Managing to deal with the 10bn pounds cost of crime: Alex Benady on enlisting people power in security

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CRIME in the business world is vast and growing, possibly costing as much as pounds 10bn a year - 2 per cent of all companies' turnover - and demands a management approach to deal with it, says John Drummond, joint managing director of Crime Prevention.

His management consultancy addresses a wide spectrum of crime-related issues, from security in the National Health Service to credit-card fraud against banks. But it is security work without burly minders or paramilitary regalia. Mr Drummond and his partner, Sheena Carmichael, say they are pioneering a 'human resources' approach.

'Many managers feel that crime is an insoluble problem,' says Mr Drummond, 'while we take the view that crime is a business cost that can be managed like any other.'

He says conventional management techniques are not equal to the problem, and cites examples of retailing companies that have seen profits wiped out by what was considered as a 'small, even tolerable level of crime'.

In the City, he reckons, two frauds of pounds 5m to pounds 10m are reported every week but that only 15 per cent of companies have a policy of automatically reporting such crimes.

Traditionally, there have been two methods of dealing with business crime. The first is physical barriers - guards, fences, locks, security tags, closed-circuit television - while the second operates at 'systems level' and includes financial checking procedures and complex reporting systems that immediately signal deviations from the norm.

Crime Prevention accepts that these are important, but says they are not enough. 'We need a more fundamental approach, and that is to treat business crime as a people issue and adopt an approach that deals with the people in an organisation,' Mr Drummond says.

Ms Carmichael says she first stumbled on the 'human resources approach' in Scotland, interviewing the manager of a Japanese factory in East Kilbride. 'Significantly, he had no office. I asked him about crime levels in the factory and he replied, about 1 1/2 televisions in two years. When you think of what they were making, TVs and videos, it's an astonishingly low figure. I concluded that it came down to management style and the inculcation of a shared-value system.'

When Crime Prevention is called in to an organisation, the first step is to audit all costs associated with crime. 'But it must be thorough. Often, organisations have no clear idea of the size or nature of their losses,' says Mr Drummond. As an example, he says the NHS registers losses of pounds 4m a year from crime but 'we reckon the true figure is closer to pounds 600m'.

The people who invariably possess the detailed knowledge of when, where and how crimes are committed in an organisation are the staff - they are either victims or potential perpetrators. So Crime Prevention leads informal discussion groups with staff to air personal concerns about crime at work, to identify where the organisation is vulnerable, and prevention measures.

Mr Drummond recalls a factory where theft of expensive tools ran into thousands of pounds a year. 'The managers wanted to install expensive security equipment. But the staff suggested putting Portaloos in the yard, so delivery men didn't have to walk through the shop. The thefts stopped overnight.'

In developing a crime prevention policy, the consultants set up training courses for all staff. The first training task is to establish a framework of shared values. 'Fairness is vital here,' says Ms Carmichael, 'You can't have one rule for management and another for workers.'

The consultants estimate it will cost between pounds 5,000 and pounds 10,000 to get a good understanding of crime in a medium- sized company, but Mr Drummond says the savings could run to 'hundreds of thousands of pounds'.