Defining honesty can help reduce shrinkage - employee thefts

Recently my wife and I had dinner at a local restaurant where we know the owner fairly well. Near the end of our meal, the owner came over, sat down, and began talking about uncovering some dishonest acts that were committed by his employees.

As our conversation progressed, the owner focused concerns on the extremes that individuals will go to in order to rationalize or cover their acts of dishonesty, and their interpretations of just what constitutes honesty or dishonesty. His examples: one individual attempted to excuse away her dishonesty by saying that when she worked in another restaurant the employees routinely gave special price breaks, free food and drinks to relatives and close friends. Another, a bartender, surprised the owner by attempting to place blame for cash shortages on innocent co-workers, even though there was evidence to the contrary.

While the above excuses may have been blatant attempts to conceal outright theft, thousands of conversations with dishonest employees have taught me that more often than not, expect most thieves to attempt, in practically any way possible, to rationalize or justify their acts of dishonesty or abuse. It's the rare one who will readily admit their dishonesty.

Webster's Dictionary defines honest as being "free from fraud or deception. " Unfortunately, the definition of honesty is clearly not as black or white as it is in Webster's. Our research has taught us that dishonesty can mean different things to different people. Unfortunately, many employers take it for granted that their employees know the difference between right or wrong. And this is where serious. problems can arise.

For the past few years, we've measured the climate of honesty in retail stores and found that it correlates directly with shrinkage. Where employees had positive attitudes toward honesty, where they clearly understood specific company policies, where they perceived internal controls to be effective and fair, and where they believed their supervisors and management to be honest, the store had low shrinkage. In stores where a weaker climate of honesty was measured, internal controls rated as ineffective, and where it was perceived that management showed minimal concern, the stores were plagued by higher shrinkage.

Employees become confused when company policy states one thing and, at the same time, they see co-workers getting away with another, while supervisors sit back and condone these actions. When little or nothing is being done about the enforcement of company rules, the employees become confused about the mixed messages they receive. Two of the more frequent abuse situations which come to mind are discount abuse and eating of candy/food.

Companies should clearly define definitions of what is honest, and what's expected of their employees as they relate to critical areas including discount privileges; time clock requirements; recording of sales, refunds, and void transactions; cash over/shortages; ringing own transactions or transactions of relatives/ friends; eating unpaid for candy/food; unauthorized removal of company merchandise, supplies, etc.; and specific guidelines relating to the wearing of store merchandise, if it's permitted.

I prefer that critical definitions be defined in writing. One client listed their "definitions" in their employees handbook. They also classified their definitions by category, i.e., major termination type) and minor (written warning type) policy violations. A signed copy of the document acknowledging understanding of the definitions is kept in each employees personnel file in the event an incident arises in which an employee claims they were never told of such a violation.

The definition of honesty can mean different things to different people. To reduce the chances of dishonesty, explain the definition within your organization and hopefully it will pay off.

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