You thought that shrinkage-loss due to things like general wear and tear, clerical error, or employee theft-was something that only retail managers had to be concerned about. But, as the manager at a small IT firm, you're concerned about the fact that more employees in industries like IT and health care admit to stealing than retail employees do. Of course, you know that doesn't mean it happens more in your industry (it might mean people in your industry are just more honest overall). Still, it's a serious problem on your radar.

That's especially true in a down economy, when some people figure they have nothing to lose since they might soon be laid off. And stealing is not limited to pens, white out, and toilet paper. You've heard of an employee who resigned, turned in his company documents and equipment, and reported his laptop missing, only that he was using the laptop from home to share company processes with competitors. Another employee pilfered laptops from his company and sold them on eBay. You've also heard of abuses of company privileges such as charging a new iPhone for personal use to the company card. Theft can also take the form of an employee messing with the books to make it look like she deserves a bonus when she doesn't or clocking in early for a pal who has not arrived at work yet. Insider fraud, by some estimates, reduces revenues by 7%.

You'd like to take steps to control the potential for employee theft at your company. You haven't had any major incidents yet, and you'd like to keep it that way. What's the best way to control this potential problem? Fortunately, there are a lot of options available to you. Monitoring software, which can track file sharing, email, and data transfers, is commonplace. Video systems, fingerprinting software, and expense report software all can help you hold your employees accountable for their actions. But you're not sure this bureaucratic approach is necessarily the best way to go. After all, employees might resent being watched by a corporate "big brother," and you'd also like to keep the positive work environment you've built. A Gallup Organization study you read made you think that good leadership alone might be the ticket at your organization. According to this study, profits increase (14% over goal, on average), turnover is low, and shrinkage is less at companies where employees are valued, have good relationships with their co-workers, are nurtured and given what they need to succeed, and receive praise when they do.

Sources: L. Taylor, "Four in 10 Managers Have Fired Employees for Theft," Inc., 1 September 2006, available online at http://www.inc.com [accessed 19 June 2009]; M. Conlin, "To Catch a Corporate Thief," Business Week, 16 February 2009, 52; T. Schwartz, "Life/Work - Issue 40," Fast Company, 19 December 2007, available online at http://www.fastcompany.com [accessed 19 June 2009].

Questions

1) To what extent can you control employee theft? Is it reasonable to eliminate it altogether? What is a satisfactory level of shrinkage?

2) The case gives an example of a bureaucratic control method and a method that is probably best classed as concertive. Think of objective and normative solutions to this control problem.

3) From the range of solutions available to you after answering question 2, decide which control method you will adopt at your company. What factors will you consider as you decide