Reputational risks
The costs of business crime
Hire in haste and repent at leisure is the message from experts who say lack of proper screening increases the risk of falling victim to employee theft.
Labour Transport spokeswoman Sue Moroney, has raised questions about the background checking of former Ministry of Transport senior manager Joanne Harrison, who was jailed last week for the theft of $723,000 of tax payer funds.
Michael Hempseed, director of human resources company Employee Solution Service, says some businesses fail to do even basic checks, and simply Googling the name of a prospective employee can reveal a past history of theft.
‘‘When recruitment is done in a hurry, that’s when things go wrong. Because they are behind if someone leaves suddenly, they don’t do all the proper checks.
‘‘I know of a financial controller who was sacked for theft and within 10 days she had another job in another business. As far as we were aware the new company didn’t contact her old employer’’.
Personal Verification Ltd does background screening, and director Craig Gubbins, regularly works for businesses ‘‘burned’’ by employee theft.
The former Security Intelligence Service officer who managed government security vetting, says screening staff pays off.
‘‘They can take your business down if you hire the wrong one.
‘‘People won’t buy a car on Trade Me without paying for an AA check, but they will hire someone without doing any checks at all. That’s the norm.’’
Gubbins says a criminal record check isn’t much help if someone has received name suppression for previous offences, but failure to nominate referees is a red flag to look out for.
They can take your business down if you hire the wrong one. Craig Gubbins, Personal Verification ltd.
Gubbins says the psychological impact of theft on management and staff can be just as devastating as the financial consequences, because the perpetrators were often trusted and well liked.
That was the case with an accounts clerk whose $90,000 theft was discovered when she went away on holiday and clients complained about being sent invoices they had already paid.
‘‘She was so well liked by management they were going to offer her shares in the company’’.
Hempseed agrees there is often a deep sense of betrayal associated with employee theft, and employers may need to consider counselling to help them move on so the business does not suffer further.
‘‘I’ve heard of owners falling into a deep depression because of how hurt they are over the fact that a trusted employee stole from them. A business owner who is depressed will struggle to be an effective leader’’.
Theft could be very damaging for workplace morale if it took some time to catch the offender and other staff were under suspicion, Hempseed says.
Many companies fire the offender and pretend the theft never happened, and some even paid off the thief to ensure their silence, he says.
‘‘It just reinforces the behaviour if they get paid for doing the wrong thing’’.
New Zealand Insurance Council insurance manager John Lucas, says most fidelity guarantee policies require theft to be reported to police as a condition of accepting a claim.
Unscheduled audits, investigating financial irregularities no matter how small, and encouraging staff speak up if they had concerns about a colleague’s behaviour, all help prevent theft, he says.
Having a procedure for handling any suspected fraud was also advisable.
He estimates about 60 per cent of corporates invest in fidelity insurance.