In the May issue of Contractor magazine, Managing Editor Robert Mader did an outstanding job of summarizing a presentation on theft given at the spring Contractors 2000 Super Meeting in Boston. The examples that the speaker used were of a $500,000 fraud and an average small business loss of $127,500! These examples might convince you that the information in Bob Mader’s report was not for you since it would be impossible for anyone, no matter how clever, to steal half a million dollars from you because your corporation’s total net worth is only half the smaller number!
Your problem is that you may never, ever, be totally sure why your business is so small until you have plugged all holes that may be leaking your profit. That’s why your biggest hole, the disappearance of assets, your net worth, is so frequently referred to as “leakage.” I assume the word leakage derives from leaks from a tank or bin, which, like the misappropriation of assets, is a subtractive phenomenon.
I’ve always compared employee theft to the farm rule about rats. If a farmer never sees a rat, he has only a few. If he seldom sees a rat he probably has a population in excess of 50. If he usually sees rats as he goes about his chores, then he has a severe infestation.
For every time I use the word rat, substitute the word theft. As with rats, if you tolerate dishonesty, it’s the same as encouraging it.
It may seem overly simplistic to start by saying you should only hire honest people, but this is absolutely your first and most important opportunity in loss prevention. After you have made every attempt to confirm the good character of your employees, you must then proceed to define honesty in your written procedures, in meetings and, finally, by your own personal example.
All employees must understand honesty as it relates to you and your company. Sadly, you cannot trust that they will know your definition unless you tell them in detail and repetitively.
When theft is discovered and confirmed there should be no debate about whether it was theft because you properly defined the word and the types of conversion of property completely and repetitively. This total definition of theft is important because it reduces the conversation and eliminates the debate that sometimes arises during the firing process. “You did it, you knew it was wrong, and we completely explained that you would be fired, and so you are.”
If you casually convert company assets to personal use and if you permit other members of the family to do the same, you are teaching dishonesty and the procedural steps in how to do it. You can write a book on honesty and the importance of it as your employees relate to the corporation and to your customers, but if you’re personally dishonest and if you tolerate dishonesty selectively, your words are fiction.
In my experience, substance addiction is the most common trigger for theft. The addiction can’t be supported by reasonable compensation at any level and theft seems to offer an easy solution. It should be clear that your company will not tolerate substance abuse and that your company is a drug-free employer. Substance abuse and misrepresenting substance abuse are firing offenses — no warning or countdown of warnings required.
It should also be understood that any conversion of the rightful property of others of any size or value is also considered dishonesty. This includes the broad public of customers served, fellow employees and, of course, the company itself.
You must stress that the issue is not the value of the property or the amount of time stolen, it is the act itself. The rule is quite simple. If it is not yours and you take it, it is theft. If it is a piece of candy in a dish in the customer’s home and it was not offered to you, it is theft. If an employee is logged in on a job and it’s not the time for a defined break and the employee is off the site at a coffee shop, it is theft.
An attractive matron in a thin dressing gown met a serviceman working in an upscale neighborhood at the door. She greeted him by inviting him in and telling him if he saw anything he liked, he should take it. He was later apprehended in Florida with her credit cards and her new white BMW claiming it was not theft, but rather a gift. This, of course, emphasizes the importance of hiring people who are honest, moral and, most importantly, smart.
As always, all my hard-line advice is what I call the “Black and White Stuff.” The real world is filled with shades of gray, designed to complicate your life, written and interpreted to protect the sinners. Thus my comments must be tempered by what the law says and how it is enforced at the time and in the place where you are in business.
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