Using Culture to Cure Theft

By Millie Kresevich

Driving Dishonesty
After my experience in a “big box” atmosphere, I transitioned to specialty retailing, but this time at the corporate level. I started observing how many employees became disgruntled as a result of the way they were treated. Even then I still didn’t have all the pieces of the puzzle in place. After several years in the corporate environment, I transitioned to a large specialty optical retailer in a field position. This is when my education really began.

Field work. Through interviews with hundreds of employees caught stealing, I learned that it did not matter what policies and procedures a corporation espoused or put in its handbook; workers reacted to how they were treated and to the prevailing culture.

A critical part of this culture was conveyed to front-line employees by the people they directly dealt with from management. For example, one day I was conducting an audit with a regional manager whose market was always low in shrink and high in sales. I was doing an audit only because the regional manager had requested that one be completed.

The first store I audited received a high score, and the manager was thrilled about us being in her store. When the regional manager walked away, I asked what about this region made it function so well. The manager said that the regional manager inspired high-quality work. She said, “He is just the kind of guy you want to do good for.” To me, this was a powerful statement. I began to wonder how he gained this type of loyalty.

The next store also received a great audit. Afterwards, the regional manager asked if I could wait a few minutes because he needed to counsel the manager before he left. After an audit like that, I could not imagine why. He said that the manager had opened the store late a few weeks ago, and he needed to document the incident in a counseling form.

That incident proved to me that this manager didn’t gain loyalty through lax standards. I listened to the counseling take place. The manager was so upset that I was just waiting for him to yell at the regional manager. Instead, the manager said, “I’m sorry I disappointed you.”

After the regional manager and I began to drive to another location, I asked him how he achieved that level of loyalty. He replied that his staff understands his level of tolerance. They also understand that there are consequences for inappropriate behavior. But most importantly, he said that he lets his people know that they come first and that the business comes second.

Now consider what type of culture evolves at a location where there is a different type of manager—one who doesn’t set high standards and allows aberrant behavior to exist. This allowable behavior may be intentional or unintentional, but in either case it can devastate employee morale.

For example, I encountered one young woman who had worked at a company for several years. Through her solid work performance, she was promoted to another division as a manager. She came with rave reviews from her previous supervisor. Early on I spent some time with her going over the operational end of the business, and she seemed excited about her new role.

About six months after she started in her new position, however, the auditing software revealed abnormalities with her discounts. When I reviewed the record, it was clear that she was engaging in discount fraud. I interviewed her and received a full confession. As it turned out, she had not even financially gained through this dishonesty; she had given her friends excessive discounts that they were not entitled to receive.

I was truly shocked that this employee would even consider stealing from the company. I asked her why she had done it, and she did not hesitate to tell me. She began to explain how the regional manager never visited the location, didn’t hold anyone accountable, didn’t return phone calls from managers, and was uninterested in the business when he was available. She went on to explain that in her prior post, she was always praised for a job well done and suitably recognized for her efforts.

I asked her what might have made a difference. She indicated that she was getting back at the regional manager for never being around, and that if she had felt appreciated, she would likely not have done what she did. She also stated that she used to love the company and wanted to grow with it, but that her attitude changed because of the way she was treated.

I am not excusing her behavior; people must be responsible for their actions. But it is worth recognizing that in this situation, we as a company contributed to her decision to become dishonest. She wasn’t dishonest when we hired her, but we helped create the opportunity for this dishonesty to take place.

In another situation, I was investigating a company’s region that previously had little trouble. Not only were there now several cases of employee theft, but also, the people caught stealing were all management-level.

One day while a manager from the affected region was helping me on an unrelated case, I asked what she thought was causing the rash of thefts in her region. She said that managers had been treated poorly by their field supervisor for years. Managers were asked to work unreasonable hours and were passed over for promotion in favor of the field supervisor’s friends.

The supervisor also asked managers to cook the books to make it look as if the region were doing better than it actually was. Those who questioned whether this was ethical or legal were threatened with dismissal.

I asked why no one had come forward to report the information, and she said that everyone was afraid to do anything. No one wanted to create waves.

She further indicated that the employee thefts stemmed from the lack of morale. Managers were disgusted with how they were treated and decided to get even with the company. Over the next several months, I received dozens of statements from employees in the region as to their treatment over the years. Over time, they trusted me and relied on me for help. I turned the information over to an executive who could take action.

Within six months every manager was interviewed about the field supervisor’s transgressions. The resulting evidence led to the supervisor’s termination.

Retail Loss Trends 2001-2006

Developing a Program
More than a year ago, I began to supplement what I had learned in the field with research on why people act without integrity in the workplace. I then developed a core curriculum for a training program that would foster a culture in which employee honesty would be likely to flourish.

Content. Through a workbook, PowerPoint presentation, and facilitator/guide, the program teaches employees how to effectively communicate with one another, comply with ethics policies, address specific situations, and build a solid foundation of integrity.

The program also covers the six principles necessary to develop a culture of integrity. These are ongoing issues that managers must work with over time to develop a strong and honest corporate culture:

  • Tell the truth. The truth, no matter what it is, is always for the greater good of the organization.
  • Tackle the problem. Address the current issue without dredging up past events. Listen to the other person’s point of view and ensure that all promised actions are carried through.
  • Disagree but commit. Employees must confront reality. Even if they have personal reasons for disagreeing, they should support the decision that is in the best interests of the company.
  • Welcome the truth. When staff embraces the truth, a frictionless environment develops, as does a climate of open communication.
  • Reward the messenger. Those who tell the truth should be given encouragement by management, no matter what the content of their message.
  • Build a platform of integrity. Managers must create a sound, ethical infrastructure that people can understand and follow.
  • Another key part of the training is the manager’s code of conduct. The items in the code should serve as reminders of issues managers deal with every day. In every communication with staff, managers should remember these items:

  • Trust others to the degree you would like them to trust you.
  • Be a great listener.
  • Clarify expectations.
  • Create an environment of honesty.
  • Lead by example.
  • Treat everyone like a customer.
  • These principles are reinforced through a series of exercises that are included in the 24-page workbook. The exercises place attendees in hypothetical ethical dilemmas that must be worked out with other employees also taking the program.

    For example, one dilemma requires those taking the program to think of a time when they did not agree with a decision made by a senior manager. They are asked to describe the circumstances and articulate why they did not agree. Then, together with other attendees in small groups, the employees think up ways to address the problem that are both productive and positive. There is a great deal of interaction from the participants during the exercises.

    The exercises focus on the issues that lead up to the behavior, not the feeling or behaviors alone. For example, one scenario states: It’s the end of the week, and you have just completed payroll. You’re excited because you made your goals in terms of sales and hours. However, your top-producing employee came in late several times during the week.

    To work through this scenario, participants are asked to answer the following questions:

  • What do you do?
  • What would you say to the employee who was late?
  • What is the benefit of addressing the situation?
  • What is the impact if you don’t address this?
  • Initially, almost everyone who takes this program says that they would talk to the associate as soon as possible because they perceive this as the correct answer. But in reality managers rarely pursue this strategy.

    One reason is the fear that the top-selling employees would be angry and would become less productive. The resulting decrease in sales would affect the manager directly. In many minds it is easier to leave a “little” issue alone as long as they are getting what is needed or what is deemed important by the company.

    The classroom discussion addresses this reality and then teaches managers the impact of letting things go based on what they perceive to be good work. The participants discuss, for example, how this strategy might affect the overall morale of the department, accepted behavior within the unit, and the manager’s ability to enforce other workplace rules.

    Another part of the interactive training addresses why people don’t commit to ethical behavior. To get to the heart of the issue, managers are asked how they would handle a difficult situation, such as a suspicion that an employee has dishonorable intent or is crossing an ethical line.

    There is no correct answer to the problem posed. The discussion focuses on staying on ethical ground, no matter what the specific approach, and on doing the right thing even when no one is looking.

    Another issue is how managers react when they perceive that a situation is unfair. This discussion focuses on unfair situations that employees have encountered or witnessed that were unfair. Managers are encouraged to discuss ways to ensure that they are being fair with all the people who work for them.

    Cost. The program takes approximately four hours to deliver with standup facilitation. The company can give some managers train-the-trainer instruction for the program, and these managers can become in-house facilitators. Thus, the cost of the program is kept to a minimum, with most of the expense in the development and printing of the material, plus staff time.

    With regard to staff costs, every employee must be away from work for at least four hours, and the facilitators should be away from what they normally do. The printing cost is a little over $1 per booklet if done in-house.

    Selling the Idea
    I partnered with the training and development department at my company to see how this program would fit into the organization. The response was unexpected. I spoke to the person who would be the most influential in getting this program off the ground. After I went through the highlights of the program, he said, “You are just trying to get people to snitch on one another.”

    I replied that the open communication fostered by the program would be the foundation of integrity and would not be a 'snitching program.' He was unmoved.

    I did not want to abandon the project, so I continued to work on the program, now titled 'Building a Culture of Integrity.' One encouraging sign was that I did have the support of the head of my department, who urged me to proceed. Meetings were set up with different departments to get their input.

    While this process was underway, I was also working with our accounting and compliance manager on the Sarbanes-Oxley requirements. (The Sarbanes-Oxley Act requires corporations to implement programs to reduce fraud in the workplace, including employee training programs.)

    I traveled to stores with the manager to ensure that our company’s audit procedures were compliant with the act. This person exemplified all of the qualities I wanted to teach in the program. He became the role model and an important advocate.

    On the recommendation of the compliance manager, I was eventually asked to come to the corporate office and present the program as an instructional session to all of the company’s department heads. The presentation was videotaped and then shown to any other executive who wanted to see it.

    Eventually the program was assigned a number and a training and development person to work on the format. As it stands right now, the company is offering the program to any employee who wants to complete it, while assessing whether it will eventually be a mandatory program for all employees.

    The company has also accepted the program as a credited course. When employees take the course, they will receive credit for continued learning that will be retained in their permanent file.



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