Many small businesses have a serious problem on their hands: employees with sticky fingers.
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A recent study by University of Cincinnati doctoral student Jay Kennedy revealed that 64 percent of small businesses have lost items to employee theft. Overall, the stolen goods ranged from cash to products sold by the business to tools and equipment.
Business News Daily recently reported on Kennedy's findings, which highlighted that most employee thefts go unreported to police. Here, we follow up with Kennedy in an email interview to learn more about employee theft and why small businesses are susceptible to it. [READ: 'Employee Theft: Why Small Businesses Don't Report It']
Why do you think employee theft is so prevalent in small businesses?
I think it is a matter of opportunity. Small businesses have fewer employees, and these employees may have a wide range of responsibilities within the business. With this responsibility comes knowledge of oversight mechanisms in place at the business, as well as knowledge of suitable targets for theft. An employee who becomes motivated to engage in theft has access, knowledge of guardianship mechanisms and knowledge of the target that allow them to be more successful in their crimes than non-employee offenders would be.
What can small business owners do to protect themselves from employee theft?
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Identify the specific opportunities of theft that exist at the business. Can employees access cash, product, materials, tools or other business resources? If so, which employees have access, and how do they have access to these resources? Then, determine what oversight or guardianship mechanisms are in place over those resources. Are those mechanisms sufficient to prevent the theft, or lead to a quick identification of theft from the business? Protection does not mean removing responsibilities and assessing the criminality of employees. Rather, it requires business owners to objectively assess the likelihood of theft within their business, and find ways to address those opportunities.
What do you think drives an employee to steal from an employer?
There are a number of reasons that have been found to drive an employee to engage in theft. The individual may just be a rotten apple — they have a natural deviant instinct. The individual may be in need [of] cash or other items because of their own personal situation. They may have an addiction or some other problem beyond the reach of the business, or they may just simply see the opportunity and chose to take advantage of it. Irrespective of the reason, focusing upon offender motivation is not the way to prevent theft, as strong guardianship mechanisms can trump most motivated offenders.
Are small businesses more vulnerable to employee theft than large businesses?
The data would suggest that they are. Small businesses have fewer employees, who have greater levels of autonomy and authority within the business. Furthermore, small businesses lack the internal controls that larger businesses have because of the number of employees they have on hand, as well as financial constraints. For example, few small businesses conduct regular external audits, because these audits represent a large expense that is difficult for them to justify from a cost perspective. Finally, the Association of Certified Fraud Examiners (2013) has found that employee frauds cost small businesses (businesses with 100 employees or fewer) $26,000, on average, more than larger businesses.
In your study, most small businesses don't report employee theft cases to police; do you think they should be reporting it?
I do think that more businesses should be reporting theft, yet I think that we need to find better avenues for connecting victimized small businesses with proper criminal justice system resources. If the current avenues are utilized — a victimized business calls the police and a patrol car responds — I think that reporting, in the aggregate sense, does not make much sense. However, if reporting of employee theft leads the victimized business owner to specialized fraud or financial crimes units, then reporting will become beneficial for the business, the community and the criminal justice system. To arrive at this point, however, we need to encourage victimized small businesses to reach out to local law enforcement, specifically seeking to find the best avenues to address their victimization.
Do you see employee theft getting better or worse in the future?
I do not think that it will get worse, yet with increased attention to the problem, it can get better. We will never be able to prevent all employee thefts, yet with increases in guardianship and more-collaborative relationships between the criminal justice system and small businesses, I am confident that reductions in the occurrence of employee theft are possible.
Originally published on Business News Daily.
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