Employee Theft

        This paper will examine and inform the readers about the definition of employee theft and the key issues regarding the motivation behind it. In addition, this paper will review academic journals to dive further into the variations of why employees steal within the United States. Finally, this paper will frame the consequences of the people who perform this crime and subsequently the elements in detecting this form of fraud.

As future business men and women, one day we may face an instance where a form of fraud has been committed within the company that we are employed by. This fraud could come in many shapes and forms but all come from the same important resource to a company, its employees. One important form of fraud is employee theft.

 Employee theft can be defined as the unauthorized taking, control, or transfer of money and/or property of the formal work organization that is committed by an employee during the course of employment (Sauser, 2007). This definition compares to that of the Brian Niehoff’s and Robert Paul’s (2000) definition of employee theft as theft considered to be intentional acts by insiders that are targeted at the organization rather than at individuals. Each developed their own variations as to what drives the trusted personnel of a firm to steal.

Depending on the source, business losses due to employee theft are estimated to resonate anywhere from $40 to $250 billion a year. Unfortunately, this can attribute to business failures as it is also estimated that 30-60% percent of all business failures are due to employee theft (Taylor & Prien, 1998). If we take this a step further, 20% of all business and 30% of all new businesses fail each year due to employee theft (Taylor & Prien, 1998). To make matters worse, employee theft doesn’t discriminate against any industry. In the retail industry alone, it is estimated that 44% of all losses are the result of employee theft (Weber, Kurke, & Pentico, 2003). However all industries as a whole, experts estimate that nearly 2 percent of gross industry sales will also be lost to employee theft (Taylor & Prien, 1998).

While these numbers are eye opening, it is important to note that employee theft is difficult to quantify. Stating any absolute statistic is a tricky situation due to the various professional organizations, government agencies, research surveyors and writers use of different ways to not only define employee theft but to also measure and gather statistics. What is important here is not the result but the events leading up to the theft. Why do they do steal? How can we find out how they’re doing it? What can we do to prevent further theft?

        Similarly, to the overall statistics, each set of research normally has their own hypothesis and findings as to what motivates an employee to steal. Hollinger and Clark (1980) noted four different motives for employee theft: Employee’s concern over their financial situation, age, employee’s position, and job satisfaction. However, if we look to William Sauser Jr. (2007) of the Advanced Management Journal, we see he attributes theft to three different elements: motive, desire, and opportunity.

        Through different empirical tests, Hollinger and Clark were able to find different correlations between certain factors and theft. First was the connection between income and theft. They had determined if a person considered his/her financials as one of their most important issues than they would be more inclined to steal. However, absolute income was not a predictor of employee theft. Secondly, they took a look at an employee’s age. This is where they found a strong, direct correlation to theft. It was determined that due to the less amount of tenure a younger employee has with a company, the lower level of commitment they may have compared to an older employee. Third, they confirmed that an employee’s position also had a direct correlation to theft. Those with greater access to the things of value within the organization were where the highest amount of thefts occurred. Finally, Hollinger and Clark found that the primary motivator of theft was job satisfaction. Their research strongly suggested that the employees who are most likely to seek redress through counterproductive or illegal behavior in order to right the perceived inequality are those who are dissatisfied with their jobs, especially those within the younger demographic (Hollinger & Clark, 1980).

        Most, if not all, business students will see some sort of schooling about the fraud triangle and the fraud diamond in their classes. This is what some call the recipe for fraud with three main elements in perceived pressure, perceived opportunity, and rationalization (Dorminey, Fleming, Kranacher, Riley, 2010). William Sauser Jr.’s elements of employee theft follow similarly to that of the fraud triangle. Motive can be seen as the rationalization of the theft. This is the reason for the vengefulness of the employee. Desire builds off of this motive. The employee now imagines the gratification they’d receive after their potential action. Opportunity is the absence of barriers allowing for that action to happen. From this approach, it is detrimental to fail to reduce opportunities and deter both motives and desire (Sauser, 2007).

        Most would understand that jail time and economic losses are consequences of employee theft. However, there are more consequences that are often overlooked. Brian Payne and Randy Gainey (2004) group the consequences of employee theft into four main categories: employee centered consequences, employer based consequences, police based consequences, and revictimization. 

Employee centered consequences are classified as the effect to current employees after a theft has occurred. Less trust will be instilled in employees. A trustworthy employee will no longer be seen as an honest worker in the eyes of management. Management as a whole sees a destruction of trust with their employees (Payne & Gainey, 2004).

Next, employer based consequences are the direct consequences of the managers and owners. Here you see managers and owners physically exhausted, experience anxiety, emotional distress, physical turmoil as well as having less faith in humankind (Payne & Gainey, 2004).

The third type of consequence seen is police based. This type of consequence is based off how the trust in a police force by a victim is influenced. Employee theft victims are less apt than nonvictims to have faith that the police will be of help to them. Ultimately, this lessens the likelihood that in future if any crime occurs, whether theft or other, the business may not utilize the police (Payne & Gainey, 2004).