Base rate for employee theft: Convergence of multiple methods.

Abstract

In this study, given the potential sensitivity of inquiries regarding theft behavior, the authors relied on randomized-re sponse techniques and unmatched-count techniques to estimate the base rate of employee theft for those personnel with access to cash, supplies, merchandise, or products easily converted to cash. Depending on the level one ascribes to nontrivial employee theft, these techniques converge on theft rates over 50%. Employee theft is a continuing and nontrivial matter for the business enterprise (e.g., Dalton, Metzger, & Wimbush, 1994; Ernst & Young, 1993; Greenberg & Scott, 1996; Hollinger & Clark, 1983; Mars, 1994; Murphy, 1993). It is difficult to estimate the amount of revenue lost through employees' theft of cash, goods, and services because much of this activity remains undetected or unpublicized. It has been estimated that as much as 75% of losses attributable to employee theft is undetected because of the difficulty in separating inventory shrinkage into its major internal (theft) and external (shoplifting) component parts (Green, 1997). Losses attributed to the theft component have been estimated at $40 billion per year (Camara & Schneider, 1994; Lipman & McGraw, 1988), although other estimates range from $6 billion to $200 billion annually (Green, 1997; Jones, Ash, & Sbto, 1990; Miner & Capps, 1996; Murphy, 1993). It has been reported that employee theft accounts for about 70% of business losses and 30% of business failures (Bullard & Resnick, 1983; Miner & Capps, 1996; Taylor, 1986). The Wall Street Journal noted that 75% of all retail employees know someone who is stealing from their respective employers (Solomon, 1987). Touby (1994) estimated that 2%-5% of each sales dollar is a premium charged to customers to offset losses resulting from internal crime.