$elihood of 0ein% cau%ht, and the second is the li$ely severity of the conse@uences or 'unish&ent. The ris$ of %ettin% cau%ht and 'unishedHhu&iliated in front of fa&ily and 'eers &ust 0e far %reater than any 'otential %ain :Hayes, 3>>5;. The %ood ne+s is that &ost e&'loyees 0elieve that they +ill %et cau%ht if they atte&'t to steal fro& their e&'loyers, so they are easily deterred fro& theft. .n the other hand, Hollin%er 0elieves that the s&all %rou' of 'eo'le +ho feel they +ill not %et cau%ht account for the hi%hest levels of theft. .ften, this %rou' $no+s the +orst that can ha''en is they +ill 0e fired? and for e&'loyees at the lo+er levels of an or%anization, they +ill si&'ly find +or$ else+here. Therefore, if an e&'loyee isnDt co&&itted to his or%anization or isnDt fearful of 0ein% cau%ht, there is little the e&'loyer can do to 'revent theft. 2evertheless, deterrent devices such as in$Hdye ta%s or electronic devices can 0e i&'le&ented and +ill 0e discussed later in this 'a'er. &onsocial Approach Accordin% to *reen0er% there are t+o nonsocial a''roaches? the first is the security a''roach, +hich is 0ased on the assu&'tion 'eo'le steal 0ecause they have the 'hysical

33 o''ortunity to do so. The second a''roach is the one &ore su''orted 0y cri&inolo%ists, +hich creates a 'rofile of individuals +ho are &ore li$ely to steal 0ased on individual differences. E&'loyers can ad&inister honesty tests and situational intervie+s in order to 'rofile individuals +ho &ay 0e &ore li$ely to steal. Cuch of the a0oveAdiscussed FTheft Trian%leG has enco&'assed the nonAsocial a''roaches to e&'loyee theft, &ostly the security a''roach. A &ore recent develo'&ent has 0een that of the social deter&inants of theft, +hich states that e&'loyee theft is a 0ehavior that is carefully re%ulated 0y or%anizational nor&s and +or$ %rou' nor&s and that stealin% is an effective +ay of su''ortin% these nor&s :*reen0ur%, 3>>6;. Social Approach *reen0er% :3>>6; states that e&'loyee theft can actually 0e thou%ht of as a 'rosocial 0ehavior that 'ro&otes an or%anizationDs +or$ nor&s. He has cate%orized the &otives into four co&'onents 0ased on the actorDs intention :'rosocial or antisocial; and the tar%et :e&'loyer or co+or$ers;. He has created an acrony& for #TEAL :#u''ort, Th+art, Even the score, and A''rovaL;. The A''rovaL &otive occurs +hen the su'ervisor condones theft? therefore e&'loyees steal to adhere to su'ervisory nor&s. This +ould 0e 'rosocial 0ehavior tar%etin% the e&'loyer. E&'loyers encoura%e e&'loyee theft +hen they en%a%e in it the&selves, 0ut *reen0er% also su%%ests that su'ervisors su''ort theft as a le%iti&ate &echanis& of 0ehavior control. To

3! illustrate, he e<'lains ho+ the su'ervisor of an undisclosed co&'any +ould allo+ e&'loyees to Fta$e ho&eG 0a%s of dia'ers for ten cents if they did a 'articularly %ood Bo0 of cleanin% the stoc$ roo&. Another e<a&'le sho+s that +hen su'ervisors intentionally 're'are for certain ite&s to 0e stolen. "n the retail industry, store &ana%ers often allo+ so&e ite&s to %ather dust so they can 0e 'urchased at reduced 'rices 0y e&'loyees. These &ethods de&onstrate ho+ theft can 0e 'art of an invisible wage structure. Ho+ever, &ana%erial acce'tance of e&'loyee theft is al&ost al+ays infor&al and uns'o$en :*reen0er% 3>>6, '. >4A>!;. The su''ort &otive de&onstrates ho+ e&'loyees 0eco&e socialized +ith res'ect to deviant nor&s. They overloo$ theft in order to adhere to their co+or$ersD standards. "n the cases +here e&'loyees steal on their o+n, su''ortin% %rou' nor&s ta$es 'lace 0y not F0lo+in% the +histleG. Another i&'ortant su''ort is referred to as reci'rocation, +hich involves sharin% su%%estions a0out effective +ays of stealin% :>5;. This ty'e of reci'rocation often occurs in de'art&ent stores and hel's de&onstrate confor&ity to a valued %rou'. E&'loyees +ho reci'rocate 0y 'artici'atin% in theft are often 'raised 0y their 'eers and satisfy the need of confor&ity. Therefore, accordin% to *reen0er%, e&'loyee theft is not only driven 0y &aterial &otives 0ut 0y social &otives as +ell. Ty'ically, e&'loyees 'ass these attitudes or 0eliefs alon% to ne+ e&'loyees, 'reservin% either the for&al rules :'ositive attitude to+ards su'ervisors; or the infor&al rules :often ne%ative attitudes to+ards su'ervisors;. "nfor&al rules can 0e rather

35 e<'ansive, deter&inin% such thin%s as the ty'es of 'hysical 'ro'erty that can 0e ta$en, the conditions under +hich 'ilferin% is tolerated, and the a&ount each +or$er is entitled to ta$e +ithout 'unish&ent :Hollin%er, 3>8>;. The ne<t &otive focuses on antisocial 0ehavior, the &otive to even the #core. "n this case, e&'loyees 'ur'osely try to cause the or%anization har& in order to Feven the scoreG. To illustrate, *reen0er% conducted an e<'eri&ent in three &anufacturin% 'lants all +ith lo+ theft rate. T+o of the factories encountered a 3,= 'ay cut and the third served as the control. After a tenA+ee$ 'eriod, the 'lants +ith the 'ay cut had theft rates si%nificantly hi%her than the control. Then, he rando&ly selected one of the t+o 'lants +ith 'ay cuts and ela0orately e<'lained in a carin% tone the need for the 'ay cut. The other 'lant +as %iven an inade@uate e<'lanation. .ver t+ice as &uch theft occurred in the 'lant +hose e&'loyees received the inade@uate e<'lanation :*reen0er% 3>>4;. *reen0er% concludes that 'ay ine@uity induced theft, 0ut also the a&ount of theft is induced 0y the nature of inter'ersonal treat&ent received :*reen0er%, 3>>6;. Finally the th+art &otive occurs +hen a &e&0er of the +or$ %rou' violates nor&s re%ulatin% theft. #o&eti&es e&'loyees li$e to ta$e too &uch or too often. Ce&0ers +ho +ish to violate %rou' nor&s are often chastised 0y the %rou' or 'unished. Accordin% to an intervie+ 0y Cars in 3>64, doc$+or$ers that resisted %rou' control +ere F'unishedG to such an e<tre&e that they re%ularly @uit their Bo0s. E&'loyee theft is an effective +ay of e<'ressin% discontent rather

3( than confrontin% the %rou'. 'ow Employees Steal "t is i&'ortant to $no+ the len%ths to +hich e&'loyees +ill %o throu%h to steal. E&'loyees are often cunnin% in their &ethods of theft. "n retail, e&'loyees can steal cash or &erchandise :ti&e and infor&ation are other o'tions 0ut +onDt 0e discussed;. First, cash theft can either 0e visi0le or invisi0le. 7isi0le cash theft can occur in the office, +here e&'loyees &ay have access to a safe or 'ic$Au' counts, or at the 'oint of sale. 1hen e&'loyees steal fro& the re%ister, they often &a$e no atte&'t to conceal the cri&e and ho'e they +ill 0e only one of &any sus'ects since &any cler$s +or$ the re%ister :Hayes, 3>>5;. "nvisi0le cash theft is &ore deceivin%, e&'loyees &ay fail to record a sale, underArin% the a&ount of the &erchandise, or refund fraudulent 'urchases. They &ay also void a transaction after the custo&er has left and ta$e the cash. #o&eti&es they overchar%e custo&ers so they can steal the difference or cash 0ad chec$s fro& an acco&'lice. Perha's the &ost creative are e&'loyees +ho 0uy &erchandise +ith the e&'loyee discount and then return the &erchandise at another store for full value. )eyond cash theft, &erchandise theft has evolved into an inventive and s$illful 'ractice a&on% resourceful e&'loyees. These store level &ethods of theft +ere ta$en fro& Hayes, 3>>5. E&'loyees can 'ass &erchandise across the counter to friends or acco&'lices, +ho &ay loo$ li$e an ordinary custo&ers, this is $no+n as Fs+eetheartin%G and is the &ost 'revalent for& of

3, e&'loyee theft. -oncealin% &erchandise and stealthily re&ovin% it durin% 0rea$s is a co&&on 'ro0le&, as is 'uttin% &erchandise in the trash or other concealed containers for later theft. #ales'eo'le &ay also have access to delivery vehicles or +arehouses +here they can directly steal the &erchandise. "t is often co&&on for e&'loyees to +ear un'aid &erchandise ri%ht out of the store.. E&'loyees &ay Fda&a%eG &erchandise to Bustify a 'rice &ar$do+n and later 'urchase the Fda&a%edG ite&. Hayes also classifies theft as %ivin% e&'loyee discounts to unauthorized fa&ily or friends, &a$in% lon% distance 'hone calls, and shortin% custo&ers s&all a&ounts of chan%e. The other ty'es of e&'loyee theft include e&0ezzle&ent and &iscellaneous a0uses. Hayes classifies e&0ezzle&ent into four cate%ories. )an$ de'osit rollin% includes stealin% all or 'art of the dayDs de'osits and re'lacin% the stolen cash +ith future de'osits. 2e<t, chec$ $itin% occurs +hen e&'loyees float funds 0et+een a le%iti&ate account and one set u' 0y the e&'loyee. They +ithdra+ cash fro& their account and de'osit a chec$ fro& their account to cover the ori%inal a&ount 0efore the chec$ clears. La''in% arises +hen dishonest e&'loyees $ee' 'art of the 'ay&ents &ade on accounts received. Lastly, 'ayroll fraud occurs +hen e&'loyees add fictitious na&es to the roster and 'aychec$s are issued to the dishonest e&'loyee :+ith the fictitious na&e;. .ther &iscellaneous a0use can occur +ith travel e<'enses, +or$erDs co&'ensation fraud, and co&'uter cri&e and data loss. "f hac$ers reach a retail co&'uter, they

3/ can issue fictitious 'ayroll chec$s, steal confidential co&'any data, and destroy lists of inventory to cover theft activities. -urrently, the use of ne+ technolo%y in the retail industry and %reater $no+led%e at youn%er e&'loyees has led to ne+ ty'es of theft. Accordin% to the article F#ho'liftersE #tudies #ay Iee' an Eye on 1or$ersG, %ift card fraud has ta$en the retail industry 0y stor&. )a&field says, FTo e&'loyees, this is li$e currency. "tDs al&ost as %ood as the U.#. dollar.G The easiest +ay for e&'loyees to steal is to %ive custo&ers a 0lan$ %ift card and ta$e the FloadedG one for the&selves. Also, e&'loyees often &ana%e to falsely refund &erchandise, and then electronically 'ut that a&ount onto a %ift card. A !4 yearAold e&'loyee fro& #ears &ana%ed to divert 95,,444 onto %ift cards and then activate the&. Another cashier +rote do+n custo&ersD credit card nu&0ers and fraudulently filled %ift cards, stealin% &ore that 935,444 :*reenhouse, !44>;. LossA'revention concernin% %ift cards is difficult. For one, it is very hard to trac$ a %ift card, &uch harder that a credit card. 2o identification is needed, 'lus the online &ar$et'lace has created an outlet for stolen %ift cards. #tolen cards can 0e sold in 0ul$, returnin% a0out 84 cents on the dollar, &uch hi%her than stolen &erchandise. e)ay has finally li&ited sellin% cards over 9,44 to one 'er +ee$. Althou%h retail 'rofessionals have refused to discuss this ty'e of theft, it has 0eco&e one of the 0i%%est co&'onents of or%anized retail cri&e :*reenhouse, !44>;. III. $inancial Costs and Social Implications Cost to the Consumer

36 Cost of the costs of retail theft are ulti&ately to the consu&er. .0viously, &erchants raise 'rices to cover the cost of doin% 0usiness, +hich increases +ith e&'loyee theft :includin% cost of &erchandise and cost of security;. Accordin% to a study conducted 0y the University of Florida, the avera%e fa&ily 'ays an e<tra 9!444 a year as a result of retail theft :-hase;. ue to the fact that stolen &erchandise doesnDt %enerate 'rofit and cannot create ta< revenue, consu&ers also have to 0ear the cost of lost ta< revenue. Third, uninsured financial losses due to cri&e are ta< deducti0le, there0y increasin% the national de0t :Hollin%er, 3>8>;. Finally, as e&'loyee thieves are a''rehended, it 'uts a strain on the already over0urdened cri&inal Bustice syste&. A%ain, the consu&er has to 'ay for the e<'ansion of the Bustice syste&. As consu&ers 0uy less &erchandise due to hi%her 'rices, havin% to raise 'rices doesnDt only hurt the 'urchaser, 0ut the retailer as +ell. Costs to Retailer As &entioned 0efore, retailers lose a0out 953 0illion due to retail theft each year :Hollin%er, !44!;. Retailers &ust re'lenish the stolen ite&s. These re'lace&ent costs tend to 0e hi%her, since retailers lose s'ecial deals or 'urchases they had 0efore. Another co&&on 'ro0le& +ith re'lacin% inventory results fro& a shortfall of &oney. 1hen e&'loyers steal &oney fro& the re%ister? sales 'urchases stay the sa&e, yet &oney in the re%ister does not &atch recorded sales. Retailers then need to divert funds fro& other sources or ne+ invest&ents to cover the cost

38 of re'lace&ent &erchandise. E&'loyees tend to steal the &ost desira0le and ne+ &erchandise, resultin% in a lac$ of selection for custo&ers. "n the co&'etitive retail industry, &issin% inventory leads to loss of sales and overall custo&er dissatisfaction. Social Costs .ther costs include increasin% insurance costs and 0usiness failures. FThe U.#. -ha&0er of -o&&erce :3>6(; esti&ates that a''ro<i&ately 54= of the 0usiness failures that occur each year are 'reci'itated or related in so&e +ay to e&'loyee dishonestyG :Hollin%er 3>8>, '. >;. 2ot to 0e overloo$ed, e&'loyee theft has a social i&'act on the retail industry as +ell. ishonest +or$ers often distrust each other, +hich can lead to ne%ative social relationshi's in the +or$'lace. As +or$'lace &orale dissolves, custo&ers &ay find e&'loyees less hel'ful and e&'loyers &ay find e&'loyees shir$in% on Bo0 res'onsi0ilities. This ne%ative e&'loyee at&os'here can lead to other counter'roductive 0ehaviors in the +or$'lace such as a0senteeis&, dru% use, and slo''y +or$&anshi'. I(. )reventin Employee Theft "t is i&'ortant to reco%nize e&'loyee theft as a &ana%e&ent 'ro0le&, not only a cri&e 'ro0le& :Hollin%er, 3>8>;. #ince e&'loyee theft is 'art of 'ro'erty deviance, Hollin%er clai&s %ood &ana%e&ent techni@ue, not necessarily &ore security e@ui'&ent, is the route to lo+er levels of theft. This is con%ruent +ith the fact that not one security device can deter a 'erson +ho is deter&ined to steal. .verall, the &ethod of 'revention de'ends on the vie+ the individual

3> 0usiness ta$es on theft. &onsocial Approach to Theft )revention As 'reviously stated, nonAsocial orientations are the individual differences and security orientations. The +ays in +hich co&'anies 'revent and ac$no+led%e e&'loyee theft de'ends on +hich orientation they su''ort. The "ndividual ifferences .rientation descri0es theft 'rone e&'loyees as F0ad a''lesG. -ertain de&o%ra'hic and individual characteristics account for these differences in e&'loyees, such as econo&ic 'ressures. F"n this 'ers'ective, the solution lies in selection 'rocedures that carefully +eed out 'otentially 'ro0le&atic e&'loyees 0efore they are hiredG :Iid+ell and Cartin !44,, '. !35;. Accordin% to Hayes, there are ei%ht 'reAe&'loy&ent screenin% &ethods to cur0 the nu&0er of F0ad a''lesG. These include the e&'loy&ent a''lication screenin%, 'ersonal and 'rofessional reference chec$s, as +ell as e&'loy&ent and education verification. "nte%rity "ntervie+s are also used to see ho+ a 'otential e&'loyee reacts to an unethical situation. A very co&&on tool is the +ritten honesty or a'titude testHsurvey. These tests rely on e&'irical research to hel' 'redict the e&'loyeeDs future 0ehaviorHhonesty. )ac$%round chec$s can also tell a lot a0out an e&'loyee? focusin% on drivin% record, +or$ersD co&'ensation clai&s, credit history, and cri&inal convictions. e'endin% on co&'any 'olicy, dru% screenin%s can 0e 'o'ular in the United #tates? +hile in other countries, hand+ritin% analysis is used as 'reAscreenin% &easure for honesty. To%ether, these &easures can hel' 'revent

!4 hirin% unruly e&'loyees, 0ut it is i&'ossi0le to co&'letely rule out all deviant +or$ers. The &ost +idely su''orted vie+ 0y the retail industry is the #ecurity .rientation. )asically, if e&'loyees have the o''ortunity to steal, +hich &ost do in the retail industry, they +ill steal 0ecause they can. FThe solution lies in reducin% or re&ovin% such o''ortunities 0y +ay of accounta0ility, &onitorin%, and surveillance &echanis&sG :Iid+ell and Cartin !44,, '. !3!;. This vie+ 'rovides &any different o''ortunities for 'revention. The first is 'revention 0y 'eo'le. Cost retail co&'anies have a irector of Loss -ontrol +ho +or$s in the security de'art&ent, &ana%es loss control functions, and re'orts to the -E.. .ther staff includes honesty sho''ers, +hich, accordin% to Hayes, 5,= of retailers use. PlainAclothes detectives, unifor&ed %uards, and fittin% roo& attendants also hel' 'revent e&'loyee theft. Accordin% to r. Richard Hollin%er, illardDs de'art&ent store treats e&'loyee theft as a cri&e 'ro0le&, stationin% ar&ed offAduty 'olicy officers at e<its. Also, senior &ana%e&ent and o'eration directors &ust also 0e a+are of the 'ro0le&, as co&&it&ent to the issue starts at the to'. #i&ilarly, 'ro%ra&s and 'rocedures i&'le&ented 0y the retailers are a necessity. Policies include alcohol and su0stance a0use courses of action, e<'ense account li&its, e&'loyee 'reA e&'loy&ent screenin% criteria, and an a''rehension and detention of dishonest e&'loyees 'olicy. The #ecurityHLoss -ontrol de'art&ent is res'onsi0le for i&'le&entin% 'rocedural controls for handlin% the re%ister, &erchandise, and cash. E&'loyee theft controls dictate the

!3 criteria that deter&ine +hen an e&'loyee needs to 0e investi%ated and detained for theft. These controls are essential in for%oin% la+suits fro& falsely accused e&'loyees. Li$e+ise, loss control can 0e%in 0efore the retail store has even 0een 0uilt. -areful 'lannin% of the site and environ&ental desi%n of the store 'lay an inte%ral role in 'reventin% e&'loyee theft. 1hen the site is 0ein% selected, the de&o%ra'hics and visi0ility of the location can %ive the retailer an idea of 'ossi0le cri&e in the area. The rentHe<'enses as +ell as the availa0le su''ort services +ill hel' %ive the retailer an idea of ho+ &uch they can or need to allocate to+ards security and theft 'revention. The ty'es of anchors in the &all or 'o+er center can %ive a cue to+ards security &easures. Cost i&'ortantly, the area cri&e 'atterns 'rovide an i&'ortant si%nal to+ards the ty'e of sho''ers and e&'loyees the retailer +ill have to &onitor and hire. Coreover, the environ&ental desi%n and 'hysical layout of individual stores can i&'act the 0ehavior of the e&'loyee. The retailer store is a 0undle of cues, &essa%es and su%%estions, +hich co&&unicate to sho''ers. The retail store is not an e<act 'arallel to the #$inner 0o<, 0ut it does create &ood, activate intentions, and %enerally affect custo&er reactions :Hayes, 3>>5;. This can include ho+ 'lanners 'lace the &erchandise fi<tures, or interior +alls? 'lanners +ant to increase the visi0ility of the &erchandise +hile 'rotectin% it fro& 'otential thieves. Psycholo%ical 0arriers include F o not enterG si%ns and fau< video ca&eras or &irrors. Physical

!! 0arriers consist of +alls, cash re%isters, fi<tures, +ire tieAdo+ns, and loc$ed doors. Retailers should re&ove tall fi<tures or to' of counter dis'lays? these li&it visi0ility, &a$in% dishonest e&'loyees less li$ely to 0e seen. Layouts should 0e desi%ned so hi%her ris$ &erchandise :e%., Be+elry; is further a+ay fro& store e<its. E&'loyees should 0e re@uired to enter the store throu%h li&ited e&'loyee entrances, +hich should 0e &onitored 0y sensors and turnstiles. #toc$ roo&s should re@uire an access code, 0e +ell lit, and 0e easily o0serva0le 0y &ana%e&ent and other e&'loyees. 1hen it co&es to the security orientation, technolo%y and syste&s 'revention is the &ost u0i@uitous source of deterrence. The 'ur'ose of Article #urveillance :A#; is to 'revent theft 0y deterrence. The t+o ty'es of A# currently availa0le are Electronic Article #urveillance :EA#; and )enefit enial evices :) ;. Cerchandise ta%%ed +ith EA# devices +ill sound an alar&

if not deactivated 0efore e<it. To &a<i&ize the effect of these devices, they should 0e attached to the &ost valua0le &erchandise, the syste& should 0e tested often, and a res'onse to activated alar&s should 0e 'lanned. Cost i&'ortantly, e&'loyees and custo&ers need to 0e a+are of these EA# devices in 'lace in order for the& to 0e useful. ) Ds contain fluid or in$, +hich da&a%es

the ite& +hen a thief tries to re&ove the device. Ruinin% the 'roduct eli&inates the 0enefit of stealin% the &erchandise. Accordin% to Hayes, the $ey to &a$in% these ta%s functional involves chan%in% the conceal&ent site on the ite& and fre@uently chan%in% the assort&ent of ite&s that

!5 are ta%%ed. Also, in order for the syste& to re&ain effective over ti&e, all alar&s should 0e res'onded to in a ti&ely &anner and ne+ly ac@uired &erchandise should 0e ta%%ed i&&ediately. .verall, these ta%s are used to $ee' e&'loyees and custo&ers fro& stealin% in the first 'lace rather than to 0e used for detention after a theft. Core fre@uently, P.# ter&inals are 0ein% used to detect irre%ularities in sales, such as voids and shorta%es, and then re'ort these e<ce'tions to &ana%e&ent. Ulti&ately, &ana%e&ent +ill 0e a0le to trace these 'ro0le&s to the ti&e, ter&inal, and finally the e&'loyee. Another 'revention &easure is closed circuit television, or --T7, used 0y nearly half of all retailers to deter and catch e&'loyee thieves. FTodayDs s&all, so'histicated di%ital ca&eras not only th+art sho'liftersA they are used to trac$ e&'loyees and individual sales transactions, to &onitor sho''in% and receivin% areas, and to hel' 'atrol the 're&isesJ. The --T7 syste&s are connected to co&'uter net+or$s that allo+ retailers to access stored or realAti&e video to investi%ate s'ecific eventsG :Ii&ieci$ and Tho&as, !44/;. Retailers use al&ost as &any fa$e ca&eras +hich are &uch less costly, to deter theft. Article #ecurity or AR# refers to the 'hysical restriction of the &erchandise, such as tieA do+ns and secureAcase dis'lays. Uni@ue li%htin% syste&s can also 0e used to hi%hli%ht areas e&'loyees often use to steal. .ther &ethods, accordin% to Hayes, include 'lacin% visual deterrents such as security %uards around e<its and usin% access control syste&s to li&it the entry

!( of s'ecific authorized e&'loyees. F"f you can esta0lish sufficient internal controls, you can si%nificantly reduce the o''ortunities for e&'loyees to steal. The esta0lish&ent of such controls, ho+ever, is only half the 0attle? you &ust also i&'le&ent and enforce the& consistentlyG :Ii&ieci$ and Tho&as, !44/;. Social Approach to Theft )revention 2onAsocial &ethods are co&&only i&'le&ented? ho+ever, situational and 'ersonal factors are not solely res'onsi0le for theft. F)y attri0utin% e&'loyee theft to various internal li&itations of e&'loyees, it is too easy to overloo$ the i&'ortant social dyna&ics that contri0ute to the 'ro0le&G :Iid+ell and Cartin !44,, '. !3(;. As &entioned earlier, the #TEAL &otive re'resents the social deter&inant often res'onsi0le for e&'loyee theft. First, in order to 'revent +or$ %rou' nor&s fro& for&in%, +hich often develo' and 'er'etuate &ethods of theft, *reen0er% su%%ests rotatin% %rou' &e&0ershi'. "f &e&0ershi' is unsta0le, e&'loyees +ill have a difficult ti&e esta0lishin% nor&s. Another 0enefit is that e&'loyees have to re&ain alert to do their Bo0 correctly. Ho+ever, so&eti&es it &ay 0e unrealistic to continuously reassi%n %rou's, as 'roductivity can suffer and e&'loyees can o''ose these chan%es. 2e<t, +ellAtrained su'ervisors should e<'lain the 'ersonal cost of stealin% to e&'loyees. E&'loyees often see stealin% as a shortAter& %ain, Bust a Fdro' in the 0uc$etG for a lar%e co&'any. Ho+ever, if these sa&e e&'loyees are educated on the sco'e and cu&ulative cost of

!, theft, they &ay thin$ t+ice 0efore stealin%. FThe social 'revention of e&'loyee theft involves convincin% e&'loyees that stealin% fro& the co&'any is a%ainst their o+n 0est interestJ E&'loyees &ust 0e hel'ed to reco%nize the 'ersonal 0enefits derived 0y 'rotectin% the 'ro'erty and assets of their e&'loyersG :Hollin%er 3>8>, '.(4;. "t see&s to +or$ 0est +hen su'ervisors 'u0licly 'ost infor&ation and %ra'hs to sho+ the costs and rates of e&'loyee theft in their current de'art&ent. FThe idea is that 0y this &easure, e&'loyees &ay co&e to understand the cu&ulative effects of their 0ehavior on the co&'anyJ .ne reason that this 'ractice &ay +or$ is si&'ly that is 'u0licly conde&ns theftG :*iacalone and *reen0er% 3>>>, '. 343;. Additionally, Fthe &ost effective a''roach for reducin% e&'loyee theft and sho'liftin% is to create a trustin%, su''ortive +or$ environ&entG :Levy and 1eitz !446, '.,,4;. #i&'ly treatin% e&'loyees +ith di%nity and res'ect or inter'ersonal treat&ent not only reduces the need for e&'loyees to Feven the scoreG 0ut also creates a nonadversarial relationshi'. F"tDs &ore difficult to steal fro& a friend than fro& so&eone +ho doesnDt care a0out youG :*iacalone and *reen0er% 3>>6, '. 345;. Another study fro& *reen0er% su%%ests that 'ro&otin% or%anizational Bustice +ill also di&inish e&'loyee theft. *reen0er% tested this theory 0y conductin% an intervention a&on% three discount stores in the sa&e chain. These stores had hi%h levels of shrin$a%e fro& e&'loyeeAonly areas. "n one store, &ana%ers received inter'ersonal Bustice trainin%? ho+ever, no &ention of reducin% e&'loyee theft +as &ade. "n the second store,

!/ &ana%ers received trainin% unrelated to inter'ersonalH or%anizational Bustice. The &ana%ers in the third store, the control, received no trainin% at all. The study found that the e&'loyees in the "JT %rou' had i&'roved attitudes and theft rate had dro''ed fro& 8= to (=. 2either of the controls had any chan%e in e&'loyee theft rates. "t is re&ar$a0le that theft rates dro''ed even thou%h none of the trainin% +as a0out reducin% e&'loyee theft, instead the trainin% focused on fairness and 'ersonal Bustice. Finally, cor'orate hotlines have 0een 'roven to hel' create or%anizational Bustice and fairness a&on% e&'loyees. E&'loyees can call s'ecial 'hone nu&0ers and co&'lain a0out 'ay or other cor'orate 'olicies they &ay disa%ree +ith. .ften, so&eone +ill 0e a0le to hel' clarify a 'ay 'olicy or Bust listen to their concerns. FThis is effective in 'art 0ecause the infor&ation itself that is i&'arted &ay shed ne+ li%ht on the fairness of the or%anizationDs 'ay 'rocedures. Li$e+ise, it also &ay 0e effective si&'ly 0ecause 0y introducin% a hotline, an or%anization is &a$in% a state&ent a0out itself as a fair co&'any, one that cares enou%h a0out its e&'loyees to &a$e such a &echanis& availa0leG :*iacalone and *reen0er% 3>>6, '. 34!;. These hotlines can 0e very cost effective and hel' o'en co&&unication 0et+een e&'loyees and e&'loyers. (. *ishonest Employees Althou%h a retailer &ay use all 'recautionary &easure to 'revent theft, it is still li$ely that e&'loyee thieves +ill 0e lur$in%. ecidin% ho+ to handle these e&'loyees is a difficult

!6 decision. Each retailer needs to have a set of 'olicies and 'rocedures in 'lace to res'ond to actual or 'ro0a0le theft. "f a co&'any is sus'icious a0out an e&'loyee, it is i&'ortant to conduct a thorou%h investi%ation 0efore 'rosecutin% the e&'loyee. #tore &ana%ers should not either i%nore the 'ro0le& or fire the e&'loyee +ithout thorou%h analysis. These investi%ations are i&'ortant, as they 'revent lia0ility and 'rotect the e&'loyeeHe&'loyer relationshi'. Accordin% to Hayes :3>>5;, the investi%ation should 0e conducted 0y 'ersonnel in loss 'revention, hu&an resources, and store o'erations. The 'lan and &eetin% should 0e docu&ented in +ritin% before any s'ecific surveillance ta$es 'lace. The hu&an resource &ana%er advises 'ro'er e&'loyee relations, le%al environ&ent, and fair treat&ent for the e&'loyee. "f an e&'loyee is deter&ined to 0e F%uiltyG heHshe should 0e referred the 'olice and sent ho&e until 'ro'erly ter&inated or investi%ated 0y the store &ana%er. Cean+hile, the loss 'revention &ana%er should docu&ent surveillance and 'ro'erly destroy the &aterial +hen the investi%ation co&es to an end. "t is necessary to res'ect the 'rivacy of the e&'loyee. For e<a&'le, it is 'rohi0ited to videota'e in restroo&s or fittin% roo&s, li&itin% the investi%ation to custo&er accessi0le areas :Hayes, 3>>5;. "f an e&'loyee is cau%ht in the act of stealin% 0y either s'ecific or rando& o0servation, no further investi%ation should 0e needed. After an e&'loyee is fired due to theft, the &ana%er needs to ta$e 'ro'er ste's in alertin% the other staff of the ter&ination. #o&e &ana%ers thin$ it is 0est to $ee' these ter&inations

!8 secret? they &ay 0e e&0arrassed 0y the situation, +ant to 'revent slander or lia0ility, or thin$ it indicates a 'oor loss control de'art&ent. Ho+ever, Hollin%er e<'lains that theft should 0e 0rou%ht out into the o'en, as &ost e&'loyees +ill hear a0out it throu%h the %ra'evine any+ay. FFor there to 0e any %eneral deterrent or 'reventative effect, other deviant and nonAdeviant e&'loyees &ust 0e infor&ed a0out the chances of %ettin% cau%ht and the severity of the 'unish&ent that resultsG :Hollin%er 3>8>, '.,6;. (I. Conclusion Preventin% and reco%nizin% e&'loyee theft as a &aBor for& of A&erican cri&e has recently hel'ed retailers 'revent shrin$a%e rates fro& risin%. There are &any o''ortunities to develo' syste&s and technolo%y to 'hysically 'revent e&'loyee theft fro& occurrin%. Ho+ever, there are often unforeseen costs to i&'le&entin% this technolo%y in the retail at&os'here. #pportunities and Concerns "n order to stay current on this issue, &aBor retailers such as 1al&art are investin% in the develo'&ent of ne+ technolo%ies. "n the future, co&'uterized authorization syste&s +ill ca'ture driverDs license infor&ation and validate the authenticity of the license. This ties the custo&erDs driverDs license nu&0er to the sale and re@uires the sa&e license 0e 'resented in order to authorize a return or 'rocess a refund. #oon, this data0ase +ill 0e shared a&on% retailers Bust li$e the ones no+ used for validatin% chec$s and authorizin% credit card sales :Ii&ieci$ and Tho&as, !44/;. 1al&art is also the leadin% retailer in the develo'&ent of Radio Fre@uency "dentification

!> or RF" technolo%y. RF" allo+s the retailer to trac$ the ite& fro& cradle to %rave, throu%h the su''lier, stora%e center, distri0ution 'rocess, and then the stores :Poirier and Cc-ollu&, !44/;. RF" is si&ilar to the UP- 0arcode used, e<ce't it can store &uch &ore data. A si&'le scan of RF" ite&s +ill reveal +here it +as 'urchased, at +hat 'rice, and 0y +hat ty'e of 'ay&ent. "f an ite& is stolen, it +ill set off an alar&, even in a store the ite& +as not stolen fro&. F.verall, +e +ill see a 0etter 'a'er trail, +ith 'ersonal sho'$ee'er identification every ti&e an ite&Ds ta% is disa0ledG :Poirier and Cc-ollu& !44/, '. 34,;. .n the other hand, article surveillance, tieAdo+ns, video ca&eras, and other &easures can 'ollute the at&os'here of a retailer. Retailers need to consider their tar%et custo&ers, their custo&ersD needs, and the flo+ of traffic throu%h the store. For e<a&'le, ho+ +ould a custo&er feel tryin% on a dress in 2ei&an Carcus, una0le to see ho+ it fits 'ro'erly due to a 0enefit denial deviceE U'scale de'art&ent stores 'ro0a0ly donDt +ant their custo&ers to feel distrusted +hile sho''in%. The retailer has to +ei%h the 0enefits versus the costs +hen considerin% ho+ to i&'le&ent a loss 'revention syste&. Another concern resultin% fro& the ne%ative at&os'here of the security a''roach is that of e&'loyee trust. FE&'loyees +ho +or$ed in locations that had hi%her e<'ressed levels of trust in &ana%e&ent, a hi%her trust cli&ate, e<hi0ited hi%her res'onsi0ility nor&s and less devianceJ the i&'le&entation of electronic &onitorin% 'ractices sends a stron% &essa%e to all e&'loyees,

54 not the Bust the ones en%a%ed in deviance. The &essa%e is clear: e&'loyees are not trustedG :1ec$ert !44,, '. 335;. E&'loyees +ho donDt feel trusted are &ore li$ely to leave an or%anization and also less li$ely to re'ort e&'loyee theft.

53 $inal Thou hts The 2ational Retail #ecurity #urvey :!44,; re'orted shrin$a%e of 956.( 0illion annual loss to retailers? a0out (6= of this loss +as due to e&'loyee theft. That e@uates to a0out 936./ 0illion fro& e&'loyee theft. These costs tric$le do+n to consu&ers and even cause so&e retailers to %o out of 0usiness. "n order to hel' 'revent this ty'e of shrin$a%e, e&'loyers need to 0e a+are of the reasons e&'loyees steal, as the &aBority do not steal for econo&ic reasons. #o&e researchers vie+ e&'loyee theft as a result of individual differences that cause so&e e&'loyees to 0e 'rone to theft. .thers vie+ theft as a result of i&'ro'erly securin% &erchandise. "t is &ost +idely a%reed u'on that e&'loyees see& to steal to resolve feelin%s of ine@uity or to adhere to social nor&s. #econdly, it is essential to see ho+ e&'loyees are 'hysically stealin% the &erchandise. This +ill allo+ the loss 'revention de'art&ent to correctly secure &erchandise and 'rosecute deviant e&'loyees.

5! "n 'reventin% e&'loyee theft it is i&'ortant to understand that the nonAsocial and social a''roaches can coe<ist 'eacefully. Technolo%y and security should 0e used to 'revent theft? ho+ever, &ana%e&ent still needs to focus on creatin% a trustin% and su''ortin% +or$ environ&ent. )y understandin% +hy e&'loyees steal and ho+ they are doin% it, retailers should realize theft is not only a cri&e 'ro0le&, 0ut a &ana%e&ent 'ro0le& as +ell.

References *iacalone, Ro0ert A., and Jerald *reen0er%. Antisocial )ehavior in .r%anizations. Thousand .a$s: #A*E Pu0lications, "nc., 3>>6. 8,A346. Print. *reenhouse, #teven. K#ho'liftersE #tudies #ay Iee' an Eye on 1or$ers.K 2e+ Lor$ Ti&es !> ece&0er !44>: n. 'a%. 1e0. > Jan !434. Mhtt':HH+++.nyti&es.co&H!44>H3!H54H0usinessH54theft.ht&lENrO5Pe&cOeta3Q. Hayes, Read. E&'loyee Theft -ontrol. .rlando: Prevention Press, "2-., 3>>5. Print. Hollin%er, Richard. ishonesty in the 1or$'lace: A Cana%erRs *uide to Preventin% E&'loyee Theft. Par$ Rid%e, "llinois: London House Press, 3>8>. Print. Hollin%er, Richard -., and ean A. a0ney. 3>>, 2ational Retail #ecurity #urvey. *ainesville, Fl: University of Florida, 3>>,. Print. Iid+ell, Roland, and -hristo'her Cartin. Cana%in% or%anizational deviance. #a%e Pu0lications, "nc, !44,. Print. Ii&ieci$, Rudol'h -., and -hris Tho&as. Loss Prevention in the Retail )usiness. Ho0o$en,

55 2e+ Jersey: John 1iley P #ons, "2-. , !44/. 354A3(4. Print. Levy, Cichael, and )arton 1eitz. Retailin% &ana%e&ent. /th ed. 2e+ Lor$, 2L: "r+in Professional Pu0, !446. Print. Poirier, -harles, and uncan Cc-ollu&. RF" strate%ic i&'le&entation and R.". J. Ross Pu0lishin%, !44/. 3(8A3,5. Print. KRecession contri0utes to Bu&' in retail shrin$a%e.K -hain #tore A%e 8,.3! :!44>;: 3/. *eneral .neFile. 1e0. 6 Jan. !434. Mhtt':HHfind.%ale%rou'.co&.l'.hscl.ufl.eduH%t<Hstart.doE 'rod"dO"T.FPuser*rou'2a&eO%ain(456,Q. 1ec$ert, John. Electronic &onitorin% in the +or$'lace. "*" *lo0al, !44,. 33!A336. htt':HH0oo$s.%oo%le.co&H0oo$sE idOd"5(v+so!*L-P'%OPA335Pd@Oe&'loyeesSshouldSfeelStrusted, StheftPeiO.1.&#,TnJL*szA#oh/1*-TPcdO!UvOone'a%eP@Oe&'loyees=!4should =!4feel=!4trusted=!-=!4theftPfOfalse