The View Of Employee Theft From 30,000 Feet

by Mark Manney
Posted On: 5/29/2019

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In 2007, I was working for 11 different vending companies at the same time. In my spare time, which was mostly in hotel rooms or airports, I was also working on the fifth rewrite and expansion of my main vending loss prevention manual titled: The Culture of Controls: Training – Technologies – Tools & Tactics.

Now, the "four Ts" were not a catchy slogan I pulled out of thin air. They were actually the results of the evolutionary process I had developed in the vending trenches to quickly bring my program to a client’s management team. I needed to kick-start the reduction of theft, fraud and business abuse that always led to the steady reduction of their Cost of Goods (COGs).

No one keeps a loss prevention consultant around for long without fairly obvious results. That’s why I named my company Loss Prevention Results Inc. That’s also why I put my program into a manual that I could use to train clients quickly, and that they could use for reference to build the program. I focused mostly on where the rubber meets the road: middle management – seeking one strong leader to become the hub of the spokes in every location or division. With the right manager/hub, the loss prevention results, COGs plummets, and profit enhancement could be amazing!

One of my most successful COG reduction clients was RE Services, then owned by Stan and Steve Ledbetter. I spent eight years on retainer working for the highly respected and esteemed Ledbetters before they sold their company. Here is an article from Vending Times (August, 2011) that gives the overview of how successful a Loss Prevention program can be.

In my first five years with the Ledbetters, the "culture of controls" and their management team’s followup with the "four Ts" reduced their losses by $4.2 million. (I should have negotiated a percent instead of a flat monthly fee). Stan Ledbetter explained some of the details in a presentation at the annual National Automatic Merchandising Association that VT summarized in the article.

After more than a couple of hundred successful vending theft, fraud and business abuse investigations in dozens of clients from 2002 to 2007, I was sitting in a plane when I thought that, if I could come up with two graphics to simply explain the seven categories of loss and their ladder progression as well as the seven investigation tactics that can be used to expose them, I could create a powerful snapshot. I then developed the two graphics here … they wrote themselves. As with any ladder, the thief starts at the bottom and climbs from trivial to criminal offenses if not caught. And the loss prevention manager has tools of increasing power and consequence for use in detecting the theft and catching the thief.

The Vending Theft Ladder

7. Cash Theft
6. Product Theft
5. Theft of Property & Parts
4. Theft of Fuel
3. Theft of Time
2. Unnecessary Product Waste
1. Productivity Theft & Fuel Waste

 

 

The Vending Investigation Ladder

7. Police, Termination/Arrest, Prosecution .. Deterrence
6. Interrogation ............................................. Confession
5. Case jacket .............................................. Documented Evidence
4. Covert GPS .............................................  Evidence
3. Covert Cameras .....................................  Evidence
2. Pre and Post Audits ................................. Evidence
1. Meters, Dex, Software Reports ............... Suspicion

Not all dishonest employees follow the same progression up the Vending Theft Ladder, but you would be surprised how many actually do, over time, if they are not caught nor disciplined. But here is the kicker. What I wanted to do with the above graphics was twofold:

• Train my client’s management team in those 14 "bullet points"
• Use both graphs to convince the 66% of my client’s employees who sit on the integrity fence not to commit any of the seven thefts, frauds and businesses abuses.
Why 66%? Here is foundational research I believe is reasonably accurate about the three types of employees you have working for you. (These figures are from forensic accounting firm Kessler International in New York City.)

How Many Employees Steal?

The breakdown is:

• 21% of employees will never steal, no matter the opportunity
• 13% of employees will steal at every opportunity
• 66% of employees may steal if they see the 13% doing it and getting away with it, or if the 13% are caught or exposed, but there are no real consequences

Why Do Employees Steal?

• 49% steal out of greed
• 43% steal out of vindictiveness to get even for perceived poor treatment (perceived being the key word)
• 8% steal out of need

In companies with lax or weak controls, up to 79% of employees (the 13% and the 66%) might be stealing from their employer. I have been in vending companies with as high as a 3% to 5% cash/product loss who were on the razor edge of bankruptcy. In these companies, the culture is out of control. The tail has been wagging the dog, the inmates are running the asylum, and most or many of the 66% have joined in with the 13% in a theft, fraud and business abuse feeding frenzy.

I have had three owners tell me the Culture of Controls saved them from looming bankruptcy and losing their legacy to their families. I know there were others who never voiced it. To me, that was always the sweet icing on the cake. I loved exposing and confronting the 13% of greedy and ungrateful parasites. Especially what I called the "mole-k" thieves, buried so deep for so long that no one suspected them as they sucked the lifeblood out of my clients for years, some for decades, a few for generations.

An interconnected and relentlessly communicated Loss Prevention program that narrows and or eliminates the opportunity for undetected theft and loss (in all forms) increases the perception of the chance of detection, meaning that the risk now outweighs the reward.

This program is based on the Loss Prevention "Best Practices" I built into the Culture of Controls and the "four Ts." The war with the thieves in your company can be fought in the heads of the 66% ... and you can win it.

Now, one of the first tactics I brought to my vending clients. one that I had learned in big-box retail, was to develop a custom-made Loss Prevention Orientation for the vending industry, and make sure every single one of my client’s employees sat through it. Then, going forward, all new hires also sat through it before they touched the first dollar or the first case of product.

I showed the two graphics to all the employees, along with other handouts, and I built the orientation around the graphics. I even posted them (and other material) in the warehouse or breakroom. Sometimes during the orientation, by just the looks on their faces and their body language, I could tell who was climbing up and down the Theft Ladder. One moneyroom counter who was stealing hyperventilated when I looked at her and started talking about cash theft. The HR manager had to get her a paper bag to breathe in and out of. She resigned the next day, and her puff-of-smoke exit reminded everyone of the Roadrunner. Oh yeah: cash shortage fell 50% the next full accounting month. Hmmm … I love the easy ones.

A well-crafted Loss Prevention Orientation is a significant deterrent to the 66% of employees, who sit on the integrity fence, and who are not determined, committed thieves. They can be convinced to behave themselves. Another way of saying that is: You can scare the crap out of them and they will stop ripping you off; some will resign with no notice … good riddance to bad rubbish.

This allows management to focus on the corrupt, incorrigible, and determined 13% who will steal at every opportunity.

The 21%, who are 100% honest 100% of the time are your allies, and many of them will tell you who the 13% are – if you provide them the vehicle. More on that in the Confidential Hotline blog at a future date.

(Yep, you only have about 1 out of 5 employees who are 100% honest 100% of the time, but most of you reading this already knew, feared or already have learned that the hard way.)

Taking this view of employee theft from 30,000 feet is part of changing your business culture to a customized Culture of Controls. No two vending companies are alike, no two cultures are alike, but the controls are identical.

What I am blogging about is also called: Theft Deterrence Marketing (TDM).

Just as you market your products to your customers, you can and must market Theft Deterrence to your employees. I will blog more about TDM in future blogs, as the bang for the buck can be tremendous.

If TDM is done right, it works! Just ask Stan and Steve Ledbetter and many, many other owners who changed their culture with controls.

I’ll close with a quote from one of my mentors, role model, favorite authors, and career hero, the greatest business consultant who ever lived:

"Culture eats strategy for breakfast" Peter Drucker

>> MARK MANNEY is the founder and chief executive of Creedmore, NC-based Loss Prevention Results, focused on the vending and foodservice industry. Click here to purchase his "Food Service Manual: The 5 Loss Prevention Common Denominators" and his "Micromarket Loss Prevention Manual" at the Vending Times Bookstore. Coming soon will be Manney's 100-plus-page master "Vending Loss Prevention Manual: Creating a Vending Culture of Controls: Training, Technologies, Tools & Tactics.” Contact him at (919) 812-3602 or mmanneylpr@gmail.com. He enjoys hearing from VT readers.