Stop Internal Theft

It is bad enough to be the victim of a thief — but it’s even worse to be cheated by one of your own. Employee theft can take many forms from skimming cash to using the vehicle inappropriately. This internal theft can be hard to quantify and prosecute. In this challenging business environment, however, stopping it and preventing future losses is a must.

SECURITY = SAVINGS

“It (Internal security) was a significant investment,” said Jeff Smith, president, All Star Services Inc., Port Huron, Mich. Smith first considered it when he wanted to reduce his cost of goods. After conversations with other vendors, he invested in technology.

“We bought cameras over $1,000 each, the size of a pen but with great resolution. And the GPS systems cost about the same,” said Smith. In addition, Smith changed the procedures in his warehouse, limiting the personnel admittance, and established better cash handling systems.

“Most vendors would say their systems are tight, but consultants use the statistic that 13 percent of people will steal from you,” said Smith.

With the help of law enforcement, Smith recently caught an employee costing the company $8,000. According to Smith, this type of money adds up fast when there are $2 and $3 shortages each time.

The theft can be felt in other losses, too. “Internally it’s not just theft of money, but wasting time, gas, or several things coupled together,” said Smith. “We are turning over every stone we can (to use security as a money saving technique),” said Smith.

PROACTIVE DECISION

“Internal is much more expensive than external
theft,” said Tom Whennen, president of Triple A Services, Romeoville, Ill. He started a loss prevention program in 2006. “We wanted to control the environment, rather than putting out fires and reacting to emergencies,” he said.

Whennen installed cameras and alarms in his facility. He purchased GPS systems and covert, internal cameras for machines. He also evaluated all areas for potential loss, including gas and phone usage. “We let employees know we have zero tolerance (for theft). They’ll be led out in handcuffs. That includes reckless driving, filling up (for personal use) with the company gas card, cell phone minutes, etc.,” said Whennen.

Whennen planned his reorganization as a way to prepare for future growth. Loss prevention techniques helped him lower his cost of goods more than 2 percent.

The cost of implementing loss prevention procedures and equipment was only 20 percent of Whennen’s return on investment, based on increased revenue after the internal security measures were used. “That (the return on investment) was just (the theft) I found and stopped, but not (the theft) we’re preventing,” said Whennen. “If companies aren’t focusing on it (internal security and loss prevention) now, they will be. It makes a huge difference.”

HIRING THE RIGHT PEOPLE

Some argue that theft can be prevented by hiring honest people. Daniel Braker, manager at Beaver Vending, Beaver Dam, Wis., lives in a small community. “In this town, we know practically everyone,” he said. But hiring an honest driver is still a problem for him. We try to hire someone we know, although that’s not always successful,” he added.

Because most of his machines are indoors and well supervised, Braker has more problems with internal theft than external theft. Challenges include gathering evidence and prosecuting the thief.

Braker had one driver whom he suspected of skimming money, but couldn’t prove it. This route driver was eventually fired for other reasons and the route’s revenue increased. However, Braker is unsure if the increase is due to better management of a combination machine on the route, or the elimination of internal theft.

USE PROFESSIONALS

There are screening tools available to measure employee integrity. Profiles International Inc., a provider of employee assessment instruments and a National Automatic
Merchandising Association Business Partner, has questionnaires specifically geared towards vending. Part of the questionnaire targets potentially untrustworthy employees by measuring integrity, substance abuse, reliability, and work ethic.