Techarmor.com

September 1999

STUDY SHOWS 79% OF EMPLOYEES STEAL FROM THEIR EMPLOYER

Michael G. Kessler & Associates, Ltd. the leading international investigative and forensic accounting firm specializing in corporate issues affecting today’s workplace, has recently completed an exhaustive study surveying over 500 employees nationwide on the issue of employee theft in the work place. The results of the study turned up some astounding facts that will clearly surprise many business owners and management level employees.

Although employee loyalty is what every business owner strives for, whether he is operating a three-person firm, or a one hundred fifty thousand person corporation, employee loyalty may in fact be a tip off to a more serious internal problem.

The results showed that extreme employee loyalty may in fact be a guise to extreme employee dishonesty. Employees that appeared to have the company’s best interest in the forefront of their activities were often just using this ploy to steal from the company.

Employees Out steal Shoplifters

Our studies showed that not only do employees steal, but also they outsteal shoplifters. In fact, employee theft is the cause for one out of every three business failures in this country today. Our study disclosed that employees readily admitted to stealing office supplies, falsifying expense reports, taking inventory and almost 87% of those surveyed admitted to falsifying time sheets because they regularly stole time from their employers and was paid for hours they did not work. Those surveyed also indicated that these practices are increasing at an alarming rate. Previous studies have revealed that the price tag on employee theft in this country today is over $120 billion a year.

Extreme Loyalty is not Always a Good Thing

The easiest way for an employee to perpetrate the theft is by a show of extreme loyalty. For example, if an employee never takes a vacation, if they appear at work no matter how physically ill they may be, or if they are the only person in the company that can perform their duties, the employer needs to step back and examine his internal organization. These practices do not positively prove that an employee is stealing, but they do, however, set the stage for the theft to occur.

21% will never steal from employer
13% will steal from employer 
66% will steal if they see others do so without consequence

Our study revealed some disturbing facts. We documented that only about 21% of employees are basically honest and will never steal, 13% are dishonest and will undoubtedly attempt theft, and the remaining 66% will steal if they see others doing it without repercussion. This statistic proves the disastrous results that will occur if an employer senses that theft is occurring, but buries his head in the sand to avoid accusing the culprit.

It is often difficult for an employer to believe what the facts spell out, especially if the employee has presented himself as a hard working loyal member of the staff. Long term employees who are personable, never take off from work, and perform their duties in an above average manner, may in fact be the impetus that will drive a company out of business. Although for many an employer, these are the hardest individuals to accuse of such a crime.

In our study among the participants we questioned were employees who admitted to stealing from their present or former employers. Yet few of these employees, less than 5%, had a criminal record of any kind for any theft-related offense. So we asked them to tell us the reasons behind their theft and "What made an otherwise loyal and honest individual feel the need to steal when placed in a work environment?" The answers varied and provided some insight into how, as an employer, to avoid the pitfalls that are often the impetus for theft.

49% Steal due to Greed
43% Steal due to Vindictiveness or need to get even for poor treatment
8% Steal due to Need

For some questioned the reason for their theft was pure greed. For others it was
vindictiveness, or a need to get even with their boss, or firm, for injustices thrust upon them. And for a small percentage it was need.

If an employer makes theft too easy then he is setting himself up for the crime. If an employer treats his employees with little respect an employee may go the extra step to perform the crime as a payback for the humiliation he may be forced to endure. If an employee has a serious problem, (i.e. financial, gambling, death or illness) within his family and he has no where to turn for help or guidance, he may be forced to take matters into his own hands to solve his existing problem, by pilfering from the firm.

We also learned that most employees (92%) would lie on their job applications if asked "they ever stole from a previous employer" and more than two thirds (68%) stated that they would not disclose on a job application that they were discharged due to theft.

Two other significant forms of employee theft that we encountered throughout our study were the theft of time and computer related thefts. This not only includes the theft of computer hardware and software, a crime which has increased dramatically within the past five years, but also includes theft in terms of time stolen from the employer by employees surfing the INTERNET for non personal reasons.

Although many firms utilize the resources of the INTERNET for business purposes, many employees told us they pretend to be utilizing the INTERNET for work purposes when in reality they are using it for personal gain or pleasure.

Our Advice

As an employer you can not always prevent these occurrences, but, as shown by our study, you can help minimize the chance of such incidents occurring by adhering to the following steps:

1. Do not bury your head in the sand, if you have any indication that a theft might be occurring immediately investigate.

2. Provide a strict written policy on dealing with employee theft. Keep in mind that if the theft of $30,000 only results in the loss of a $20,000 a year job, it is probably a poor deterrent.

3. Vigilantly follow through on written procedures. If the employee manual calls for criminal prosecution of employee theft and it is not carried through, it is setting a poor example to the rest of the workforce.

4. Be sure your firm has an internal checks and balance system so that no one employee has the authority to write checks or process incoming payments to the company.

5. Provide a grievance process for employees which will allow them a fair representation if they feel they have been treated poorly.

6. Thoroughly screen all new employees before bringing them onboard. This may not prevent all acts of thievery, but knowing as much as you can about an individual before hiring them will cut down the cases of employee theft.

What Else Can You Do

You know something isn’t right. There is no concrete proof that a problem exists, but you get the feeling that something is amiss. Is it just undue suspicion, paranoia maybe, or is there reason for your fears? More than likely if you, as the owner or manager in a business, start to feel that something is wrong you should trust your instincts. Employee fraud and misconduct is often a difficult crime to prove and more often a difficult crime to accept. This is especially true when the suspect is a long time member of the firm and someone that you previously trusted with the well being of your organization. 

Keep in mind that employee theft is responsible for one out of three business failures in this country. 79% of all employees have the capacity to steal, which is evidenced by the numbers that place employee theft at $120 billion dollars a year.