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Reaping the rewards of a reward line.

BUSINESSES EVERYWHERE SHARE the need to reduce inventory shrinkage and solve, or at least control, employee theft. But just how do you minimize this prevalent problem? Fortunately, solutions do exist.

Begin with the source--employees. Hiring honest people is one thing; keeping them that way is another. Most employees do not have a high enough level of commitment to their employer to motivate them to report theft or other types of misconduct. Implementing a system designed to reward employees for reporting theft can increase profitability and motivate personnel to stay trustworthy; many companies have instituted reward lines for reporting abuse problems.

Creating a system, such as a reward line, that offers monetary incentives, comp time, peer recognition, or company perks, goes a long way in reducing shrinkage. It also conveys to employees the seriousness of theft. If procedures for reporting theft are not clearly defined, employees feel powerless to implicate others. And, more importantly, when management fails to respond to what appears to be obvious abuse, employees feel the company doesn't care.

Does a reward line system work? John Weber, director of loss prevention for Builder's Square, a chain of home improvement warehouse stores, says his company took action to combat theft by organizing and implementing E.M.P.A.C.T. (Employees Motivated to Protect Assets and Curtail Theft). Weber claims that during 1990 the company experienced a combined return ratio of four to one--that is, for each dollar spent, the company was able to recoup four dollars. The system's monetary incentives have certainly paid off.

Neiman Marcus is reported to have had even greater success through its SOP program (Save Our Profits), with a return ratio of seven to one. Both companies have internal systems that contribute to the bottom line while keeping employee benefits intact. Employees are eager to contribute information so they are no longer the victims of others' unconscionable behavior, which often results in reduced pay.

Interaction creates a win-win situation. In addition, allowing employees to contribute to the company's success generally makes for a happier work force. Employees feel empowered to share in problem solving. They take more pride in their positions and the overall effect they alone can have on the company. Management takes note of the increased profitability, and everyone is satisfied.

HOW DO YOU IMPLEMENT A REWARD line? You can take two routes once you decide a reporting system is the answer. Each system has pros and cons, but through careful planning you can choose the best system for your company. Begin by answering the following questions:

* Who will control the reward line? Normally, the security, audit, or human resources department manages an in-house program.

* How will funds be allocated?

* Are there legal concerns (union contracts or deferred liability)?

* Which incentive program will be implemented (cash reward, points for merchandise, or perks)?

The next step is to decide who will design, implement, and control the system. This step can be contracted out or controlled internally. An in-house system offers benefits such as complete control and continuity of the program. As an added plus, funds allocated to this end can often be used to subsidize other department programs. However, you may want to contract with an outside service and reap added benefits, such as greater employee involvement.

Normally, employees are more willing to report an abuse when they know their voice won't be identified. Also, it is easier to answer calls after business hours since employees are most likely to call after their work shift ends.

Two other benefits arise from using an outside service: First, contract personnel have been trained to handle calls appropriately. Second, expenses such as staffing costs, toll-free telephone lines, posters, and other paraphernalia can be shared by a number of clients, thereby lowering the overall cost of the program.

Finally, choose a program based on the benefits each program offers and the environment of your own company. A successful program needs complete support from top management and clear communication at all levels. It also requires constant review and refinement. A program must also encourage employee involvement with continuous publicity.

Displaying posters in work areas, enclosing brochures periodically with paychecks, and providing wallet cards with the reporting telephone number and a brief description of how to place a call are all ways to heighten employee awareness. Another ingredient for a program that works well is to hold employee meetings frequently to announce program successes, discuss problem areas, and encourage employees to make recommendations for improvement.

Industry sources report that in 1989 retailers lost $2.2 billion due to shrinkage. With the current economic doldrums, that is a hefty price to pay. In fact, it is a large price to pay even during boom times.

Consider your options in addressing employee theft now. One option you may choose is the reward line. The result could be a stronger company and more concerned employees. Turn a loss into a gain.

Allan R. Wick, CPP, is president of Intertect Inc. in San Antonio, TX. He is a member of ASIS. Cynthia J. Bindman is senior vice president of Intertect Inc.
COPYRIGHT 1992 American Society for Industrial Security
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:reward systems to reduce employee theft
Author:Wick, Allan R.; Bindman, Cynthia J.
Publication:Security Management
Date:Jun 1, 1992
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