OPERANNG OPPORTUNITIES

WALLY LYNCH Paid Associates PO. Box 741623 Dallas, Tx.75243

VERY once in a while, routinely available statistics couple with an obscure news story to create a synergistic opportunity worth sharing. But first, a little background.

Anyone in this business charged with bottom line responsibility during the last l0 years has been faced with the enigma of "cost of goods gone." In our trade, it's shrink, theft, error, damage, etc. The lion's share of the problem has long been identified with employee theft, both blue and white collar.

All of us at various conventions and seminars have been exposed to a parade ofconvicted felons telling us how to cope with the problem. As more stringent preventive steps. the polygraph and/or the sophisticated detective agencies were employed. Some firms began honesty testing for new employees.

ln the process lots oflitigation and lots of dollars generated the outlawing ofthe lie detector test in some 20 states and the realization that no "system" could for long foil the determined and/or clever thief. The "cost ofgoods gone" was perhaps bent but not broken.

The obscure appeared as a news item about a year ago in the Vr'ail Street Journal , in the last paragraph ofan article, bylined Thomas F. O'Boyle, on using honesty tests to gauge workers' morale. In his research the author had uncovered a company so frustrated by ' 'cost of goods gone' ' that it used a technique not envisioned by the creators ofthe honesty test with enormously grati$,ing results.

They gave the test to all employees. Then they explainedhc^v the results could be graded so that each ofthe participants could evaluate his own score. This exposure and the process

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of self correction, according to the article, generated an immediate two-thirds reduction in inventory theft.

Researching the "test" took a while, but I discovered that the salient features are it is inexpensive, costing fi to $20 per employee, rates 92% accurate, is absolutely nondiscriminatory, meets EEO and FETC requirements, takes an hour to complete and five minutes to score.

Coupled with the facts, the obscure news story gave a clear message. Here was a way to meet legally, head on and inexpensively inhouse a universal problem.

The routinely available figures on sales and theft are enorrnousin the trillions for retail and in the billions for theft. This old head isn't able to express them numerically, much less comprehend their meaning, but a friendly math professor at a local college provided the interpretation that was needed when he identified theft from retailers on average at3.8% of sales. The National Retail Merchant's Association (NRMA) sub-divides the problem further. They state that their reports indicate the "cost of goods gone" consists of 45% employee theft, 35% customer theftand,20% generated by bookkeeping fraud and error. For most merchants these costs exceed pre-tax profits.

A good way to gauge the cost effectiveness of company wide testing is to compare last year's pre-tax profits with the product of $20 times the number of employees. For most companies the relationship exceeds $1000 to $1.

There are precious few things that any of us can do fbr so little investment of time and dollars that appear to pay such large dividends. If you would like more information write for HonesN Testing Pamphlet, P-10.