In the best of times, retailers know that theft is a matter of when, not if.

In times like these, well, you can only imagine that the threat is amplified. Some estimates show retail theft soaring 20 percent over the past six months or so. For a small retailer, a 20 percent increase can be a death knell. It’s a serious increase even for the Wal-Marts of the world.

But before you cast an overly-cautious eye at the next customer who comes in, you may want to look within first.

I recently had a chance to talk to Terrence Shulman, head of the Shulman Center for Compulsive Theft and Spending. Companies a year ago—before the credit meltdown—he says, were losing $50 billion annually from employee theft. Shoplifting, meanwhile, accounted for $15 billion to $20 billion—60 percent less! Worse, Shulman says, shoplifters usually don’t habitually frequent the same locales. Employees, on the other hand, are there everyday. And on average, it takes 18 months to catch a thieving employee.

“It’s hard to live in an environment where you can’t trust anybody,” Shulman says. “But we all need universal precautions. Especially today.”

Shulman, author of “Biting the Hand That Feeds: The Employee Theft Epidemic,” is a therapist who helps people who are addicted to everything from shoplifting to credit card fraud. Oh, and in case you were wondering, he really knows what he’s talking about: He’s a former compulsive thief. He was even arrested—twice—for his crimes.

We talked about steps retailers can take to lessen employee theft. We also talked about the psychology of employee theft. After all, you can better prevent problems if you better understand them.

Yes, theft is up due to the bad economy. When people have less money, they steal more.

However, employee theft is also driven by anger at their perspective employers, not necessarily by a feeling of financial necessity. Lack of respect is a big driver, he says. Another driver is having their hours or benefits cut, or having increased responsibilities levied on them with no increased compensation.

Anger at the current business and political climate is also a factor. Many employees, he explains, see the headlines of “fat cat execs” getting million-dollar bonuses, while their failed companies are getting bailed out by U.S. taxpayers. This is leading to an “entitlement environment” in which some employees feel they deserve more than they really do, because others—such as bank CEOs, AIG execs, certain politicians, and even Bernie Madoff—are rolling in money they don’t deserve, Shulman says.

These feelings can manifest in stealing money, merchandise or even identities.

“People are beginning to think differently about ethics,” Shulman says. “They are increasingly thinking that life is not fair, that nobody is honest. When you’re working hard, and when you’re only criticized and not rewarded, this thinking increases. It might start off small. Like lying on a time card. Or taking office supplies home. Little by little, the seeds are planted.”

He continues: “They’re thinking, ‘Why should I be busting my butt for so little?’ It creeps in even with people of integrity. Over time, it becomes addictive.”

Which leads to how to decrease the probability that you will become a victim:

• Conduct background checks on prospective employees.
• Look into “honesty assessment” tests.
• Require letters of reference.
• Set up a probationary period for new employees. So not to make them feel like they’re under suspicion, make sure the policy is applied to everyone.
• Consider technologies such as more advanced cameras, RFID and barcoded timecards.
• Conduct random audits to limit embezzlement.
• If a theft does occur, prosecute. It may be tempting to forego the hassles of prosecution, but you’ll send a message to other employees. And you may actually help the thief out. Going to jail may be the catalyst that affects change in his or her life, Shulman says.

But perhaps the most important tip: Don’t forget the “human element.” Trust your intuition when interviewing a prospective employee. We can rely on all the technology in the world. But in the end, human instinct is often the most powerful tool in detecting—and preventing—bad behavior.

And…once you’ve hired an employee, treat him or her well! Employees who are respected by their employers are less apt to steal, Shulman says. Further, having happier employees may actually lead to less customer shoplifting. That’s because shoplifters often commit their crimes on a whim, perhaps when confronted by a rude or complacent employee. Happy employees are simply less apt to be rude or complacent.

And since we’re on the topic of the human element, watch the bottom-line instinct when confronted by decreasing revenue. The first thing many retailers do when facing financial pressures is to cut back on employees' hours. But this can actually cause increased opportunities for customer theft because there will be fewer eyes.

I’ll leave you with a few sobering and optimistic figures. According to Shulman, about 30 percent of retail employees will steal regardless of what you do; it’s just in them. However, 30 percent also will never steal, due to their good ethics. That leaves 40 percent that you can affect…

Positively or negatively.

Until next time,

Joan,

The eSecurityDiva