Loss control requires careful attention to details
BRENTWOOD, CA, April 12, 2006—Dan Cosgrove can assure owners of retail businesses of one thing: their employees are stealing from them. And employee theft is costing billions of dollars annually.
For starters, he points to the National Restaurant Association estimate that employees are responsible for 75% of inventory shortages—and that they steal what amounts to four percent of sales in restaurants. With annual restaurant sales estimated at $511 billion in 2006, that alone will amount to over $20 billion in employee theft.
But more importantly, Cosgrove has seen the problem firsthand—over and over again. His Brentwood, California-based company, Mercantile Systems, is frequently called upon to help restaurants, retailers and other cash businesses improve their operations—and profitability.
"Most of my clients already suspect they have a problem—but they still don't really believe it could be their employees," he says. "Especially if they're honest themselves, they don’t understand why an employee would steal."
But think like the employee, Cosgrove admonishes. "They're often making minimum wage, and struggling. Maybe they're not taking cash—just walking out the door with food or liquor. They may even justify it to themselves by saying 'everybody does it.' And this behavior is often so widespread that—worst of all—they even may assume that management knows about it and is doing nothing to stop it."
The US Department of Commerce says that 75% of employees steal from the workplace at least once—and half of those steal repeatedly. "They do it again and again because they don't get caught," Cosgrove points out.
He has some pointers for managers of cash businesses that can make a big dent in employee theft:
Track employee sales
Dishonest employees count on owners and managers to not be paying attention. If the boss doesn't take the time to review the accounting and track individual employee sales, it makes it easier to rip off the employer.
His recommendation? Audit the cash to look for patterns. During a shift take a current reading, remove the register drawer and replace it with a fresh one. If one employee's cash register is always over or under by a large amount, or if the cash isn't adding up to what the register reading is saying, it should be a red flag. Share the audit results with the staff. Just putting employees on notice that they could be audited at any time will discourage many of them from stealing, especially if the company is consistent about it. (And the boss could put a positive twist on it, by offering a reward to any employee who balances to the penny.)
Work side by side with employees
Cosgrove recommends that managers pick one day a week to work behind the counter and that they make sure to work with each of their employees. Is there a difference in sales for that day? Are the numbers always higher when the manager works? In a bar, restaurant or other cash retailer, this may mean an employee is pocketing some sales, or giving away food and drinks (or merchandise) to friends. (Don't reach any conclusions, however, until there’s at least a month or so of results to analyze.)
Trust but verify
Cosgrove recommends reviewing employees’ schedules, their total sales, their "no sales" and their daily sales over several weeks and noting what days they work. Then the manager should give the highest grossing sales associate, waiter, or bartender an unexpected schedule change. What happens to the shift he or she left should provide interesting data. If sales increase for that shift, the manager may find that what looks like the best salesperson could also be the biggest source of employee theft. The busiest shifts are the easiest times to steal. Doing this with the lowest grossing sales person may provide more insight, too.
In the restaurant or bar business, this can be an eye-opener. A very busy bar may turn out to be the result of a bartender who is giving away drinks. Why not? He gets big tips—and frequently is rewarded by an owner who thinks the employee is generating big business!
Cosgrove says that these simple steps not only can minimize employee theft, but can provide a manager with useful information about his business and employees. But if the company appears to have a major problem, it may be time to turn to an expert—someone who can identify what's happening when the manager isn’t around. An undercover observer—whether a licensed investigator or a mystery shopper—can help catch the dishonest employee who's simply smart enough to keep his eye out for the boss.
Where’s there's one, there may be more
Cosgrove's final piece of advice is to never assume "the problem is solved"—or even that the worst offenders have been stopped. Nonetheless, by showing that the company is serious about employee theft, it may be possible to discourage all but the most determined thieves—and reinforce the honest employees. The key is to be consistent and thorough.
For more information about loss prevention, employee tracking, or to receive an employee theft case study, go to www.mercsystem.com.