When an employee takes company property, he should be punished. After all, he was given a job for which he received fair compensation in exchange for a fair day’s work. However, this thief has not only stolen from his employer, he also has affected the future of the company and his coworkers. Many organizations feel that a dishonest employee should be prosecuted to deter other employees from theft, but is prosecution really a deterrent?
Management might wonder if prosecution of a dishonest employee is always the most cost effective path; often the employer's cost to prosecute exceeds the loss caused by the associate. Undoubtedly, prosecution has a short-term impact on employees who were close to the coworker arrested by the police. However, the long-term deterrent of the prosecution is questionable. How long does someone slow down after seeing another driver get a speeding ticket?
Employees steal because they believe they will not get caught or rationalize that their actions are of little consequence. The associate’s "fear of detection" is the company’s best deterrent. If an employee believes he will be identified if he steals, then he is less likely to do so. Criminals make rational decisions to steal based on their assessment of the risks of being discovered. As a result, a criminal rarely commits a crime if he is aware he is being observed by police. The high risk of discovery versus the reward of the crime is the equation. On a simple scale, apprehension outweighs the likelihood of reward, so no crime take place.
Rarely, does the dishonest employee consider the end consequences before he acts. The criminal’s considerations seem to end with “getting caught would be bad,” rather than a long analysis of the implications legally or personally. Just look at states employing the death penalty; the death penalty does not lower the murder rate. A number of years ago, a Michigan study looked at the shrinkage rates for companies prosecuting and those simply terminating the dishonest associate. The biggest deterrent to theft was the associate’s belief he would be caught if he stole. It was this simple idea that tipped the balance to lower shrink.
Many companies believe reducing the opportunities for dishonesty through operational controls, employee awareness programs and visual deterrence are much more effective in reducing shrink than making an example of the dishonest employee after the fact. Little current evidence appears to support the belief that prosecution of dishonest employees reduces shrink or prevents other employees from committing acts of dishonesty.
Because of the cost and potential liabilities, more and more companies are seeking restitution from dishonest employees, rather than prosecution. These companies are also focusing more of their resources up front to deter acts of dishonesty, rather than after-the-fact prosecution.
With reductions in force companies have to decide how to use their manpower in the most effective way. Prosecution may require five or six visits to court before the case is fully adjudicated. The prosecution could be the equivalent of three or four working days lost while the investigator waits to testify. Admittedly, the courts have done much over the years to streamline appearances of witnesses, but pursuit of a criminal case still requires a significant investment of time.
When the company's goal is to prosecute as often as possible and seek restitution through the court system, they often discover this process, too, can be difficult and time consuming. When the case is won in court and the subject is ordered to pay restitution, the payments are generally minimal and spread over a long period of time. The employee may plead guilty, but contest the total dollar figure of the admission. The burden of proof to establish loss then falls on the employer who must establish the actually loss independent of the employee’s written statement. Providing independent proof may require substantial additional investigative time to research company records to substantiate the organization’s loss.
Some courts may require the employer and employee to work out an agreed-upon payment plan. If the employee defaults on a court-ordered payment, the company can then turn it over to a collection agency or go back to court to get a judgment against the employee. The bottom line is that restitution collected in this manner can be difficult and costly to obtain. It can be easier to simply use the civil recovery statutes and ignore the criminal courts altogether.
Regardless of whether a company elects to prosecute or simply obtain restitution and forego prosecution, the decision should not be based solely on punishment, but rather the return on investment.
If one was to make the argument that prosecution will provide a deterrent, then we should also consider employee turnover. In some locations employee turnover may range from 80 percent to 200 percent depending on the business model. For prosecution to be an effective deterrent, people have to know about it. Yet in the high turnover location, an employee arrested in January will likely not even be a memory by March. However, if the associate worked in a stable work environment, such as a buying group, the arrest may linger in the coworkers’ minds for years.