Workplace losses because of employee theft may be severely under-reported. Employees have been known to take cash as well as company products, equipment, and tools. The Association of Certified Fraud Examiners (ACFE) say it is difficult to estimate the annual figures lost to fraud, but they believe that organizations may lose 5% of their annual revenue to it. Their 2018 report states that:
- Asset misappropriation schemes are the most common, at 89% of all occupational fraud cases; the median loss is $114,000.
- Non cash misappropriation (equipment, tools, products) accounts for 21% of these cases and leads to a median loss of $98,000.
- Businesses with fewer than 100 employees lose the most.
- 42% of these thefts are because there are no internal controls.
- For businesses with some internal controls, lack of management review was the most common reason for the loss (19%).
- Recovery is difficult:
- 53% recovered nothing; 32% got a partial receiver, and only 15% recovered all losses.
- The more that was lost, the less likely it was that anything would be recovered.
Why Do Employees Steal?
The 10-80-10 principle of human behavior is a rule of thumb stating that 10% of individuals are outstanding, 10% are definitely not, and that 80% of people can go either way. In terms of ethics, this principle means that 10% of people will never take so much as a pencil and 10% will view your business as a personal cash cow. (Hint: Try not to hire this percentage!).
The behavior of the vast majority will depend on circumstances. Some of these circumstances may be beyond your control – things like personal financial need, for instance – but others are not. Occupational fraud may start as a crime of opportunity; it may flourish because of workplace norms. If there’s a belief at your company that pilferage won’t be noticed or that “everyone does it,” some of that 80% will bend to the bad.
Make it Easy to Be Virtuous
Pay attention to your employees. Know enough about their lives to know if there are red flags. Be sure let individuals know what is or is not allowed, through policy guidelines, on-boarding procedures, or departmental meetings. A print shop may allow an employee to run off some pages for personal use at no charge every now and then, but draws the line at a certain number or commercial use, for instance. Don’t tolerate fraud or misconduct.
Add institute internal controls if you don’t already have them. Audit and inventory procedures should be a regular (or surprise) function of your business.
Property ID Tags
In conjunction with these other measures, asset tags can help stop pilferage. When you put a label with the company name on an asset, it’s a visual reminder to employees that the company is keeping an eye on it. Asset tags can reduce temptation and remove some of the opportunity. The knowledge that the company is aware of assets and has marked them helps keep the 80% honest.
Barcodes or QR codes can help make internal controls of audit and inventory easier, too. More accurate record keeping can key you into losses more quickly. And, bonus, if a lost item has an asset tag, people can return it more easily!