?”Corporations don’t have feelings.” “No one got hurt.” “If my company’s going to cut my benefits, it owes me.”
Those are among the excuses, workplace experts say, that employees use to justify stealing things from their employers—a practice whose frequency has nearly doubled in the past 16 years, according to a new report.
The theft of noncash property jumped from 10.6 percent of company fraud cases in 2002 to 21 percent in 2018, according to Report to the Nations: 2018 Global Study on Occupational Fraud and Abuse by the Association of Certified Fraud Examiners (ACFE).
“Generally, people like to think of themselves as basically good, and so they need to have some justification for the crime that allows them to preserve their self-image,” said Art Markman, professor of psychology and marketing at the University of Texas at Austin and author of the Fast Company article “The Psychology Behind Why People Steal Their Coworkers’ Stuff.” “One way to do that is to see the company as doing wrong to them in some way. If they feel poorly treated at work or underpaid, then they can justify the crime as a way of balancing the scales.”
The report analyzed 2,690 cases of occupational fraud in 125 countries that were investigated between January 2016 and October 2017. The frauds were committed in 23 major industry categories against organizations that included small local businesses, multinational corporations, private and public entities, government agencies and nonprofits. The perpetrators worked in virtually every part of the organization, from entry-level employees to C-suite executives.
Noncash fraud is theft of company property such as workplace supplies, equipment, food or proprietary information. The report also described seven other types of fraud:
- Billing: An employee submits to the company invoices for fictitious goods or services, inflated invoices, or invoices for personal purchases.
- Cash larceny: An employee steals an incoming payment from an organization after it has been recorded on the organization’s books.
- Payroll: An employee makes a false claim for compensation, such as claiming overtime for hours not worked.
- Skimming: An employee steals an incoming payment before recording it on the organization’s books.
- Expense reimbursements: An employee makes a claim for reimbursement of fictitious or inflated business expenses.
- Register disbursements: An employee makes false entries on a cash register to conceal the theft of cash.
- Cash on hand: An employee steals cash held on the company’s premises, such as taking money from a company vault.
The heat map below shows several categories of fraud schemes, the median loss that a company suffers because of them, and what percentage of all fraud that category represents. Organizations victimized by noncash fraud suffered a median loss of $98,000. The percentages total more than 100 percent because some frauds involve more than one category.
[SHRM members-only toolkit: Developing and Sustaining Employee Engagement]
Why Do Workers Steal?
In some cases, a bad experience at work—such as receiving a poor performance evaluation, a demotion or an involuntary cut in hours, or having pay or benefits eliminated or reduced—or even fear of job loss “can cause financial stress or resentment toward the employer, which might play a role in the decision to commit fraud,” the report authors wrote. “We refer to these events as ‘human resources-related red flags.’ “
The authors found that nearly 40 percent of fraudsters had experienced some form of HR-related red flags prior to or during the time of their frauds. The most common of these were negative performance evaluations (14 percent of cases) and fear of job loss (13 percent).
Another way workers justify stealing is by thinking of the company as a faceless entity that won’t be hurt by the crime, Markman said.
“Even for larger-scale theft of property, people often treat corporations as abstract entities,” he said. “Corporations don’t have feelings, so the theft can feel a little like a victimless crime.”
Workers also consider their life circumstances when justifying theft, such as having unexpected expenses that might lead to debt, he said.
“The top two reasons [for committing workplace theft] over the past 10 years have been living beyond the person’s means and financial difficulties,” said Jacob Parks, associate general counsel at the Austin, Texas-based ACFE. “This could mean that financial difficulty is a more common rationalization during hard times.”
Research in psychology shows that a high percentage of people will engage in petty theft and small-scale cheating when there is little chance of being caught, Markman said. Hence, there’s widespread stealing of workplace supplies, such as pens, pencils, staplers and tape dispensers, which people justify by assuming that the expense to the company is small. And if they often work from home, then they feel they should be able to have some office supplies there, too.
“The way people commit fraud is changing,” Parks said. “For theft of noncash assets, [the] idea that the work and personal life have become more blurred could be a factor. Another possible factor is that intellectual property, such as software or customer lists, has become increasingly important for employers, which might make that information more valuable from a fraudster’s perspective. Intellectual property can also be easier to steal in the sense that it doesn’t go missing like stolen inventory would but can still be very valuable to outside parties.”
Handling Workplace Theft
Workplace experts offer these suggestions for preventing theft:
Talk with employees—at staff meetings, by e-mail and through printed postings—about theft and the employer’s position on it. Make clear that any theft violates company policy and that stealing will cause managers to question the employee’s honesty and integrity and could jeopardize the employee’s future with the company.
Give specific examples of how stealing is wrong, even when taking the smallest of items. Appeal to workers’ self-image; people typically want others to view them well.
Tell employees to report any stealing they witness either to a supervisor or through an anonymous channel, but discourage them from taking matters into their own hands, such as by using their cameras for surveillance, which may be illegal or against company policy.
Companies may want to install surveillance systems if stealing becomes pervasive, although this can be expensive. And they should never do so without first consulting legal counsel.