Theft & The Aftermath: An Inside Job

Strategies for combating the costly problem of internal theft
Dealing with inter-office crime and creating a positive post-firing workplace

By Erinn Morgan

In October of 2010, a British optician's secretary was sentenced to two years of imprisonment for stealing the equivalent of more than $270,000 over the course of five and a half years from her employer. The former employee of Woolcott Opticians was found guilty of four counts of theft including wages above and beyond her salary, plus cash and checks paid to herself and her own utility bills.

Could this happen at your optical shop? While such large-scale fraud is infrequent in the eyecare business, there is no question that internal theft of a smaller scale—particularly product theft—is a too-common experience.

“Shrink rate is about two percent across the board in retail, but in optical it's more like seven percent—about two thirds of that comes from internal theft,” says Liz Martinez, ABOC, NCLE, author of “The Retail Manager's Guide to Crime and Loss Prevention” and a criminal justice instructor at Kaplan College in Las Vegas.

Why is the rate of theft so much higher in the optical world? “First off, there is no way to trace most items that are sold in optical, plus they are small, easy to conceal, and have a high resell value,” says Martinez. She also notes that unscrupulous individuals may see a doctor making a lot of money and feel they should themselves be better paid. “They say, ‘Well, I'll just make up the money by taking this product,’” she notes.

Eyewear theft is also more prevalent because so many hands touch the frames. “Your product is always in jeopardy because there are so many people that are able to get their hands on the inventory,” says Patrick Murphy, president of LPT Security Consulting. “Most business owners don't want to believe they have any problems, but internal theft is a difficult egg to crack in the world of loss prevention.”

IT TAKES ALL KINDS

What are the different varieties of internal theft? First off, there is taking merchandise for personal use. “Most of the time it's sunglasses with shoplifting, but it's more of a mixed bag with internal theft leaning toward sunwear,” says Drake McLean, president of Dietz-McLean Optical, which has seven locations in Texas.

Clearly, taking funds is another type of theft. Additionally, taking any company property that is not necessarily merchandise (such as supplies) is internal theft. Indiscretions like rounding up hours or reimbursable expenses plus unauthorized or excessive discounting are other types of theft.

“We've experienced all of the above,” says McLean, “but certainly more on the product front. How we often determine it is in the inventory process or some other accounting that shows up that doesn't make sense. The primary controls are to have a decent accounting system with periodic inventories. Then you want to eliminate any confusion in the area of transferring merchandise.”

How do you actually handle an employee who you've determined is stealing? “That starts getting difficult because there are so many factors involved,” says McLean. “It's a situational decision that has to be made. Generally, we would always approach the staff or the person with the issue if we have a problem.”

He also suggests consulting with a lawyer to help understand where you should be on the issue. “Your reaction is sometimes more aggressive than what you should do,” McLean says.

Security experts suggest that those interested in warding off troubles with internal theft may benefit from following a few targeted strategies, starting with announcing your company policy against internal theft.

SET A POLICY—AND DISPLAY IT

According to Murphy, the first thing retailers should do is set a policy that says: “Employees shouldn't steal.” He adds, “And make it clear that if you steal we are going to fire you and, if we can, we will prosecute you. It needs to be a very clear-cut policy that the theft of any company property will not be tolerated.”

“We have a clear company policy, which is stated in our employee manual, that says it is unlawful for you to take company property for your own use,” says McLean.

Murphy also suggests putting up posters or something similar in a break room that talks about protecting company assets. “It doesn't have to be a picture of the grim reaper saying we will cut your hands off if you steal from us, but it should talk to the employees about protecting their profits, which will enable them to make more money and realize better benefits,” he says. “It's up to the management to reinforce those policies on a regular basis, either through this type of collateral or five-minute meetings before the store opens.”

CONTROL YOUR INVENTORY

A consistent issue with inventory numbers is a clear indicator that you have some type of problem, possibly with internal theft. “The questions start being asked when you take a count and come up short,” says McLean. “You have to work through the situation. Who is the manager of the location and who else works there? Try to eliminate variables.”

A solid inventory system is a critical component to combating internal theft. We're looking at using computerized orders to assist in developing a stronger inventory system along with computerized tickets to sell merchandise,” says Jim Lewis, owner of the eight-location Harvey and Lewis Opticians in the Hartford, Conn., area.

At Dietz-McLean, employees are also responsible for the new boxes of frames they open and check into the dispensary. “If you open a box that has merchandise in it, you kind of ‘own’ that box,” says McLean.

CONSIDER CROSS TRAINING

A cash/retail business like optical can be challenging. In addition to assigning accountability for merchandise, some experts suggest mixing up the duties that employees handle. “Cross train people and don't always assign everyone to the same duties; this way [someone who is dishonest] can't set it up to steal money or merchandise,” says Martinez, who adds, “A big problem for a lot of doctors is the theft of patient copay money. It's usually small, but a dishonest employee might say, ‘Ok, $5 for the doctor and $5 for me.’ You have to have the appropriate accounting procedures in place to control this.”

TAKE AN INTEREST

In addition to hiring the right people, solid management skills will go a long way to thwarting thieves. “Treat your employees well and take a personal interest in them,” says Martinez. “It's a lot easier to steal from ‘The Doctor’ or ‘The Company’ if you have no personal interest. It's much harder to take from someone who is asking, ‘How are your kids?’ and, ‘How do you like your new car?’ Good management skills are really important.”

HIRE WELL

Many internal theft problems can be nipped in the bud with good hiring practices. “When hiring, do a rudimentary reference check at the very least. You may also want to run a criminal check. This gets into money, but it could be worth it,” says Martinez, who also notes that regional frame reps can be an excellent source of information on potential employees.

“It all comes back to good hiring,” adds Lewis. “A lot of times people develop a reputation for that kind of thing, too. It's a small enough industry that people will talk about those people who have a reputation.”

SET THE STAGE

If you suspect an employee is stealing, the first step to resolution is to keep a record of your losses and when they occurred. “It's simply a business process,” says Murphy. If the records point to issues with one employee in particular but there is no conclusive evidence, ECPs can employ other tactics to finalize the process. “I knew an ECP that used to have people go in and secret shop his store. He'd give them a $100 bill to go in and buy a pair of sunglasses and see where the money ended up.” Others have marked bills in their register to determine if the employee in question took them.

In the end, the key to thwarting internal theft is to build smart policies and procedures around the internal theft problem. “Otherwise, you are not going to make enough money to get to the bank,” says Murphy. “You are not [a big box store] where you can absorb this stuff. It can really impact your bottom line. So, vigilance will take you a long way.”