Employee theft: Where does the problem lie?

By Bill Fotsch and John Case

Search online for “employee theft” and you’ll turn up a dozen or more incidents every week. Employees steal goods and money. They scoop up lottery tickets, credit-card numbers, computer data, checks. They deliberately ring up the wrong price or give out too much change. They create fictitious suppliers to which they send money. And, of course, they embezzle. Small and midsize firms are particularly vulnerable, according to Hiscox, a business insurance firm.

What to do? Well, plenty of companies will be delighted to sell you insurance against the risk of theft. You can also crack down on your employees, add more controls and boost video surveillance.

But here’s a crazy idea. Instead of all that, you can help your team understand the economics of the business, engage them in moving key numbers in the right direction and share with them the incremental profits that you earn. You can get them on your side, which is to say on the side of business success. We call this economic engagement.

A hidden problem

Some years ago, one of us—Bill—took on a coaching job in an unlikely place. It was at a copper mining company in Africa. Its workers were terribly poor by Western standards, and most contributed to the support of a large extended family.

Bill was making progress in helping the company’s managers and employees understand and practice the principles of economic engagement, but there was one holdout. He was the head of the internal transport unit. Bill asked him why he felt the idea wouldn’t work in his department. 

“You don’t understand, coming from the US,” said the transport manager. “All my truck drivers are thieves.”

“What do they steal?” asked Bill.

“Almost anything,” said the transport manager. “Oil, gas, tires, batteries, you name it.”

The cost of theft

Bill and the manager examined the unit’s financials and estimated the costs of theft. It was almost twice what the truck drivers were being paid. 

“So here’s an idea,” Bill said. “A team bonus plan funded by reduction in theft.” 

Nah, replied the manager. The drivers would never go for it since they were making more by stealing. Bill told him he was nuts. At best they were getting ten cents on the dollar for sales to the black market, not to mention the personal risk. And there was no question that the truck drivers knew who the thieves were, even if they weren’t stealing. Anyone who continued to steal would be stealing from themselves and the other drivers.  Finally the manager agreed. Bill returned home.

Six weeks later, Bill was back. He paid a visit to the manager, only to find he had done nothing. Bill got up and closed the door to the manager’s office, and said something like this:

“Listen. I think if myself as a reasonably ethical guy. But if I left home each morning, leaving my extended family of twenty behind, and saw that my young daughter was hungry again, you know what I would do? Anything. Anything at all. If that involved stealing, so be it.

Cutting the losses

“Now, we discussed a way where your truck drivers could actually earn more than what they do stealing, and you would cut your losses by 75%. Yet you have done nothing. So at this point you can do one of two things: initiate this program today, before I leave, or call the COO who hired me and try to get me fired.” Bill picked up the phone and asked the man whether he should get the COO on the line. The manager decided to go with the first option.

Six months later, the company’s costs for batteries, tires, fuel, and oil were a fraction of what they had been. The employees were taking home more money than ever, thanks to the bonus program. And the transport manager was fired for selling things on the black market.

It’s all so simple. Leaders who assume that employees are all thieves will have employees who prove them right. Leaders who create an environment that fosters loyalty, teamwork, and honesty—and who share the rewards of those attributes—will have employees who respond accordingly. It’s just one more way in which economic engagement works. 

Bill Fotsch is founder and president of Open-Book Coaching. John Case is a writer who has published widely on open-book management and related business philosophies.