Optometrist Alice Oliver, owner of Olivers Optical Shop, of Anytown, Ohio, had a problem. Employees are stealing money from your business, said an anonymous caller. Theyre not ringing up cash sales. Instead, theyre pocketing your money.

When Dr. Oliver asked for more information, the caller hung up.

That night after closing, Dr. Oliver and her office manager spot-checked the shops inventory. Both the frames and accessories inventories showed large shortages. The caller was telling the truth.

When two of the suspects heard about the phone call, they quit on the spot. The third suspect walked out when the investigator walked in the door.

Olivers Optical got rid of its thieves but was unable to recover its losses. (On a national level, retail employee theft costs businesses $14.6 billion annually, according to the 2004 National Retail Security Survey, conducted by the University of Florida.) Dr. Oliver wondered if there might be a better way to deal with employee theft problems.

Screen Job Applicants
The better way to handle employee theft problems is to prevent them from occurring by identifying dishonest applicants before you hire them. Applicant screening is critical to your profitability. Less employee theft is just one benefit. Others include reduced turnover, better job performance, less absenteeism and better customer service.

Just as important, screening identifies worthy applicants. Good job candidates dont stay unemployed for long. Theyre usually in the running for several jobs at the same time. If you can offer employment to top candidates quickly, you can hire more of the best. You can do this by using the right screening procedures in the right sequence.

Screening the applicant is based on two main sources of information:

The applicant herself. Take the right approach, and the applicant will disclose much of the information youre looking for. What she tells you about herself will cause you to advance her on the list of potential employees or eliminate her from consideration.

Outside sources. Additional information includes criminal record checks, credit reports, drug tests, and work and personal references. This type of information is often more time consuming to obtain, so obtain it later in the hiring process.

Both sources allow you to bypass the bad apples and hire the best employees. To obtain this information, follow these seven steps:

1. Require a Thorough Application
All employment applications are not created equal. A thorough employment application is worth more than its weight in gold.

Your employment application provides your first look at the applicant. Yet, most employment applications are too brief and fail to ask all the necessary questions. So, make sure yours is thorough. (If you think your employment application could be improved, obtain a sample customizable application form from www.TheftStopper.com.)

2. Ask for Honesty
Job applicants are more likely to answer the questions on your employment application truthfully if you tell them why they should. Tell the applicant: Id like you to fill out this employment application. Please take your time. Make sure your answers are true, correct and complete. All your answers will be checked for truthfulness. Be sure to list all jobs youve held in the past 10 years, including temporary and part-time jobs, and make sure you list the true reasons for leaving each one.

If you have been convicted of any criminal offenses, list those, too. We have hired people who have criminal records but only when they were truthful about them. You dont have to be a perfect person to work here. You didnt see any employees with halos over their heads when you walked in here, did you?

Will this pitch persuade every applicant to answer every question on the application truthfully? Of course not, but your applicants will give you more truthful answers with this speech than without it. Their answers may surprise you.

3. Administer an Honesty Test
A good pre-employment honesty test will tell you much more than the applicants likelihood to steal. (These are available from loss prevention and security consultants. See below, How Honest Are You?) You can administer the test on site during the applicants first visit. Internet scoring provides you with results in minutes. These tests are especially helpful for screening young applicants, as they have limited employment histories, no credit histories and no adult criminal records. The best pre-employment honesty tests include:

Questions that evaluate your applicants likelihood to steal. These include theft admissions questions, theft attitude questions and questions about behavior in hypothetical theft situations.

Questions about other areas predictive of employee suitability. These include work attitudes, work history, customer service attitudes, current alcohol and drug use, and undetected crimes.

Validity scales. These identify those applicants trying to beat the test by answering falsely to make themselves look like saints.

An individualized post-test interview worksheet included along with the test scores. The worksheet lists key questions answered incorrectly and provides suggested follow-up questions. The follow-up questions can help you evaluate the seriousness of admissions made on the test. You can incorporate these follow-up questions into your applicants first employment interview.

Before the interview, review both the application and honesty test results. Make notes about answers you want the applicant to explain.

Begin the interview by briefly introducing yourself. Candidly explain the negatives as well as the positives of the job. Ask the applicant if she is still interested after hearing the jobs negatives. This often-overlooked step can increase permanency significantly.

Make sure the candidate provides specific and complete explanations as to why she left each job in the past five years. Make sure she completely explains what she was doing during any periods of unemployment between jobs.

Try this approach: With her completed application in hand, ask about previous jobs in reverse order, beginning with the most recent. Ask your questions as if the applicant had written nothing in the employment history section. If an applicant has trouble answering the same questions verbally that she just filled in on the written application, you may want to question her more carefully. Or, you may want to politely end the interview there. At the very least, this approach gives applicants the opportunity to fill in any blanks that may exist on the written application.

5. Get a Credit Check
With the applicants written consent, conduct an Internet search under free credit report. You can do this in minutes. Print two copies of the applicants credit reportone for her and one for you.

Compare her starting pay with her debts and reasonable living expenses. This comparison will reveal whether she can afford to work for you. Employees whose debts and expenses always exceed their income have a perpetual shortfall to make up. Some may be tempted to make up their shortfalls by stealing your merchandise or money. If she cant handle her own money, should you really trust her to handle yours?

(Bear in mind that if you request a credit report, you must abide by the Fair Credit Reporting Act. For instance, if you reject an applicant based on her credit report, you must disclose this to her. This gives the applicant an opportunity to refute erroneous information. For more on this, go to www.ftc.gov/bcp/conline/pubs/buspubs/credempl.htm.)

6. Check for a Criminal Record
Tell the applicant that she can expedite the hiring process if she will stop by the police station nearest her home and obtain a copy of her own criminal record. Tell her you will reimburse her for the cost.

Few applicants who have criminal convictions will return with copies of their criminal records in hand. Instead, they typically prefer to seek employment elsewhere.

Some states have put their criminal records online. Applicants criminal records can be accessed free in minutes with the applicants consent. If you have free and immediate access to an applicants criminal records, check her criminal record as soon as she completes her employment application. (See below, A Practical Look at Criminal Record Checks and Drug Testing.)

(Again, if you reject an applicant based on this information, you are required by federal law to disclose this to the applicant to allow her a chance to refute that information.)

7. Check References
Human resource departments in large companies typically provide minimal information about former employees, such as beginning and ending dates of employment and positions held. Call the applicants previous supervisors instead. Immediate supervisors and small business owners know their former subordinates well. Supervisors also feel obligated to help former employees who did a good job for them.

Most supervisors can be coaxed into giving a reference. Heres one technique to try if a supervisor balks:

You: Mr. Edwards? Florence Johnson has applied to work for us here at Family Eye Care. Florence said she worked for you from February 2004 through June 2005. Is that correct?

Supervisor: Yeah, thats about right.

You: Was her performance good, fair or poor?

Supervisor: Corporate has told me not to answer that one.

You: Sounds like her performance was terrible.

Supervisor: No, Florence did a real good job!

You: Thank you, sir. I appreciate your time.

The former supervisor confirmed that Florence was a good employee. If you say, Sounds like her performance was terrible, and the supervisor responds with silence, thats a bad reference. Be patient and listen carefully. What they dont tell you can be revealing.

Finally, call the people the applicant listed as her personal references. Some frustrated practitioners will tell you that personal references say nothing but good things about the applicant. Not so. Asking the personal reference questions you would ask a work reference could produce surprising results. Again, ask questions as if you had no information about the applicants work history or criminal record.

When hiring employees, establish a specific procedure for screening applicants. This starts with a comprehensive employment application and pre-employ- ment honesty test. Make sure you follow all steps with each applicant during the hiring process.

Hiring the best will make your life easier and profits bigger. Hiring undesirables will cost you money and make your life miserable. You can reduce employee theft drastically and pick a winning team. Just follow the seven steps.

Mr. Bassett is the president of the James W. Bassett Company, in Cincinnati. His company (www.TheftStopper.com) specializes in pre-employment honesty testing and questionnaires to investigate employee thefts.