Tuesday, October 19, 2004
Employee Background Checks - Preventing Theft
In an article posted on HR.com, "Turnover’s Impact on Shrinkage in Retail Positions" (free subscription required), Alice Snell of iLogos writes about the correlation between shrinkage and turnover.
She reports that, “Loss prevention experts estimate that as much as one-half of retail inventory shrinkage is due to employee theft. Estimates of inventory shortage in the U.S. retail industry put the total financial loss at approximately $30 billion. This means that employee theft is costing the U.S. economy more than $15 billion annually, making employee theft the greatest form of larceny in America.”
She goes on to quote the 2002 Annual National Retail Security Survey, which showed that shrinkage rates in retailers where manager turnover was less than 50% annually averaged 1.63% (calculated as the percentage of sales revenue that the missing inventory represents) while retailers with manager turnover over 50% per year experienced significantly higher shrinkage rates at 2.10%.
Ms. Snell makes a point similar to yesterday’s post on this blog, arguing that, “Since turnover and shrinkage share a common cause, the solution must address the root of both, by improving screening and selection of new employees.” She mentions (citing the same survey) that the two most popular pre employment screening resources for retailers are verification of past employment history (used by 89% of retailers) and criminal conviction checks (84%). However, Ms. Snell goes one step further in urging retail employers to screen applicants for cultural fit and engagement as well.
She reports that, “Loss prevention experts estimate that as much as one-half of retail inventory shrinkage is due to employee theft. Estimates of inventory shortage in the U.S. retail industry put the total financial loss at approximately $30 billion. This means that employee theft is costing the U.S. economy more than $15 billion annually, making employee theft the greatest form of larceny in America.”
She goes on to quote the 2002 Annual National Retail Security Survey, which showed that shrinkage rates in retailers where manager turnover was less than 50% annually averaged 1.63% (calculated as the percentage of sales revenue that the missing inventory represents) while retailers with manager turnover over 50% per year experienced significantly higher shrinkage rates at 2.10%.
Ms. Snell makes a point similar to yesterday’s post on this blog, arguing that, “Since turnover and shrinkage share a common cause, the solution must address the root of both, by improving screening and selection of new employees.” She mentions (citing the same survey) that the two most popular pre employment screening resources for retailers are verification of past employment history (used by 89% of retailers) and criminal conviction checks (84%). However, Ms. Snell goes one step further in urging retail employers to screen applicants for cultural fit and engagement as well.
