Friday, October 29, 2010

Employee Theft: Good News and Bad

The 2010 Global Retail Theft Barometer reports that shrinkage was down by 5.6% to an annual rate of $107.3 billion. Yes, that's right Billion with a "B". That translates to an extra cost of about $186 per family.

While we are pleased that there was a net reduction in shrinkage, it still carries an enormous price tage (1.36% of retail sales). In order to achieve this reduction, companies have had to spend significantly more money on loss prevention / security (increasing 9.7% to $26.8 billion).

Being a company that has operations in the background check industry, we appreciate some of the tools and have some understanding of their relative effectiveness. When hiring, as companies are now beginning to do, it is important to know as much as you can about the candidate sitting across the desk. We advocate the use of many different tools to develop a background that is both broad and deep. We recommend:

  • Search for criminal offenses in every state where the applicant has lived (for past 7 years)

  • Search credit history (where permissible by law)

  • Verify employment history

  • Verify education history, degrees obtained, and accreditation of institution

  • Drug screening

  • Integrity testing

Integrity testing is one of the most interesting mechanisms for advancing a deep understanding of the emotional makeup and propensity as it relates to employee theft. As good as the searches for criminal records are, they only tell you about offences for which the applicant was caught, prosecuted, and convicted. You know nothing about those instances where they were not caught, prosecuted, or convicted. Worse still, it tells you only so much about what the applicant would do if they perceived and opportunity to steal from their employer.

So, as your company looks for additional ways to prevent losses from shrinkage, take a good close look at integrity testing. The tests are useful in providing deep insight that might not otherwise be obtained through any other means and importantly, it is highly cost-effective.

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