1.  Bureau of National Affairs --- Losses from employee theft are between $15 billion to $25 billion annually  US Chamber of Commerce --- employees steal between 20 - 40 billion dollars annually from their employers (this is 10 times the value of street crime in the US or 1.5% of the annual value of all world trade)  University of Florida 2002 National Retail Security Survey, employee theft was estimated to be responsible for 48% of store inventory shrinkage. That represents an estimated employee theft price tag of about 15-billion dollars per year  Neil Snyder of the University of Virginia --- About 1/3 of all small business failures can be attributed to employee theft  Study of over 9,000 employees in three different industries found that 1/3 (34%) of the typical company's employees admitted to some form of stealing from their employer  U.S. Department of Justice --- 35% of store employees admitted to stealing from their Co.  A 1984 study showed that Canadian bank employees stole $382 million from banks (more than 9 times the amount stolen in bank robberies)  Annual loss to the Banking industry from employee embezzlement is estimated to be greater than $1 billion annually  Approximately 2% of revenues each year are lost to employee theft. Employees are responsible for twice as many losses to business as shoplifters Some Data

2. Honesty Tests --- Why use them? Reduce employee theft Reduce inappropriate use of company resources (e.g., Internet, phone, supplies) Reduce counter-productive work behaviors (e.g., lying, policy violations) Reduce fraud (e.g., recordkeeping/accounting, expenses)

3. Two Basic “Types” 1) Overt integrity tests 2) Covert (Honesty test questions imbedded within personality measures, e.g., among items assessing drug use/attitudes, tendency toward violence) Honesty (Integrity) Testing Increased usage with passage of the EPPA (1988) In 1990 --- 6000 companies administering about 2.5 million tests annually

4. Honesty Testing --- Types of Questions Overt Tests (consists of questions directly related to an individual’s one’s own behavior and attitudes towards illegal behavior): 1)Frequency and extent of theft (e.g., What percentage of people take more than $1.00 per week from their employer?) 2) Punitiveness toward theft (e.g., should a person be fired if caught stealing $5.00?) 3) Thoughts about theft (e.g., Have you ever thought about taking company merchandise without actually taking any?; Do you think it is stealing to take small items home from work?) 4) Perceived ease of theft (e.g., How easy would it be for a dishonest person to steal from an employer?) 5) Likelihood of detection (e.g., What percent of employees thieves are ever caught?) Other questions: Do you think you are too honest to take something that is not yours? Do you believe most employers take advantage of the people who work for them? How often do you tell the truth? I have frequently associated with fellow employees who admitted they were stealing merchandise from the company.

5. Covert Tests (tests about one’s attitudes thought to relate to honesty) It would be better if almost all laws were thrown away [Conventionality, traditionalism] Sometimes I am strongly attracted by the personal articles of others [S elf-discipline] I like to take chances [Sensation seeking] On average, how often during the week do you go to parties? [Sensation seeking] Does it bother you when people ask stupid questions? [Forgiveness] How often do you make your bed? [Tidiness] I feel lonely even when I am with other people [Alienation] Honesty Testing --- Types of Questions (cont.)

6. Retribution --- “I am underpaid and I’m only taking what I deserve”; “The company angered me and I got back at it” Justification --- “Everybody does it, besides, they can write it off”; “The company makes a large profit and I deserve some of it” Shame/Low Self-Esteem—Feeling of feeling good at something Need Boredom/Excitement— To live on the edge Conformity --- “Everyone is doing it” Power and Control — Offset feelings of powerlessness Grief — Trying to fill a void due to a loss Some Reasons for Employee Theft

7. Honesty Tests ---Validity Issues a) Correlations with polygraph results b) Future behavior (e.g., # days with cash shortage, discharges) c) Admissions of past theft d) Shrinkage reduction e) Contrasted groups (e.g., scores by criminals vs. general population scores) Other Issues Cut-off Score Determination (e.g., cost-benefit assessment; tailoring the cut-off score for individual companies and job categories?) Role of honesty test score in the selection system (e.g., fail an honesty test but pass personality and ability tests)

8. The American Psychological Association (Goldberg, Grenier, Guion, Sechrest, & Wing, 1991) [Review of almost 300 studies (research publication and test publishers] Finding: “for those few tests for which validity information is available, the preponderance of the evidence is supportive of their predictive validity” (Goldberg et al, 1991, p.26). Large-scale meta analysis of 665 validity coefficients for integrity tests (Ones, Viswesvaran, & Schmidt, 1993) Validity coefficient with supervisor ratings of job performance as the criterion was.21 (corrected for criterion unreliability and range restriction in the criterion, r =.34) Average predictive validity of a criterion defined as “counter-productive behaviors” (e.g., theft and theft-related incidents, absenteeism, tardiness, violence). Over 443 validity coefficients --- r =.33; corrected value =.47 Some Evidence on Honesty Testing