Proactive Loss Prevention

Background screening is an important part of your hiring process.

Written Apr 14, 2008, read 233 times since then.

The main reason employees steal is more of a result of opportunity. If the opportunity to steal is present and the risk of getting caught is low, the employee may steal.

What can businesses do to limit their loses? The answer is simple. Proactive loss prevention. Proactive loss prevention means minimizing employee theft. It gives businesses the ability to recognize, respond to, and to resolve situations of employee misconduct or dishonesty legally when they happen, not six months later when you lost thousands of dollars or may be facing an uphill legal battle.

The main reason too few businesses invest in proactive loss prevention is because they think it is too expensive, or that theft only occurs in big companies. The fact is, effective loss prevention costs less to implement than what one employee thief can steal from you in just one week.

"___I have stolen over $13,000 from____by using several methods, like not ringing sales, fake voids, etc. I allowed my friends, about 60 in all, to come in and shoplift. It was to easy to steal here, that's why I got the job."

Clerk, Convenience Store Chain

"Proactive" loss prevention begins at the hiring process. Whether you are hiring one employee or several it is extremely important to conduct pre-employment background checks on anyone you are considering to hire.

Did you know that 36% of applications are falsified?*

33% of employees admit to stealing product or money?*

*Statistics from the U.S. Department of Justice and Department of Commerce

Depending on the employee’s duties, the types of backgrounds you should be checking are criminal histories, credit, social security verification, past residences, references, etc. It is also important that you are within the guidelines of the Fair Credit Reporting Act when conducting backgrounds. For example, employees you run backgrounds on must sign a release. The release MUST be a separate document apart from their application. If you deny employment due to their background then you are required to give, or send, the employee an adverse letter stating the reason why they were not hired. This gives the applicant a chance to request a copy of their background from the reporting agency. Some employers use companies who do a quick search. The results are based on archived results, not being kept current, and they don't advise you of the FCRA guidelines.

It is also good to know that if a company hires someone without doing a background, the company could be held liable if that employee causes harm to another employee or customer or if the company experiences financial loss due to not being diligent in the hiring process. Negligent hiring lawsuits average $500,000!

What information can be included in pre-employment screening? To name just a few:

Civil Records * Criminal Records * Verify Social Security Numbers * Credit * Sex Offender * Employment Verification * Driving Records * Certification Verification * Tax Liens * International Terrorists Fugitive Scan * Reference Verification * Education Verification * International Criminal History * Address Verification.

Most background results can be within 24-48 hours.

Doug Rector is a licensed private investigator who conducts background checks. He also specializes in employee theft issues. NWLPC also provides a mystery shopping service.

Learn more about the author, Douglas Rector.

Comment on this article

Posted by Kare Anderson, Sausalito, California | Apr 17, 2008

Douglas this is a great article that everyone who has employees should read. Like our form of government, checks and balances are more likely to bring out the best in others, not the worst.

Temptation is terribly human. WPutting systems in place for all parts of the business, thinking of best and worst case scenarios, means one can focus on improving the business offering and how one serves customers and attracts more customers.

Please come back and give us a follow-up article on the steps one should take to prevent loss, if they should use someone like you to be surethey have covered the bases, etc.

Kare
Posted by Keith Gormezano, Seattle, Washington | Apr 18, 2008

Unfortunately, not every prospective employee is going to pop up in a database. And if they have been honest with you about their mistakes such as a felony conviction or getting fired for X, I would be more inclined to hire them because of that honesty.

When I was an apartment manager, I used to check out their cars when I walked them from the viewed unit. If their car was trashed out, so was their application. I figured that was how they would treat their unit. I would also check out their previous (not just their current who might not tell me the truth because they wanted to be rid of them) landlord.

If it was today, I would if they were applying for an employee position, check out their previous employer and supervisor. Google them and check out their networking profiles on MySpace and FaceBook. It is amazing what can pop up.

Perhaps this is why so many businesses use secret shopper services to see if an employee rings an item correctly. Sometimes, it does seem like the best way of dealing with this issue is to constantly test the honestly of your employees. It is a sad reality of today.

However, it is nice to know that you made the right decision to hire when the results come back positive. Several of my recent clients are small retail business who can not afford the five finger discount of 100%. And this kind of knowledge would make them sleep at night.

However, I am a little tired of seeing huge profits for the owners and no medical insurance and a retirement plan for the employees. Could it be that some business owners create the problem themselves?

Dr. QuickBooks: I make house calls to teach you.
Posted by John Hays, Seattle, Washington | Apr 18, 2008

Mr. Rector is suggesting that you use a tool that is very valuable in the hiring, decision making process.

He is not suggesting that a background provides an absolute assurance that hiring a particular person is a good idea. He is not ruling out intuition or any of the other soft inputs to the hiring decision.

He is talking about taking advantage of available legal data sources, using legal procedures. He is talking about due diligence in making a hiring decision that can have a make or break impact on your business, especially if it is small and operating on narrow margins.

You can choose to wing it using whatever methodology makes sense to you or you can choose to spend a little now to improve your odds and maybe save a lot later.

How much is your business worth? How much do you want to bet?

Disclaimer: I have no business association with Mr. Rector. I do backgrounds only as an adjunct to cases involving criminal or civil litigation.

Seattle Washington Private Investigator
Posted by Felix German, San Francisco, California | Apr 18, 2008

Great Article. I just want to add that all business owners with employees should have Employment Practice Liability Insurance and Crime Insurance as a method of protection. I will post some articles on these subjects later