Eliminating Employee Theft

By Brian J. Warrener

I recently completed a consulting assignment for a large operator with annual food and beverage sales in excess of $1.5 million dollars. This operation was managed and staffed by smart, competent, honest people with tens of thousands of dollars in the latest point of sale and accounting hardware and software at their disposal. And still, I was brought in because a small group of employees had perpetrated a theft of nearly a half-million dollars. Much of the stealing occurred at the bar.

How does such an egregious situation occur within a business run and populated by good people with the best tools? In this case, and in many like it, the third resource available to management, the resource that makes the first two so useful, was neglected.

The first two resources are human and physical: shift managers, bartenders, bar backs and servers; glassware, small tools, tables, chairs, stools and registers. These are fairly obvious to most operators and are the areas in which they have the most experience. Consequently, they receive the most attention, often at the expense of the all-important third resource: policies, procedures, and methods—the systemic resources.

Operators need to carefully consider all three sets of resources to reduce the possibilities of internal and external theft. None of the specific resources described here are sure to accomplish this goal, and each needs to be evaluated for your specific business.

Controlling Transactions: Registers and Point of Sale Systems
It may seem strange to group cash registers and point of sale systems (POS) together. One is, however, an appropriate replacement for the other, depending on your operational needs.

Stand-alone registers should, at the very least, be capable of providing managers with X and Z reports and producing customer receipts. More sophisticated stand-alone registers allow for the establishment of specific drink, product, or category buttons. This added function provides critical information for establishing expected sales during the course of any specific pre-determined period of time.

Today’s sophisticated POS systems offer a wide range of functionality. They are capable of producing virtually any report that a manager might need to help effectively run and control his business, including sales data by category, liquor type, time period, shift and employee. They include a significant and important number of added benefits. They are easy to use, especially for new employees, because any drink being produced can be included on the screen, saving time and improving the accuracy of charges. They can also be interfaced with accounting software, again saving time and improving accuracy, this time for administrative staff.

Controlling Production: Pour Systems and Measured Pourers
I have been a bartender, manager, and patron. In each role, I hate measured pours. In the most general terms, pouring from a jigger makes for a small pour that reduces my tip (and my drink) and diminishes the perception of a bartender’s expertise.

Measured pours do have a place in beverage operations and are certainly an effective method for controlling the amount of product passed across a bar; but that place is at service bars where customers are not present, where the show of having an expert bartender making a superior drink is not a core component of the transaction for the patron.

Like jiggers, automated pour systems, where spirits are dispensed from a gun, are an effective method for control that, in my opinion, diminish the customer experience by diminishing the bartender’s demonstration of craft. However, pouring systems do provide the added benefit of allowing for a perpetual inventory system to be maintained.  They are also best reserved for service bars, and because they are expensive, service bars in higher-volume operations.

A couple of excellent solutions to this problem exist, one low-tech and one high-tech. First the low: A recent graduate of mine landed a job at a well-known resort on Cape Cod, Massachusetts, where all of the bartenders free-pour and are expected to be accurate. To ensure this, the Exacto-pour System is used. This consists of a series of tubes with measurements that the bar staff can’t see. Bartenders are tested weekly on their ability to free-pour pre-determined quantities of spirits. If they fail, they can’t work their shifts. If they fail three times, their employment is terminated.

The high-tech solution is beginning to hit the market in greater numbers. Products like the wireless dispensing system from Wircon (www.wicron.com) allow managers and owners to monitor serving habits. Chips are coded to specific spirits and embedded in pour tops. The chips communicate to a central processor the exact amount of a spirit poured, allowing for complete control without damaging the customer experience.

Hiring for Honesty
It can be difficult enough finding qualified, reliable individuals to work within your operation. Is it possible, through the interview process, to identify potential employees who possess these attributes and are also, by nature, honest? Research indicates—and human resources professionals concur—that you can make an effort to identify honesty as an attribute during the interview process. The right questions simply need to be asked in the right way.

During the hiring process, most potential employers are comfortable asking questions that relate to hard skills. The questions are easily formulated and the answers are easily quantifiable. “What’s in a mai tai?” “Where have you worked?” and “How much experience do you have?” are simple questions with easy answers.

Questions designed to determine honesty and integrity are not so simplistic, and the answers tend to be esoteric. Interview questions like “What would you do if you saw someone do something unethical?” or “If you saw a co-worker doing something dishonest, would you tell your boss? How would you handle it?” are tough to answer. Look for appropriateness in the substance of the answer as well as the manner in which the response is delivered. Look at facial expressions and body language. Most of us intuitively know when someone is lying or uncomfortable with an answer. Put that ability to good use when interviewing.
There is no way to completely avoid employee theft. Your best bet is to take the tips outlined here and practice the art of prevention. The reality is this: In order to operate in this business, you have to provide employees access to stuff they might be tempted to steal. But hiring the right people, giving them the right tools, and implementing the right systems gives you the best chance to minimize employee theft.

Brian J. Warrener is an Associate Professor in The Hospitality College at Johnson & Wales University in Providence, Rhode Island.