Improving Corporate Profitability with Preemployment Integrity Tests
STEVEN H. WERNER, DENNIS S. JOY, AND JOHN W. JONES
It is widely acknowledged that internal employee theft is one of a number of factors contributing to inventory shrinkage, cash shortages, and, in some cases, business failure. Although accurate and reliable estimates of the typical amount of financial loss resulting from internal theft incurred by businesses are difficult to obtain, theft by employees, as well as other forms of workplace counterproductivity (e.g. on-the-job drug abuse, carelessness, violations of safe personnel practices), have had a significant impact on the profit-making structure of most major businesses today. This is an unacceptable fact given that U.S. corporations are struggling to regain a strong leadership role in the global economy. An estimate by the National Corrective Training Institute indicated the overall shrinkage losses for all segments of retailing were between $16 billion and $24 billion annually. Findings recently published by the Bureau of National Affairs have confirmed this earlier estimate: "A conservative estimate of the annual economic loss to U.S. business from employee theft ranges from $15 billion to $25 billion per year" ( Shepard & Duston, 1988).
Hollinger and Clark ( 1983) determined that the average base rate of employee theft in the retail sector was 42 percent of workers. These findings are consistent with even more recent research conducted by Hefter ( 1986) that suggests that one in three employees steals at work. Research conducted by Slora ( 1988) indicates that theft in the fast food industry is significantly more prevelant than in other industries. Admittedly, no methods can accurately determine the share of total company loss due to internal theft, shoplifting, bookkeeping error, or