Internal theft is a problem for any business, but particularly so for jewelers, whose product is small, easily concealable, and sometimes exceptionally valuable.

Yet, for many jewelers, it's not a big priority. “A lot of times people suspect internal theft and do nothing,” says John Kennedy of Jewelers' Security Alliance. “If people really believe that someone is stealing from them, they should view it as a significant business problem.

“Our invariable experience is, if you think you have a stealing problem, it is much larger than you think,” he continues. “Usually what you think you know is just the tip of the iceberg. Once people steal from you, they don't stop. We've had situations where people thought theft was minor and it turned out to be millions of dollars over the years.”

To prevent internal theft, experts recommend the following steps:

Properly screen applicants. According to one study, most employees who have stolen from employers have done so in the past. So before you hire someone, do the requisite background checks for a past criminal record. Kennedy notes that background checks are far cheaper than in the past.

In addition, call a prospective employee's references, verify work dates on résumés, and ask if they would hire the person again. “See if you get their actual supervisor, and listen to their tone of voice,” Kennedy advises.

But Kennedy doesn't recommend psychological tests that supposedly screen for honesty. “In my experience, they don't pick out the actual crooks, and there are too many false positives for honest people,” he says.

Have a set policy and stick to it. Make sure employees know that your policy is to prosecute offenders. Let them know there is no “acceptable amount” of theft. Put the policy in writing. Remind employees of it every so often.

Don't tempt people. Like the fabled reason George Mallory gave for wanting to climb Mount Everest, employees sometimes will take something “because it is there.” Don't leave merchandise unattended, and make sure employees know they are always being watched.

While some retailers encourage employees to wear store merchandise, be careful about the practice. Maintain strict policies about employees “borrowing” things without permission. Also, keep strict records about employee purchases and transactions. Do not let employees ring up their own transactions.

Establish a way for employees to confidentially report internal theft. Many companies have had success with confidential hotlines and e-mail boxes to report inappropriate or unethical behavior. Also, employee exit interviews sometimes reveal surprising information about other employees' dishonesty. JSA also has an internal theft tip line at (800) 325-1883.

Keep tight control of keys and safe combinations. Always know which employees have access to which keys. Make sure all your keys say “do not duplicate,” and your locks are not generic ones that can be opened with a generic key.

Furthermore, if your safe requires a combination and key, put one person in charge of the lock and another in charge of the combination. Limit the number of employees who know the safe combination. And when an employee leaves your store, change it.

Many companies offer products for better inventory control. DGA Security Systems, New York, has just introduced GemControl, which requires access cards to open a showcase and keeps a computer record of each time a case was accessed.

Make sure more than one person is responsible for your in-store systems. Many jewelers think internal theft can be prevented with good inventory control. But Kennedy notes there is a disturbing increase in computer-savvy crooks manipulating the system. “People with computer skills can bypass certain systems,” he says. “It's under the radar and the boss is in the dark.”

The key, he says, is checks and balances. “Employees should split functions and no one person should have sole control,” he says.

Conduct random checks. Check and double-check inventory frequently, but don't do it predictably. If someone is stealing from you, they may realize when you do inventory checks and plan around them. Random, unscheduled checks are far better for keeping people off guard.

In addition, Kennedy recommends frequent case counts. “Keep all your trays completely filled, if not with product, then with some kind of marker, so you know when something is missing,” he says.

Establish a culture of honesty. The tone of any organization is set from the top. If employees see you fleece customers or cut corners, they may be encouraged to cut corners with you.

Keep employees happy. Employee thefts are not necessarily related to economic issues. Sometimes, it's a matter of simple boredom. For some employees, stealing is an adrenaline boost.

Most employees who steal have what Jack McCann of Argus Protective Services in New York, which has handled many internal theft cases for jewelers, calls “entitlement issues.” A thief can be any employee, he says. “Dishonest employees aren't just the kid in the mailroom who comes in for shipping and receiving,” he says. “Sometimes it's done by long-term employees who are approaching retirement and are disgruntled because they don't feel they are compensated at the ratio they have contributed to the business.”

The best antidote: Make sure your employees feel they have a stake in—and can profit from—your organization's success. Then, if they hurt the business, they're hurting themselves.

Let employees get help. Have an open-door policy for workers to discuss personal issues. In addition, provide insurance coverage for workers to deal with mental health issues or drug or alcohol abuse.

Don't shrug off disappearing merchandise. If something is missing, don't assume it's a result of sloppiness. That could be the factor, but it could be something more. Investigate any losses promptly and thoroughly.

If you catch someone stealing from you, call the police. Don't think you can handle it on your own. Theft is a serious matter that should be dealt with professionally.

If you merely suspect internal theft, Kennedy says to quietly hire a private investigator. He notes that JSA has a list of PIs who are experienced in jewelry cases.

“We've had excellent success with private investigators,” Kennedy notes. “A lot of times, these crooks are not sophisticated, and these things are not that easy to cover up.”

The Warning Signs
While the following signs are by no means absolute indicators of employee theft, they can be seen as warnings:

Change in behavior. Often employee theft stems from stressful external events such as divorce; problems with drugs, alcohol, or gambling; or a relative with a serious illness and mounting medical bills. “Any change in their personality would indicate they are more prone to become more dishonest employees,” says Jack McCann of Argus Protective Services in New York. He notes that, for this reason, airline pilots undergo personality tests every year.

Change in lifestyle.“It's a telltale sign. People living beyond their means,” John Kennedy of Jewelers' Security Alliance says. “You ask, 'Why is this person suddenly driving a Mercedes?'”

People who try to avoid supervision or never take a vacation.Employees who refuse to delegate sometimes do it to cover up, Kennedy warns. In fact, many financial firms require their employees to take vacations, because it's often then that dishonesty is discovered.