Product and merchandise theft from retail chain-stores, warehouses and distribution centers is carried out by customers and employees alike. Yet monitoring via Closed CCTV alone is not an efficient nor sufficient solution to battle this problem. Rather, employees must be drafted into the effort, and encouraged to fight theft through instruction and bonuses", states Dov Lev, world-renowned expert in merchandise-loss prevention.
Data published from American research surveys, carried out yearly since 1991, suggest that companies experience an average annual loss of about 1 percent due to customer and employee theft. What is worrisome is that at the extreme end, damage caused by theft could reach as much as 30% of yearly earnings, and this is a lethal estimation for every business.
A Israel Security Agency graduate who gained experience in the civilian market as a consultant to Israeli and international companies in the field of merchandise-loss prevention, Lev insists that the economic equilibrium in the war against merchandise theft is concealed, as in many other cases, in the proportion found between the value of losses, and the investment in anti-theft initiatives. He notes, however, that rather than investing solely in electronic monitoring technologies, companies should also focus on dissuading employees from pick-pocketing company products, and train them in identifying potential thieves according to common patterns and characteristics.
What are the main reasons allowing for product theft by clients and employees?
There are many reasons. But at the core lies managerial error, which allows for such incidents to occur. Company managers must accept from the start that there is a problem to be dealt with, allow for an internal analysis of the company, and carry out post-assessment suggestions. Often there are simple acts that can be prevented by altering operations and management.
And yet people are still quick to adopt CCTV technology, which they see as an effective solution to theft-prevention.
It's simply a mistake. Cameras certainly aid in monitoring thefts, however, without efficient manpower, trained in utilizing the technology, and in encouraging others towards that same goal, the solution won't be complete. It's true that today there exists sophisticated electronic equipment which monitors unusual movements. For example, cameras which are activated only when there is movement in a specific location, or cameras which track the entrance of individuals into unauthorized areas. Yet nonetheless, employees play a significant role in the fight against merchandise-loss.
How does one encourage them?
They must be integrated into the general effort, first of all by explaining that theft is caused at least in part by their management. In order to sharpen their contribution to the campaign, they are gathered for instructional lessons in how to manage the daily work, and how to identify potential thieves. When an employee succeeds in preventing a theft, he receives a bonus. I can think of one workplace where it was decided that each employee who succeeded in prevented a theft received a bonus of fifty dollars, even if the product itself was only worth twenty dollars. And it worked!
How does one really identify a customer who intends to steal?
This type of customer has many typical behavioral traits. For example, if you see a customer who enters a department store with an exceptionally large bag, there is already a clue that he or she should be monitored. The best way for an employee to respond is actually not to confront and question the customer, but rather to just watch the individual, and make sure he sees that he is being monitored. As soon as he realizes that there's someone watching him, he won't attempt stealing.
That's true for customer theft. What does one do to prevent employees from stealing?
According to studies published mostly in Europe and the United States, employees are responsible for 48% of thefts! They have many more opportunities, and are much more tempted into doing so. In certain countries, where employees earn low minimum wages, workers even feel that they are entitled to company merchandise to supplement their income…
So how does one prevent employees from stealing?
First of all, early screening of candidates and their trustworthiness must be meticulous. In regards to this, by the way, I'm a huge fan of polygraph testing during the interview process. It's true that there are countries where the use of polygraphs is unacceptable according to the court of law, in part at least because it is a breach of privacy. But even in these countries, there isn't an obstacle to polygraph use, so long as both parties agree. If someone has nothing to hide, then he has no reason to decline.
For over ten years I worked for one of Irsael’s largest retails chain-stores in various positions, and security and theft prevention was always my responsibility. When I began working there, property theft was estimated to be 2.18% of the company’s annual proceeds. Financially, this manifested as a roughly 30 million Shekel annual loss. We saw these losses begin to drop immediately after we started taping thefts carried out by employees, and then showing these surveillance videos to the rest of the employees. The effect was incredible. Even when we later started blurring the employees’ faces we saw the same results, because the employees could still identify their coworkers’ clothing and body language. In the first phase, carried out in partnership with security officers, we succeeded in reducing thefts to 1.5% of annual proceeds. After two years it was down to 0.7%, which, in my opinion, is the lowest possible percentage. A percentage of less than 1% is acceptable in any retail chain-store.
In Nairobi, Kenya, we worked to minimize merchandise-theft for a delivery company that held over 200 trucks. This company’s losses had two main sources: Gas theft by employees who worked in the company, and a decrease in the transportation of beer-bottles due to the high rate of bottle-breakage. By changing the fueling system, and by paying bonuses to those employees who were careful to keep bottles intact, we managed to significantly minimize losses.
What kind of bonuses were the employees given there?
As the company profited by decreasing the number of broken bottles, it divided these earnings with those employees who worked towards damage-control. The company’s losses were reduced from five million dollars to two million dollars. One million of the three million that was saved was divided among the employees.
Is paying bonuses to employees always worth it for the company?
Not in every case. As I mentioned earlier, first of all it depends on the proportion found between the total sum saved, and the amount invested in monitoring and training initiatives. Not long ago I read in a newspaper that net earnings of one of Israel’s largest supermarket chains is less than three percent of their total sales. Their losses due to theft, as reported, are between 2.5 and 3 percent. That means that if appropriate measures were taken to minimize their losses by a third, the company would profit by 30 percent!
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