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Employee theft on the rise, survey reveals

By Jenna Cyprus     Nov 11, 2013 in Business
Are you sure that you've done enough screening and tests on your applicants before hiring them? The current statistics on employee theft might cause you to think otherwise.
Retail theft was up 5.5 percent in 2012, according to the Annual Retail Theft Survey. The survey, which reviewed the records of 23 major retailers, logged a similar increase in 2011, which could offer a warning about prevailing issues in the retail industry.
"The seriousness of retail theft is a much greater problem than many people realize," says Mark R. Doyle, president of Jack L. Hayes International, the company that conducts the survey each year. "These theft losses are stealing profits from retailers and driving retail prices higher for the consumer."
Retailers apprehended more than 1.1 million shoplifters and employees in 2012, and recovered more than $189 million in goods. To keep these losses down, experts recommend retailers become aware of the following major risks that fuel internal loss.
Low staffing levels
When consumer spending decreases, retailers are forced to cut back on the number of employees that cover the premises at a given time. When employees are left alone, internal theft increases. Investigative firm Diogenes LLC recommends that managers staff with at least two employees in the store at both open and close, as well as requiring supervisor authorization for voids and refunds.
Inadequate screening
Professional background checks cost money, while basic reference checks take managers away from their day-to-day duties. However, failure to screen job applicants properly is a top reason for employee theft, Jack L. Hayes International found.
The company analyzed a random sample of the IntegReview questionnaires that major retailers give employees to test honesty levels. More than 64 percent were found to be "low risk," while another 16.6 percent were moderate risk.
Nearly 20 percent of applicants were deemed "high risk," due to admissions of previous wrongdoings and answers to honesty-related questions on the test. For instance, more than 18 percent answered yes to having frequently associated with those who were admittedly stealing, while more than 9 percent said they are not honest and may steal or cheat.
By weeding out these high- and moderate-risk candidates from the start, retailers may be able to prevent a large number of theft incidents.
Outdated inventory management
Inventory management procedures are essential in a retail environment. Retailers should have a record of every item that enters and leaves every store in their system, and this information should be verified through regular store-wide inventories.
Any "shrinkage" should be logged in as detailed a manner as possible, with notes as to whether the loss was the result of theft or breakage. And don't forget about your warehouse. Often retailers spend so much time focusing on floor activity, they miss out on this crucial area of the operation.
Items initially enter and sometimes exit the store in this area, which makes it a prime target for theft, since warehouse staff can easily state items were never received. Have receiving and shipping policies in place to prevent losses, and conduct regular audits of warehouse processes.
Electronic inventory management solutions can save retailers thousands in theft each year, because they make it easier to track inventory. Outdated manual systems are not only time-consuming, they are also more prone to errors.
As the holiday season approaches, it's important that retailers review their hiring and loss prevention policies to avoid theft. In the rush to staff stores, many retailers hire teams of seasonal employees without taking the time to do background checks.
Even if a retailer can't afford a full-time surveillance staff, security cameras installed throughout the store, as well as in stock rooms and warehouses, can go a long way toward preventing internal theft.
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