Saturday, October 20, 2012

Reducing Theft

Let's say we look at employee theft in department stores. Now, every department store will have some degree of employee theft, but all stores would like to minimize it. It hurts the bottom line, and makes people want to shop elsewhere.

Let's say there is one department store in particular, that institutes strict policies to discourage employee theft. Employees are not allowed to work without at least one other person watching them. Stores are watched closely and inventory is kept where it is under constant surveillance. There are strong protections for "whistle blowers".

Every employee has a background check for criminal records, and has to read and sign off on the policies against stealing.  Every employee also has to spend time at least once a year in a course outlining the policies of the store, the procedures to prevent employee theft, and encouraging them to report and handle it if it does occur. Entire departments in the organization are devoted to ensuring that the policies are adhered to, that the store works with authorities if theft occurs, and to create an environment where anyone can safely and anonymously report suspicious activities. Even the front page of the store's web site has links to report employee theft anonymously, and links to the store policies and procedures.

These procedures were designed by another company that specializes in detecting and reducing theft. They are expensive, and are the best of any store in its class. Over the next few years the number of employee thefts reported is a fraction of the number of thefts reported by stores of similar size which do not have such programs in place.

What can we conclude from this?

A) The store is serious about reducing theft and its procedures have been effective. Other stores should look into doing the same.

B) No conclusion can be drawn. They just got lucky.

C) The store actually has a secret policy that encourages theft. Theft is actually rampant within the company, much higher than in other companies, but they cover it up by punishing whistle blowers. Everyone who knows about this is on the take.

Got your conclusion? I'm going to bet it is "A", or if you are a severe pessimist, "B". But "A" is the more reasonable choice. In any situation when you change a parameter and the result changes, it is reasonable to conclude that there is a relationship between the two. That conclusion becomes even more reasonable if there is a distinct mode of causality.

For instance, if you see that buildings made of nonflammable building material have fewer fires than those made with flammable materials, you can infer that the choice of building material contributed to the difference, not just because the two are correlated, but because we can see a direct causal relationship. Likewise for the employee theft example. The store's policies were known to reduce theft, and so it is likely that it was a contributing factor.

Now replace "department store" with "Catholic Church" and replace "theft" with "sex abuse". Does your conclusion change? Why? Is your conclusion reasonable?


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