Staff Dishonesty: Exploring the Impact of Advertising

Staff dishonesty, also known as internal theft, is hard for retailers to monitor and quantify, hard to detect and hard to prevent. For example, one of the main “tools” available to detect internal theft is staff searching, but this is highly problematic to execute well and consistently at the store.

At the same time, it can be far easier for retail loss prevention leaders to prioritise the more visible problem of external theft, and to target their investments at this problem. Thus the problem of internal theft is often de-prioritised.

However, when loss prevention leaders are asked to estimate the contribution of staff dishonesty to the total unknown loss number, they consistently suggest that a third of those losses can be explained by staff dishonesty, which includes collusion.

Previous ECR research (click here) and working group meetings have looked to explain why staff steal, the role of technologies that might detect internal theft, such as Exception Based Reporting (EBR) on POS, scanner tunnels, etc, and discussions around policy,; do retailers prosecute always, do staff dishonesty numbers [and names?] get regularly communicated, and then about the reporting systems themselves.

In this meeting, we turned our attention to the power of advertising [the risk of being caught] and the lessons learnt from the deployment of advertising campaigns. To start the meeting, one of the group members shared their experiences and some highlights from their PHD dissertation. The group then discussed his presentation and then their own learnings.

Below are three key takeaways.

#1: Culture matters:

Some of the retailers in the meeting shared that for their business, the problem of internal theft was one that they preferred to NOT communicate. This policy decision came from the very top of the business rather than the loss prevention team.

It was informed by those at the top of the organisation intent on building a culture of honesty and integrity. A sense that this was NOT a major problem for their business and an implicit belief that their employees would not steal from their business. For those loss prevention teams working for retailers where the top management were opposed to such communications, any campaign ideas were thwarted.

However, there was at least one retailer in the meeting who took away an action to gain approval for a blitz campaign over a 12 week period. At our next meeting we will hope to see the results from that blitz campaign.

#2: The Detection Gap

Given many retailers sensitivity on the advertising and communication of the internal theft problem, the investigation of the possible incidents of internal theft, using EBR, has become the foundation of retailers staff dishonesty prevention programmes.

However, as the retailer presenter shared, if they were able to investigate and close just one internal case per week, valued at €2,500, then a retailer losing €2.6 million per year to internal theft, would only be able to successfully detect just 5% of the internal theft problem!

This is not to suggest that EBR and the work of investigations should now be de-prioritised, more that there needs to be in place additional approaches to reduce the other 95% of the internal theft problem.

This observation took us to the question of advertising the risk and consequences of staff dishonesty. Does it work?

#3: Yes, Advertising works!

While we hold an ambition to gather more empirical data, in this call and on previous ones, we have become aware of a number of case studies, that suggest that advertising does "work" and can help reduce internal theft.

Retailer 1: This retailer had given notice to a very high shrink store that n three months time, they would be going into "special measures". What they observed was that even before the start of the assessment of the likely measures needed, and before making any new investments, the store itself had miraculously recorded a 20% reduction in loss. The conclusion from the retailer was that the awareness of an upcoming investigation had lead to a reduction in staff dishonesty.

Retailer 2: For this petrol retailer, to counter their problem of “drive offs” whereby the customer filled their car with fuel but rather than pay, drove off without paying, they installed ANPR / LPR technology to replace their paper based "drive off" incident recording system, where staff were required to write down the number / licence plates of the "drive off" vehicle along with the time, date, details of the incident.

The placement of the ANPR cameras was not advertised to the customer, however store associates were made aware of the technology and its ability to accurately record the number / licence plates of every vehicle. In the first month of installation of ANPR, drive offs reduced by 60%.

The conclusion that this retailer drew from this dramatic change in drive offs, was that members of staff who were previously in a position to mis-record details of the incident, had now shared with their friends that the retailer now can automatically record the number / licence plates of all those who drive off and do not pay. Their advice to their friends was that they should not attempt to steal from this retailer, because they will be caught.

Retailer 3: This retailer evidenced a significant reduction in shrink that could only be explained by a reduction in staff dishonesty with the introduction of a store wide communication to all managers and store associates of a new central video monitoring capability that can detect incidents of fraud, theft, and poor compliance.

Measuring the losses in the stores that were told they were now being monitored, they saw a positive improvement in loss Vs control stores, explained only by the communication, that lead to a change in store associate and manager behaviours, dissuading them from stealing and undertaking fraudulent actions.

Crucially, the value of the reduced losses, helped deliver improvements to the bottom line that allowed them to prove a business case for the remote monitoring capability.

Retailer 4: This fashion retailer, to counter the internal theft problem, prepared an advertising blitz on the risk and consequences of being caught stealing from the company and evidenced a 14% reduction in losses Vs control stores. They believed the results could only be explained by lower levels of staff dishonesty in the test stores.

Retailer 5: This retailer created a poster campaign of targeted messages to store associates to discourage internal theft. They implemented the posters in trial stores and compared the results to control stores who did not receive the posters.

The results at the overall store level did not show an overall reduction in losses. However, when they looked at the results against their targeted categories, tobacco, sandwiches and cash, they saw clear evidence of a change in losses.

Against their targeted messages on tobacco, which is sold from behind the kiosk meaning any product losses cannot be explained by external theft, they saw a 293% reduction, similar results were also seen with lottery tickets and postage stamps.

On sandwiches and ready meals, they evidenced a 25% reduction in losses. Finally, on cash losses, they evidenced an 18% reduction.

Taken together, these five case studies illustrate the potential impact of advertising the risk of internal theft which point perhaps to a double digit potential reduction in losses.

It was clear though that to be effective, retailers need to be very clear on the messages themselves, with the messages differentiated against the different internal thief personas, as the retailer presenter shared, the older, more experienced store associate will respond differently to messages around the impact of being dismissed on their family than a young, new hire.

An idea discussed, where internal communications were in scope, was for the loss prevention team to ask their company's marketing teams to use the same skills they use to create great consumer advertising, to create an advertising campaign to reduce staff dishonesty. The impact on the bottom line could be significant, and the cost near zero!

After the meeting, I asked Professor Emmeline Taylor for her takeaways, click to hear / view.

May 5, 2024