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Study Claims That Employee Theft Rises as Economy Worsens

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Jonathan Cooper
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I recently came across an interesting blog post entitled "Does Theft Go Up In Economic Downturn?" which cited a study discussing whether there is a documented, proven connection between the state of the overall economy and job market and the rate of theft and other dishonest or counterproductive acts (such as a breach of fiduciary duty) by company employees.

One interesting theory in the study was promulgated by researchers from DePaul University, who articulated an "Employee Risk Triangle" theory of employee theft. Basically, this theorry subscribes to the notion that when 3 factors work together - need, attidude and opportunity - the likelihood of employee dishonesty rises dramatically.

According to this theory, although the any of these factors could manifest before the others, one scenario where the 3 factors could intersect would be as follows: due to a slumping economy, a company is forced to lay off many workers, and reduce (as well as eliminate) managerial positions. The resulting uncertaintly about their job security causes many employees to start feeling apathathetic about their jobs [attitude]; concurrently, some of these employees' spouses lose their jobs, putting them under greater financial strain [need]; finally, due to the reduced supervisory oversight on the job and co-employees' own degree of distraction, co-workers may be more apt to look the other way or outright ignore others' unethical behavior [opportunity].

Leaving aside my questions about the scientific reliability of this study, it seems to me that from the small business owner's perspective, the study, and the blog post quoting it, suffer from two flawed assumptions: (1) that the majority of people will falter if their ethics are put to the test (see my earlier blog article "Employee Theft Insurance Policies and the Culture That Spawned Them"); and, (2) that unless you use pre-fabricated tests to screen prospective employees, you are all but guaranteed to hire people of dubious character (paradoxically, although the blog post cites the study for the proposition that employees' ethics can be compromised as circumstances change, the blog post is silent on the issue of ongoing screening of existing employees).

Nevertheless, I think the study serves as a useful reminder to adhere strictly to Dan Kennedy's maxim: hire slow, fire fast.

Category: General

Jonathan Cooper
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Non-Compete, Trade Secret and School Negligence Lawyer

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