NEW YORK -- To counter some alarming trends in employee theft, retailers have taken proactive, even aggressive approaches to developing employee loss-prevention programs. And most agree technology alone is not enough to catch a thief.
Retailers interviewed by SN have found that combining technology with employee involvement has been the best way to reduce employee-related shrink.
According to the Security & Loss Prevention Issues Survey 1997, conducted by the Food Marketing Institute, Washington, there were more than 18,000 reported cases of employee theft in supermarkets in 1996, averaging $406.59 per incident. Employee theft outstrips losses from consumer theft on a per-incident basis, say retailers.
"I've seen instances where a cashier would slide $250 worth of products in one attempt. Whereas your average customer in a grocery store, if they walk out with $10 worth of products, that's a lot for a shoplifter," explained Dave Eller, vice president of loss prevention/risk management at Jitney Jungle Stores of America, Jackson, Miss.
"Most retailers today recognize that it's an issue that has to be addressed. We're not so naive anymore to believe that each individual we hire is entirely honest," he added.
Employee hot lines are a growing trend among retailers, and retailers are reporting positive results. Supermarkets set up phone lines that go directly to their loss-prevention departments, and in some cases to the president of the company, so employees can leave anonymous messages about dishonest acts conducted by other employees.
"All the technology is wonderful, but essentially it comes down to dealing with the employees," Eller said. "We use our employees to help us control employee theft. Peer pressure is a great motivator. Unless you have the human factor, and involvement on the part of your management personnel and store employees, technology is essentially useless."
"The majority of our employee apprehensions come from tips from other employees," said Kevin Snyder, senior vice president of store operations and sales at Redner's Markets, Baldon, Pa.
Redner's has capitalized on the power of employee involvement with an incentive program for its stockholding employees. The 31-store chain has an Inventory Improvement Bonus award, based on savings the chain achieves beyond the 0.5% it budgets annually for shrink.
Snyder explained that anything the company saves beyond this budgeted amount is paid back to the employees. Over the past three years, Redner's has paid out more than $2 million in cash bonuses. Last year, the average bonus check was $700, paid out to 900 participants.
"Now if they see or know of another employee stealing, it affects them directly. If there's somebody walking out of a store with $100 worth of merchandise, that's $100 less that they have to share in the cash bonus," explained Snyder.
After retailers receive anonymous tips about dishonest employees, often that's where technology comes into play. For example, retailers can set up closed-circuit television camera monitoring devices or video cameras, or use the ones they already have in place, to covertly catch employees in the act of stealing. Videotape gives retailers the physical evidence necessary to prosecute.
"You have to have physical evidence. Employee statements alone are not enough to prosecute. It goes without saying videotape is some of the greatest physical evidence one can acquire. It doesn't leave a lot of room for interpretation," said Jitney Jungle's Eller.
Eller explained that Jitney Jungle has an array of surveillance technology used to collect physical evidence at its 105 stores. For example, the retailer has two different types of camera systems. One is the CCTV system. Then there are covert or "hidden" cameras set up to watch employees, for example, after receiving an anonymous tip.
The retailer also recently installed a computer system at headquarters enabling Eller to tap into any store's monitoring systems, via modem, and look at that store's conditions.
Jim Tedesco, Buffalo, N.Y.-based director of loss prevention for the New York retail group of Fleming Cos., Oklahoma City, explained that most employee theft occurs at the point of sale. He said that 15 Buffalo-area Jubilee Foods stores recently implemented a software system that closely monitors cashier performance, specifically for loss prevention.
"When we talk about loss prevention and shrink in the supermarket industry, more than half -- 51% to 55% -- originates from employees," said Tedesco. "The biggest part of that, 30% to 35% or more, is being caused right at the front end by cashiers."
The computer software prints out a report that tracks cashier performance based on more than 20 different categories, such as dollar value per customer, number of voids, and the number of no-sales.
Tedesco pointed out that if the report shows that a cashier is having problems, he doesn't automatically assume that theft is taking place. The cashier may simply need additional training. If the software uncovers problems, a manager will provide advice. Still, the program lets cashiers know that they're being watched, and that unlawful behavior won't be tolerated.
"We want to keep them honest. And one of the ways to keep them honest is to let them know that their performance is being monitored. This is really a preventative tool. It costs a lot of money to catch them stealing," said Tedesco.
Chuck Dillon, corporate director of loss prevention at Associated Wholesale Grocers, Kansas City, Kan., said the company is attacking employee theft by focusing on training and awareness.
Besides recently adding additional warehouse access controls, CCTVs and security, the wholesaler is focusing on making its staff, on all levels, aware of their actions and responsibilities as honest employees.
"We want an environment that's based upon trust, and everybody trying to achieve the same goals. So a lot of times, it's more efficient to concentrate on the positive than the negative side," said Dillon.
