MOI: Motive (Method), Opportunity & Indicators to Prevent Business Shrinkage

Since more than 55% of thefts are ego-driven (a theft of something that enhances one’s ego or that serves a personal desire), it is appropriate that the best acronym for a strategy to detect and deter theft is MOI – the French word for “me.” However, almost all thefts and frauds, as well as inadvertent losses and shrinkage, can be monitored more effectively using a modified MOI Inventory.

MOI Inventories examine the three essential elements of any intentional loss: motive, opportunity and indicators. Losses and shrinkage other than theft and fraud also can be tracked using an Opportunity and Indicator spreadsheet. “Motive” becomes “Method” in the revised MOI Inventory. These include accidental shrinkage and failures in administrative or operational systems.

Loss occurs when a combination of the three – motive (or methods), opportunity, indicators -- reaches a critical mass. Critical mass results from reaching a threshold level of opportunity and motive, in specific. Little opportunity but very high motive, little motive but very high opportunity, average amounts of each, or any variety of those combinations will result in loss. An abundance of indicators also reveals that critical mass has or is being reached.

More than a decade ago, I was conducting a seminar on loss in a very tightly-knit community. As an illustration of the MOI principles, I placed a five-dollar bill on the front podium, one on the back table next to the coffee and snacks and one on the floor just outside the conference room door. By the end of the session all three bills were still there. However, in the eleven prior seminars across the province, I had lost every one of the bills placed outside the door, six of the ones placed on the rear table and none of the ones placed on the podiums, even though the podium was left unattended occasionally during each two-to-three-hour program. All of the bills had a telephone number written on them. To me, that illustrated opportunity at work, and motive. In sixteen instances, the two had reached critical mass.

Where the five-dollar bill lay outside the door, there was extreme opportunity and, while the amount was relatively small, the risk in taking the money was negligible. Critical mass was achieved mostly through opportunity. At the rear table, opportunity was moderate, but sufficient enough for some to take the cash. At the front, there was almost no opportunity and motive would have needed to be extreme for theft to occur. However, in the closed community, even the risk outside the door was high, if anyone had happened to pass by when the bill was being taken.

By reducing opportunity, even in the face of relatively strong motive, theft can be averted. By understanding individual motive and defending against it, opportunity can remain fairly strong and theft will be less likely to occur.

Indicators simply show where theft likely will occur, or where it has. These “tracks” will reveal the most available opportunities for deviant behaviour. Thus, by understanding motive, recognizing the indicators and responding to opportunity, loss can be reduced or eliminated in almost every environment.

But what of loss that occurs inadvertently, through administrative error, miscalculations and oversight? These, too, can be mitigated by attention to opportunity first, then by examining indicators or tracks and, finally, by looking at the methodology involved in production, distribution, presentation, development and delivery of goods or services. Within such methodology analyses are determination of yields, supply lines, market, money handling and various other aspects of operations.

Shrinkage is the cause of two-thirds of business failures (CFIB), with market conditions contributing the largest impact to the remaining one-third. Shrinkage is preventable. Shrinkage also is detectable. Thus, the use of the MOI Inventory is a vital strategy to help ensure that your business remains viable. However, most business managers and owners focus more on the marketing, rather than on the more tedious details of operations. In order to provide any business with the greatest probability that it will be successful, more emphasis needs to be placed on these technical aspects. MOI may well be the most viable of the tools available to do so.

Employee Collusion

In less than three months, the video department of a large Canadian grocery store had an inventory shrinkage of over $140,000, on sales of just over $400,000. That’s a 35% loss. Yet, there had not been one apprehension of any shoplifters in that period, due to heightened electronic article surveillance use. As well, close monitoring of shipments through the receiving doors and of bookkeeping in the office eliminated those two spots as sources of the loss. Then, one of the regional loss prevention officers noticed an oddity: there were several $1.47 and $1.49 sales in a two-week period, midway through the 3-month section. And, in every case, those odd sale amounts occurred during the shift of one employee. They began to monitor him closely.

Nothing happened for two months, until the employee again felt comfortable that he was not being watched.  Then, he sold a television to a young man, ringing up the sale. But the customer offered up only a ten dollar bill for the purchase, which was worth nearly $1,500. The team of investigators waited until the customer left the store, then apprehended him discretely. Another investigator continued to watch the employee. Within the hour, another young client purchased a laptop, a gaming console and software. Total value was $2,300. Again, only two fives were tendered. Now they had a pattern. The second customer was arrested, and the employee remained on duty while the LPOs waited for the police to arrive. In the meantime, they interviewed the “customers.” Both willingly talked, telling of the chain of purchases that they and four others had been making at the store. They repeated their confession to the police. Even though the employee later denied it, he was charged and convicted of eighteen counts of fraud. Only $22,000 of the almost $150,000 was recovered. That was the impact of collusion.

Collusion between staff and customers can be problematic in any operation, from retail to manufacturing, from office to service from warehousing to transportation. But it is only one arm of a many-limbed problem, with collusion between bookkeepers and suppliers being one of the most common sources of theft and fraud. Back-door loss often occurs when delivery driver and receiver/shipper choose to cooperate to commit theft or fraud. Sales reps and floor managers, employees and forepersons, bookkeeper and cashier, merchandiser/stocker and receiver or supply company office staff and receiving company back door employees also are common combinations.

Collusion also is one of the most difficult forms of theft or fraud to detect and deter, as well. Simple cameras or basic control systems frequently are not enough.  At the same time, catching such collusion does not guarantee conviction, as it may be difficult to show that the employee knew he or she was causing a loss, if an arrest is based on only one incident.

To reduce collusion, regular monitoring & surveillance, knowing each employee individually, established policies and consistent  controls are essential. Collusion can be reduced, but it is almost impossible to eliminate. Your best choice is to keep the opportunity for loss to a minimum, by being a hands-on owner or manager.