New study offers tips to combat 'sweethearting'

YARMOUTH, Maine—A first-of-its-kind study on "sweethearting"—a form of employee theft when the employee gives away products or services for free or at a discount—claims traditional mitigation strategies used by loss prevention professionals often don't work and offers guidance to managers struggling to address the problem.

The study's authors—Clay Voorhees, assistant professor of marketing at Michigan State University; Michael Brady, professor of business administration at Florida State University; and Michael Brusco, professor of marketing at FSU—initially approached the subject of sweethearting from a marketing perspective. In marketing, the sort of close customer-employee relationship developed from sweethearting is "wonderful," Voorhees told Security Director News. But he realized there was a "dark side" to the practice that he discovered hadn't been studied in any depth.

Employee theft and fraud costs U.S. companies—not just in the retail sector, but across the board—$600 billion each year, according to the study, which will be published in the Journal of Marketing. What percentage of that amount is sweethearting is hard to nail down. Vorrhees, Brady and Brusco's study cites another report in the Journal of Marketing that claims sweethearting is responsible for 35 percent of companies' annual profit losses in the retail sector. However, the National Retail Federation's National Retail Security Survey claims 18 percent of retail theft cases involve collusion between an employee and outside actors, Joe LaRocca, the NRF's senior advisor for asset protection, told SDN. LaRocca has heard the 35 percent number, but does not know the source.

Voorhees, Brady and Brusco set out to discover the motivations behind the employees who participate in sweethearting. They interviewed 171 employees in service-related jobs and 610 customers (another aspect of the study is sweethearting's affect on customer loyalty and satisfaction). Sweethearting differs from the traditional definition of employee theft. In most cases, the thieving employee is also the direct recipient of the stolen merchandise. But with sweethearting it's more complex because while the employee is taking all the risks and breaking the law, any benefit they gain is completely indirect, Voorhees said. Those indirect benefits come in the form of increased tips, increased social status, and "tit-for-tat" agreements, where the deviant employee hopes to benefit from reciprocal service at a customer's place of business at a later time.

Retailers already deploy various techniques to combat sweethearting, such as register tracking systems, video surveillance, and pre-employment screening, according to LaRocca. But the most effective programs, he said, are laying out clear standard operating procedures, auditing programs, and encouraging employees to be aware of the problem and report anything suspicious to management. "Some companies even offer a financial incentive for such information," LaRocca said.

But some of those techniques are not as effective as people think, according to Voorhees. He felt that earlier research on employee theft was deficient because it did not take into account the complex nature of the motivations behind sweethearting. The existing research often looked at only one or two deterrent techniques, such as the likelihood of getting caught and severity of punishment, Voorhees said. "If you studied those in isolation they always reduce theft and deviance," he said. "In our study, once we controlled for a lot of these other effects, like the financial motivation, these reciprocal arrangements, all of a sudden severity of punishment and likelihood of getting caught fell out and weren't significant. They had no deterrent on sweethearting behavior."

So, what's a loss prevention manager to do if threat of punishment and increased vigilance are not necessarily the best tools to combat sweethearting? Voorhees suggests two strategies: Make sure employee training includes an ethics component and pre-employment screening for particular personality traits that Voorhees and his co-author discovered may identify people that are at risk to engage in these theft behaviors at higher rates than others.

The first strategy should also include components beyond an employee's initial training. "Even posting really passive reminders to employees about what their ethical obligations are can drastically reduce deviant behavior across the board," Voorhees said.

As for the second strategy of pre-employment screening, the study identified three personality traits to watch out for. The first is obvious: personal ethics. The two others are a need of social approval and general risk seeking. "The more fun-loving, more adventurous people are, the more likely they will engage in sweethearting," Voorhees said. "When we did interviews with some employees, some of the employees were frank and said: 'I do it for no other reason than it's fun. Walking the line between getting caught is the only thing that keeps my job remotely interesting.'"

Screening for these three traits "would mitigate most if not all the problems for a lot of retailers and restaurants," Voorhees said.