Management11 Warning Signs that Your Employees May Be Ripping You Off  

Trainer’s Note: Feel free to reproduce and distribute this article to managers.

The warning signs of possible theft or other criminal activity aren’t always easy to spot. Sometimes there’s no forewarning. But, internal theft is different. The warning signs are almost always right in front of us - if we’re paying attention.

And given that research suggests 1 in 3 employees steal if given the opportunity, employers should pay attention. Losses due to employee theft of cash and property can be staggering. Small businesses may collapse, while the profits of large businesses take a huge hit. Consider these statistics:

• The U.S. Chamber of Commerce estimates that employee theft costs American employers more than $50 billion dollars each year.
• In a study conducted last year by The Chubb Group of Insurance Companies, executives of 60 percent of the companies surveyed said they expected their employees to steal money or equipment.
• Another study conducted by The Chubb Group in 2004 found that 39 percent of private companies had employees who stole company funds, equipment, or merchandise.

Awareness is Key

Background checks, reference checks, screening tools and other hiring instruments can help. But, even if you have strong hiring practices, closing your eyes to potential theft is a dream for would-be thieves.

The manager-employee relationship can make the warning signs of employee theft difficult to spot. Managers who work to build trust with their employees don’t allow themselves to question what may be in front of them. The relationship clouds their judgment and the resulting denial can be a powerful blinder.

That’s why awareness is critical. Regardless of the trust you have for your employees - and you should have trust - question what doesn’t seem right. Start with these 11 signs of potential employee theft:

1. Big-ticket purchases or significant change in employee spending habits or lifestyle.

This isn’t about the employee who buys a new car after saving for a year. It’s about the employee who buys a new luxury car even though he’s always talking about barely having enough money to pay the bills and put food on the table. It’s about the guy who buys a new big screen TV even though he counts down the hours until he receives his paycheck so he can put gas in his car. It’s the employee who books a first-class cruise vacation even though you know she’s having trouble paying her student loans.

This alone doesn’t mean your employee is stealing from you. Maybe your employee did save enough for that luxury car. Maybe the big screen TV is a gift from a wealthy uncle. And, maybe the cruise is a long-awaited graduation gift. The point is this: a significant change is a potential red flag. Use it to stop and think about what else is going on around you.

2. Change in work habits.

You know the type. She breezes in every day at 8:27 a.m. and gathers her things on her desk at 5:25 so she can be out the door promptly at 5:30. If all of a sudden she starts coming in before 8 so she can have some quiet time before everyone else arrives, make a mental note. Unless she has had a huge change in her workload or something significant is happening at home and she doesn’t want to be there, it’s unusual and you should question it.

Likewise, if an employee, who historically grumbled whenever you asked him to put in a half-hour overtime, suddenly stays late all the time, you should wonder why.

3. Purposefully trying to work independently or unsupervised.

Likewise, make a mental note about an employee who always looks for ways to work alone. Volunteering to work in the back room or offering to organize out-of-the way displays may be a manager’s dream come true: initiative. Or, it may be a way for an employee to be out of sight.

4. Problems with payroll, travel, and expense records.

We all make mistakes. But accounting discrepancies should be tracked. Is there a question about hours worked versus hours paid? Did she lose a receipt? Did he forget to reconcile petty cash? Did she exceed the entertainment stipend with clients? Did he forget to itemize his expenses?

Give your employee the benefit of the doubt the first time. But, if it happens again, pay attention. This is where small companies which don’t have specific accounting practices or well defined policies about travel and expenses, can get in trouble. Take the time to develop a policy and pay attention.

5. Missing items.

You’re busy. You have a lot of balls in the air, so, once in awhile a mental error might just be forgetfulness. Maybe you didn’t have the extra printer cartridges you thought you did. But before you decide you’re headed for early stage dementia, consider that your “forgetfulness” may be something else.

If you thought you received 17 incentive gifts, you probably did. Make a mental note. If you thought you saw four cases on a pallet, you probably did. Check the paperwork and ask questions. If you have only two in the backroom inventory and yet the computer still shows three, find out what happened. Was it sold? Did someone make a computer error? Did someone move it? Did someone put it onto the floor?

6. Excessive absences.

Excessive absences from an otherwise steady and regular employee are an indication that something is going on. If it’s not health issues, family problems, or something specific that makes sense to you, look for other warning signs of theft. Often, a tug of conscience or not wanting to be around when the theft happens can be the reason for the unexplained absences.

7. Suspicious cars, especially cars parked near back doors or dumpsters.

This seems like common sense, but how often do you drive around or look outside to see what’s going on in the more isolated areas of your workplace? It’s probably a matter of security to do so at shift’s end or at the end of the workday, but consider impromptu check-ins during the day or near the end of the workday.

8. Change in employee behavior.

This is one managers have a tendency to dismiss. But, again, we’re talking about a noticeable change. There is a reason that your employee who usually shows zero initiative all of sudden is offering to take out the trash and work through his breaks. Is it your superior leadership example? Maybe. Or is it something else?

Acknowledge the positive change but beware. Be specific and let your employee know you’re paying attention. “I’ve noticed how hard you’ve been working - taking out the garbage and wanting to work through your breaks.” And make sure your employee knows your expectations. For example, breaks are required and they need to be scheduled according to customer, co-worker, and workload needs, not individual preference.

9. Pattern of friends or family showing up, or family and friends who insist they only go through employee’s checkout line.

Internal theft isn’t always a solo operation. Watch buddies who come in and only want to go through their friend’s line. If they came in for an innocent hello, they shouldn’t care about going through someone else’s line before chatting for a few minutes. If it’s a one-time situation, it’s probably nothing. But, if it becomes a regular thing, question what’s going on.

10. Change in voids, over rings, cash drawer over/shorts.

Look for patterns. A pattern of small overages may mean your employee is stealing by voiding a sale after the customer pays and pocketing the sale amount but not the tax. For example, an employee may void a $6.36 sale, and steal $6 from the drawer.

A pattern of shortages, especially in dollar amounts, may mean your employee is stealing directly from the drawer.

A pattern of over rings may mean your employee is pocketing cash payments. In particular, be wary of any employee who tends to pile merchandise in front of the register while taking care of customers. The blocked register view gives an employee the opportunity to ring up less than charged or to over ring something secretively and pocket the difference.

10. An increase in damaged merchandise or misplaced product.

Are your damages higher than usual? Is there a spike when certain employees are working? Have you noticed misplaced product or damaged product in out-of-the-way places or in bags? These are red flags for employee theft.Be especially sensitive to:

• Product that is sold in multiples. Employees may purposefully damage the packaging and steal a few of the items.
• Packaging with minor damage. Employees may purposefully damage the packaging taking care not to damage any of the product and steal it at a later date.
• Empty packaging. It may be shoplifting or it may be employee theft.

The bottom line is this: trust your employees. Believe in them. Build a positive working relationship. But, pay attention. If something doesn’t seem right, question it. Proving yourself wrong will validate your trust. Proving yourself right will protect your assets.

Michele Eby works for Media Partners as a writer and training advisor. She has worked in the training and development field for more than 15 years.

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