Employee theft can cause significant harm to businesses, creating financial burdens, legal troubles, and reputational damage. Here are five red flags to look for that can clue in leadership to employee theft, and how to minimize their impacts by implementing an ethics hotline.

1. Extravagant Lifestyle Changes

If an employee suddenly begins purchasing big-ticket items such as cars, vacations, or jewelry without a pay increase, there may be the possibility of employee theft. There may have been other incidents leading up to this that could have tipped off management, too. Look for requests for pay advances or visible financial stress. Those employees who handle money, inventory, or purchasing should be audited or reviewed regularly, and an ethics hotline provides fellow employees the opportunity to submit their concerns anonymously about theft or inappropriate conduct.

2. Secretive Behavior

Staff members who are single-handedly controlling or monitoring a process within the company and resist periodic reviews, avoid taking time off, or work odd schedules (late nights or weekends) are red flags. Scrutiny should be taken, and data from ethics hotline reports can pinpoint misconduct. Audits or reviews of completed work can be conducted outside of regular business hours based on this data.

3. Discrepancies in Paperwork or Financial Transactions

Evidence of ‘cooking the books’, mysterious or unexplained losses, like unaccounted-for supplies, missing equipment, or paperwork, could indicate theft and are red flags. Occurrences of theft often begin with small, unnoticeable incidents that can be flagged with regular reconciliation and documentation. These checks and balances provide visibility and control, and enable leadership to catch theft early, when losses are still small. An ethics policy that creates a clear outline of these control mechanisms and proper use of the ethics hotline is the first step in stopping employee theft.

4. Changes in Demeanor

A normally cheerful, agreeable employee who suddenly becomes defensive or irritable when asked questions about his or her job duties is a red flag. Other signs to watch for may include punctuality issues, maybe arriving very early or later than the appointed start time, avoiding leadership reviews or audits, and changes in their productivity. Data from ethics hotline reports can further reinforce the suspicion of employee misconduct. Management and employees maintaining open lines of communication, as with an ethics hotline, builds trust and transparency. Employees know they have a safe space to raise their concerns without fear of retaliation. 

5. Bypassing Oversight or Control Mechanisms

Oversight and control mechanisms, such as pre-approval of purchases, contract verification, and payment approval, are in place to prevent misunderstandings or suspicions. Employees who try to dodge these checks and balances may be engaging in unscrupulous behavior. Weak spots in your organization’s oversight protocol increase the potential of fraudulent activity. Dual control, in which more than one person participates in a process, can strengthen weak spots and ensure that financial policies are followed. The chain of command from the beginning to the end of the procurement system should be clearly outlined in the company’s ethics policy, and the ethics hotline should complete the process to keep activities above board. 

Putting it All Together with Ethical Advocate

Building a culture rooted in trust, accountability, and transparency lays the foundation for a safe work environment, encouraging employees to report all concerns through the ethics hotline. It’s safe to say that just because an employee exhibits any or all of these behaviors does not mean they are guilty of fraud or theft. Your ethics policy and hotline reports can help lead management to a reasonable conclusion. Contact us today to learn more about the benefits of an ethics hotline for your company.

Photo by Anna Tarazevich: https://www.pexels.com/photo/woman-sitting-behind-her-desk-having-a-telephone-call-5196818/