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Protecting Yourself from Employee Theft

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Awhile back I talked with one of the owners of a shop that, at the time, was enjoying annual sales of about $11 million. His most difficult task? Preventing his employees from stealing him blind. He told me about some of the elaborate schemes he had uncovered of employees stealing parts and selling them on their own. I was reminded of this when I read an article about an Omaha, Neb.-based dealership parts and service director who used an elaborate scheme to order parts for the body shop and then not deliver. He would cancel the bill to the shop, then sell the parts on eBay. Investigators found he had received (and sold) $548,000 in parts since March 2001.

Unhappiness Leads to Theft

The FBI reports employee theft as the fastest-growing crime in America.

The U.S. Chamber of Commerce estimates that 75 percent of employees steal from the workplace and that most do so repeatedly. They say one-third of all U.S. corporate bankruptcies are directly caused by employee theft. The American Society of Employers estimates that 20 percent of every dollar earned by a U.S. company is lost to employee theft. According to diversifiedriskmanagement.com, employee theft is costing American business $40 billion annually and is increasing by 15 percent each year.

The likelihood that disgruntled employees will steal rises because they tend to feel they are owed more than they are receiving.

Employees grow disgruntled for many reasons, but most often because they feel overworked, underpaid, unappreciated or have been passed up for a promotion. Once an employee is disgruntled, the relationship with the employer becomes adversarial. But to avoid putting their job at risk, employees try to hide how displeased they are and their anger finds its outlet in theft.

The likelihood that disgruntled employees will steal rises because they tend to feel they are owed more than they are receiving. Employees may steal anything from simple office supplies to high-dollar computer hardware. There’s no limit, really, to what might be lifted: Inventory, money, parts, components, supplies, information and company intellectual property are all at risk.

A Little of This, A Little More of That

I’ve personally noticed some painters and painters’ helpers who take a bit of paint for their own use, and some use shop tools and paint to do private jobs on the weekend. This seems minor compared to selling stolen parts, but is it?

Tools and materials commonly disappear in many shops. But schemes to steal and resell parts are generally hidden very carefully and hard to detect. When shop owners do discover employee theft, it seems they generally fire the person without charging them with a crime. This may be why statistics on employee theft in shops are hard to come by. Even if shops do suffer less theft than the national numbers indicate, there can be little question that any theft reduces net profit. Worse yet, other employees who see someone getting away with theft may copy the behavior.

Even if theft is not yet a problem in your shop, given the condition of the economy and the national statistics on employee theft it would seem to be a wise strategy to head it off before it starts. The American Society of Employers list of top concerns about employees is available at employeetheftsolutions.com. Addressing these may head off the kind of employee dissatisfaction that could lead an employee to rationalize stealing.

    1. Recognition
    2. Autonomy
    3. Clear/fair policies and a system for airing grievances
    4. Fair/generous benefits
    5. Team cohesion
    6. Positive management/employee morale
    7. Manageable workload
    8. Job security
    9. Rate of pay/salary
    10. Promotion/evaluation

Thwarting Theft with Lean Practices

The new emphasis on lean procedures and team productivity may give shops another effective anti-theft strategy. The focus on teams keeps technicians more aware of each other’s actions. If recognition, clear policies and job security are built into a lean production system, perhaps the likelihood of theft will diminish. An article on money.cnn.com notes that employers tend to find it difficult to believe their employees would steal from them, so they don’t put restrictions in place. But when penalties are clearly known, and supported by a clear message that theft is being watched for and will not be tolerated, shops may be spared from the startling national statistics on workplace theft.


Tom Franklin, author of Strategies for Greater Body Shop Growth, has been a sales and marketing consultant for more than 40 years.

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