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Tough Times Demand Tighter Security Controls

Posted On: 2/20/2009

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vending, coin-operated, vending machine, vending security, vending technology, loss prevention, Mark Manney, security, theft, locks, stealing, security cameras

Across the industry, operators have been forced to reduce employee hours and eliminate positions as they consolidate routes and shed unprofitable accounts to adjust to current economic conditions. Layoffs in businesses that vending companies serve not only reduce same-location sales for the operator, but also lower commissions for route personnel. Disgruntled by the loss of compensation, benefits and perks, employees often look for ways to skim collections and pilfer product, and often feel justified in doing so.

Establishing controls to safeguard cash, product, vehicles and equipment at all times and communicating a zero-tolerance policy for theft is essential to sustaining profitability through one of the most difficult economic environments the industry has seen in decades.

Security expert Mark Manney of Loss Prevention Results (Wake Forest, NC) honed his loss-prevention expertise over three decades at "big box" retail stores. For the past seven years, he has devoted his efforts to the vending and foodservice industries with a customized program that provides operators training, technologies, tools and tactics to address their unique security challenges. Internal theft presents the greatest threat to security in any type of business, according to Manney, and establishing a companywide "culture of controls" is not difficult and is perhaps the most effective way to deter theft. "When it comes to losses, external threats in any business are hardly on the radar screen versus internal theft," he told VT. "The people who work in banks steal much more than the guys who come in with guns. Shoplifting is a big issue in retail, but internal theft is a much bigger concern. With external theft, you see the machine has damage and it's generally an isolated, occasional incident; with internal theft, there's less evidence. It takes work to identify a problem, and a lot more work to get to the bottom of it."

Manney cited research suggesting that 13% of American workers will steal at every opportunity, 21% will never pilfer and 66% "sit on the integrity fence." That 66% can easily be swayed to steal if they see the 13% that do getting away with it, or getting caught and not suffering any consequences. And during difficult economic times, they are more likely to join in and steal in various ways, said Manney, emphasizing that cash is not the only thing employees will take.

Most dishonest employees progressively climb the "theft ladder," starting off by stealing productivity through misuse of time. The next rung on the theft ladder, directly impacting the operator's bottom line, is fuel waste, followed by unnecessary product waste. The ascent continues with outright theft of time and fuel and pilferage of property and product. Cash theft is the uppermost rung on the ladder. "Once someone is stealing cash -- the boldest form of theft -- they usually are climbing up and down the other rungs," the security expert emphasized.

When setting out to establish a companywide culture of controls, the most effective way to deter theft, according to Manney, is to instill fear of prosecution in employees. The second most powerful means of dissuading employees from stealing, he added, is to make it known that an investigator is being assigned to uncover any internal wrongdoing within the organization. By simply making employees aware that they will be held legally accountable for their actions, operators are likely to rid themselves of many dishonest employees, who will choose to leave, and decrease the incidence of internal theft.

"Fear of termination does not generally carry much weight when it comes to deterring dishonest employees from stealing if they see an opportunity," added Manney. "But it does hold more weight now, when they can't go down the road and get another job real easily."

A key component of Manney's loss prevention program is the use of hidden motion-activated video cameras in vending machines and covert GPS units on route vehicles, which he considers essential tools to identifying dishonest employees and documenting them in action. Just as the fear of prosecution or investigation can be enough to deter theft, knowledge of the presence of hidden cameras and GPS technology that tracks their every move "terrifies" employees, according to Manney. And for the 66% "on the integrity fence," the risk of getting caught often outweighs the reward they may gain from stealing.

Manney introduces employees to the loss prevention programs he is putting in place at their companies by showing them videos of employees who are caught stealing at other companies. "You see the look in their eyes when you tell them that, as of tomorrow, the GPS systems and cameras will be in place," he said. "In one company, the next reporting month, before we even took one action other than informing employees what was coming, there was a 65% reduction in overtime and cash and product loss dropped 7/10 of a percent, because they knew the party was over."

Inevitably, the 13% of employees who will steal at every opportunity will commit theft, and footage recorded by a covert camera provides indisputable evidence for the operator to submit to the police. Manney teaches his clients how to document evidence, conduct their own interrogations and present a well-structured case jacket to the police that they can use during their own interviews with suspects. By following his methodical approach, the security expert said operators not only rid themselves of dishonest employees, but often receive full restitution for stolen cash and goods.

Once the evidence is all in place, Manney advises operators to time arrests so they are made during the workday as publicly as possible. "To instill fear among those employees who sit on the integrity fence, you want to time an arrest when the route drivers are all back so it's a public hanging in town square during rush hour," he suggested. "Remember that fear of prosecution is the single greatest deterrent to employees stealing from you. It's part of a shotgun approach to communicating that controls are in place throughout the organization."

Once loss prevention procedures are in place, it is not difficult for an operator to investigate and document suspected theft, which is the only way to apprehend those who steal and deter those considering it, according to Manney. "There's a certain segment of that 13% that you have to go after, because they're determined, incorrigible and they like to play the cat-and-mouse game," he emphasized. "Too many operators don't make the effort to take it to that level. They can and they should." Use of tamper-evident collection bags and locking keyrings with careful inventory control are other loss-prevention measures Manney says should be part of every operation.

"There's a lot the operator can do that does not have to do with locks or technology to get their losses down. Companies can get the same results whether they have the most sophisticated software or no software," emphasized the security expert. "I have clients low on technology but light years ahead with loss control. Software tells you at the machine when there's loss. My program goes to the moneyroom, the warehouse and the truck to prove who is stealing and then communicate it back throughout the company when we catch the bandit, so other employees realize it's suicide."

Manney's use of covert cameras has not only identified employee theft at more than 50 vending and foodservice companies with whom he's worked, but has also helped police apprehend outside burglars, many of whom were career criminals.

To further deter theft from outsiders and make those with bad intentions think twice before shaking a vending machine, the security pro created decals stating that the machine is equipped with a motion-activated camera. Operators using the decals also display a poster near the machine that shows images of three people caught on camera shaking product out of a vending machine, all of whom were terminated from their jobs for doing so.

"Vending is one of the last cash-intense businesses, and creating procedures and employing tactics that residually safeguard what operators work so hard to earn is so worthwhile and necessary. With the right controls, an organization cleans up very quickly. And when someone starts in again they stick out like a sore thumb," said Manney.

He emphasized that no loss-prevention program can succeed without management buying in and cautioned that many are resistant to change and reluctant to believe employees they've trusted for years could be stealing. "A huge amount of effort is usually needed to make it happen, and it may mean some key people choose to leave," he noted. "Those who stay have to be 100% onboard because it's an ongoing process that takes new approaches and commitment in order to reap the residual rewards."

Recognizing the need to establish a formal loss-prevention program, Stan Ledbetter of RE Services (LaFayette, GA) enlisted Manney's expertise five years ago. A 45-year industry veteran, Ledbetter said he has sustained levels of cash and product loss at half the industry average, or better, as a result.

"As an operator, you get enamored with route accounting and don't realize there are so many ways you can lose cash and product. Route accounting helps you see there is a problem at the machine, but not necessarily in other parts of the company, or to track down where the problem is or who is responsible or how to resolve it," he told VT. "Our loss prevention program has established a new level of control, from the machines to the trucks to the moneyroom and, more importantly, it has truly created a culture in our company that has made every employee aware that there is no tolerance for theft, and they will get caught and prosecuted if they attempt it."

With 600 employees in four divisions operating 100 routes, the Georgia operator said the installation of covert GPS units on his trucks, cameras throughout his buildings and in machines, and tight key-control procedures were among the measures that helped immediately flesh out dishonest employees in his company and convince his management team to get on board.

"It wasn't easy to convince route supervisors to buy in because most of them were route drivers and they're good, honest people. They don't want to seed machines with marked bills, which is an ongoing part of Mark's program that really establishes a level of control we never had. They don't want to run the risk of discovering that those bills didn't make their way to the moneyroom and someone they trust is up to no good," he told VT. "But, with a comprehensive program in place, once they start to see the results, you can convince your team to be more diligent and see the problems and confront them for the good of the company."

Ledbetter requires all prospective employees to watch a video of employees caught stealing on vending cameras as part of the interview process. Every staff member who handles money must also watch the footage annually.

"We have always taken measures to control internal losses, but we didn't have a formal program and we didn't communicate it to our employees the way we do now, which is key to its success," said Ledbetter. "It has a halo effect. It's not just catching the person stealing, but making an example by making everyone aware of the consequences when things go wrong."

Manney typically appoints a "loss prevention control officer" to oversee the program once he establishes it. Ledbetter said that, understandably, there was no one in house with the "moral courage" for the job at RE Services, so Manney has assumed the role. The security veteran works closely with RE Services management through monthly conference calls and conducts onsite investigations when necessary. And every two to three years, he holds a "town hall" meeting at each district where he reviews all the loss prevention measures in place with the entire RE Services team.

RE Services has also benefited from a toll-free hotline Manney established that allows employees to anonymously report suspected theft within the company and receive a $200 reward if their tip uncovers a dishonest employee.

"It gives everyone an outlet to report if they're seeing something wrong without fear of repercussion," the operator said. "It might be their superior they're reporting; it's all done through an outside agency and we never know their name. We put the phone number on their paycheck to remind them to report any money-related and safety issues. They use it and trust it, and it benefits everyone and weeds out the dishonest employees. It's another measure to keep people honest and establish a focus on loss prevention throughout the organization."