Reduce Employee Theft by Removing Opportunity

Cost-effective strategies to cut internal shrink include better employee locker solutions.

Sponsored by Digilock

Last year was another tough one for retailers with respect to employee theft. Retailers participating in the National Retail Security Survey (NRSS) said employee/internal theft was the source of 30 percent of inventory shrink. The report also found that the average loss of dishonest employee cases increased dramatically—from $1,234 to $1,923.

It’s not the only data set highlighting today’s risk. Jack L. Hayes International’s 30th Annual Retail Theft Survey found that 1 in every 35 retail workers were apprehended for theft from their employer in 2017.

“Over the years, Hayes International has witnessed a steady and significant rise in this serious problem,” according to its survey report. “Each year, thousands of employees are caught stealing from their employers and coworkers. Furthermore, our studies reflect that this group of thieves are being caught stealing far more than a few insignificant supplies.”

More trouble could be coming as the labor market continues to tighten. With it, there seems little opportunity for retailers to take serious aim at losses from employee theft through more selective hiring.

There are certainly sophisticated security options available—vendors have even developed analytic tools that leverage artificial intelligence to combat losses from thieving associates—but a hefty price tag is frequently attached. Electronic performance monitoring is an emerging trend, for example. It can help retailers identify and manage risky employees, but using advanced technology to gather, analyze, and report on employee behavior risks alienating the workforce—and may provide some workers with the very justification they need to steal.

So what’s LP to do?

While there are no easy answers, not every solution needs to feed into the crime prevention arms race. An important foundation, say researchers and industry experts, is for retailers to assess whether their basic control policies and procedures might be inadvertently contributing to employee dishonesty. In one study, of hundreds of associates terminated for theft, 77 percent were simply taking advantage of an opportunity to steal created for them by management.

“One of the most direct ways to cut theft is by giving employees a secure place to store their belongings while at work with a solution that reduces the opportunity to steal,” notes Daniel Johnson, a manager at Digilock, manufacturer of electronic locks and lockers and the Lockup® line of employee lockers.

Lockup lockers are designed specifically for employee use in the retail space, where multiple shifts are scheduled throughout the day. With a shared-use keypad lock, lockers are available to store workers during their shift and, once vacated, are immediately ready for another user. As such, in addition to cutting shrink, it reduces the cost and footprint of an employee locker solution.

Clear polycarbonate doors, one of the product options, provides the ability to see contents inside employee lockers. The transparency enhances internal theft prevention and improves rules compliance by offering a credible deterrent, according to Johnson.

“The product is designed and developed to provide employees with a secure place to put their belongings and provides them piece of mind knowing that don’t have to worry about their valuables being stolen,” said Johnson. It also provides managers with final oversight of the space via a management override key, which allows them to quickly open any locker for a routine or targeted audit. “Most importantly, the solution helps to prevent workers from being tempted to remove something from the sales floor during the day and store it in a locker, with the idea that they’ll be able to take it home at the end of their shift,” said Johnson.

It is exactly that kind of temptation retailers need to remove, according to theft prevention research. In one study, these “unforced errors”—opportunities to steal created by management—acted as a catalyst in three out of four employee theft cases.

The study was highlighted in 2017 in an article by Dr. Richard Hollinger, former director of the Security Research Project, which annually conducts the NRSS, in which he reflected on his 30 years of reviewing academic studies for insight into the causes of retail theft. In it, he pointed LP leaders to a study out of the University of Texas, “Dishonest Associates in the Workplace: The Correlation between Motivation and Opportunity in Retail among Employee Theft(s).” The research project concluded that most losses from employee theft are partially the fault of actions or lack of action by management. Among the conditions, it found that theft is significantly more likely to occur when stores: fail to inspect trash; lack good key controls; allow lock-up doors to be propped open; don’t conduct bag checks; and allow unauthorized associates in lock-up areas.

Addressing in-store storage solutions, then, gets at the heart of why employees steal: because they have a chance to do it.

“The locks themselves operate with a four-digit personal code, like a hotel safe,” explained Johnson. In addition to being more economical than lockers with employee-provided padlocks, it makes auditing simple. “The override key lets management open it and check inside, and when they’re done they shut the door and it remembers the previous code, so the user would never know.”

For more information, visit lockup.com.

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