Inside Job: 5 Steps to Detecting (and Preventing) Employee Theft

Only Human

"Human beings will always end up doing what they are incentivized to do."  — Economics

One of the sad realities of human life is that people do bad things. What leads to that fact and its various philosophical implications is something we'll leave to better minds to analyze. But for the thousands of merchants using Shopventory, this means having to deal with the unpleasant subject of both Customer and Employee theft.

For merchants, theft can affect everything from pricing to merchandising displays and always impacts the bottom line. In some businesses, a few occasional instances of theft are inevitable, but for most retailers, an ounce of prevention goes a loooooong way. 


Here are 5 steps to preventing theft in your business:

1. Valued Employees Are Loyal Employees

Payroll aside (we'll come back to it), employees who are treated like they're invisible will soon begin to think they can get away with being invisible. It is important for any employee to feel they have a truly valued role in your company's mission.

This can be as simple as making it a point once a week to have a 5 minute one-on-one with each of your employees. Showing an interest will make your employees feel like they are part of the team. You don't steal from someone you know and respect unless something is really wrong. 

Yes, this does also extend to payroll. Offering below-market wages is an option that can save money in the short term, but it will have to be weighed against employee turnover and how long it takes you to train a replacement. Oftentimes, you could have saved money by simply giving a raise to a talented, loyal employee rather than letting them go only to spend time and resources training the four people throughout the year who were brought in to fill the position. 

It's worth it in the long run to have those tough conversations and do your homework to make sure wages are as fair as can be managed for the position. Like any other commodity, you usually get the talent and loyalty you pay for. 


2. Have a Direction

Whether it's saving lives, or selling gum, people want to be a part of a larger plan and feel they are contributing to its progress. 

Even if you're not planning any sort of expansion, it's a good idea to set goals in which your employees have a share. Create what we tech guys call an "if/then statement". "If x, then y." To give an example, you can say "if we can get sales up $xxx this week, then we'll provide bagels in the break room on Friday". 

Be careful about making treats a regular occurrence, but the point is an employee who sees that their actions have direct consequences for them and their co-workers will stop and think before they do something to jeopardizes themselves.

Morale is more often than not the number one determiner of whether your employees will end up stealing from you. Morale is a tricky thing to address, but problems generally stem from a sense of stagnation. Setting goals, even small ones will give your employees a sense of progress and accomplishment.

Again, the investment isn't too taxing on your part, but the return is an employee who sees the bigger picture and shares the goal of your company's success. 


3. Get To The Root

We at Shopventory have a very strict rule: "Don't treat the symptoms, cure the disease instead." Many times, merchants will spend time and resources setting up elaborate systems that could have been resolved with one minor tweak to the everyday things.

Rather than paying a security firm an exorbitant amount of money to come and wire every inch of the store to catch the occasional shoplifter, the same impact could be had with a warning sticker regarding surveillance. The problem wasn't that the merchant didn't have a view of every inch of the store, it was that shoplifters thought they don't have a view of every inch of the store.

When it comes to employee theft, this can be as simple as removing pockets from the uniform, or requiring two people to sign off on the final cash drawer count, or simply putting a cover over loose, easily pocketed items ('out of sight, out of mind' goes both ways). Temptation can be tough to overcome so eliminate it as much as possible. Lock doors, add passwords, and if necessary, go ahead and install a well-placed camera or two. 

Rather than, "I don't trust you",  it's best to send the message "this protects you as much as it does the business." For instance: "If something goes missing from that room, I know it wasn't you because you don't have access." Suddenly, the employee doesn't feel restricted, but protected.

However, this means you must abide by the system yourself. Your employees take their queues from you about what's acceptable. If you send the message it's okay to bend the rules, don't be surprised when the rules get bent beyond recognition. This goes nicely into our next point...


4. Send a Message

A mistake that often gets made is never bringing up the subject of theft. This should be 'day one stuff' for all new members of staff. It's usually best to say it in a way that assumes they already know it, but it's important not to leave it unsaid. "We obviously reconcile all the sales and all the inventory regularly. Of course, if you're caught stealing, you're fired."

It doesn't insult the person because it assumes they knew that already, but it makes it perfectly clear that theft is a consideration you account for. They know there is a barrier before they run into it. It's amazing how much even a passing mention can impact someone who is even entertaining the idea. Just knowing that you're looking for theft will usually deter someone who's thinking about it. 


5. Log Everything

Whether or not you're actually looking at and manually auditing reports, the fact that there is a direct paper trail will also have a huge impact. Time-stamped records that the employee has no access to delete or alter will give you the information you need to hold your employees accountable. 

Our Shopventory app does this beautifully on the back end. Every change to inventory is logged and timestamped permanently into the item's history. Even if the item is deleted, you can still go back and see the full history. You can also pull historical inventory reports and see what should have been on your shelves for any given minute in time, as long as Shopventory was installed.

Your employee never needs to interact with Shopventory to process sales, so as long as you have a trusted party updating inventory in the Shopventory app, funny business will be caught easily. Employees learn to avoid the gaze of the camera, they learn the patterns of their managers' breaks, they slowly explore the subtleties of the point of sale system and begin to find the holes they could exploit if they wanted to. 

Letting them know there is a detailed and itemized breadcrumb trail that leads right back to them if they do will change their perspective. Suddenly, there isn't a "he said — she said" accusation session. There are no mole hunts where everyone suddenly distrusts each other. No biases or prejudices rear their ugly heads. There is only data that you can sit down and analyze. You can see when items went missing, when discounts were given, and how changes to inventory were made. 

With a detailed timeline like this, you don't go in with suspicions. You go in with hard, provable, unbiased data. You can go to sleep that night without wondering whether you made the right decision to take action.

We at Shopventory have heard more than once from grateful merchants the stories of rogue employees who were let go because the paper trail pointed directly toward the culprit. They didn't have to agonize, or think up kung-fu master "mind traps", or turn anyone against each other. They just had to notice the discrepancy, look through the records, identify the pattern, and take confident action.


In Summary

Your inventory is your livelihood. Whether it's candy bars or diamond rings, every theft ends up taking a chunk out of you and your employees' mortgages, car payments, and retirement savings. Shopventory is here to help you safeguard that inventory by accounting for every change that occurs.

With the right tools and the right attitude, you can create an atmosphere where theft simply isn't a rational option and the bad guy always gets caught. New employees will be informed by your staff that any theft will be identified with ease and it's pointless to try. Data helps you do this in an unbiased way. No accusations or recrimination. Just time, math, and accountability. 

If you're curious about how Shopventory's inventory management tools can help your business maximize profits and minimize theft, contact us! We're actual people, based in the US, we've been around since 2012, and thousands of merchants worldwide have already entrusted us to help them manage over $1 Billion worth of inventory worldwide.