Pulling in the reins on
employee embezzlement
The following article came to Play Meter
from Charles. Charles & Associates of
Kansas City. Kansas. CCA is a marketing
management consulting firm specializing
in market and product planning. psycho-
logical research and video game playing
behavior.
he phenomenal growth in the video
game business can be attributed to
at least two key market trends,
both reflecting greater market penetration:
I . Enhanced consumer demand.
more people are playing these games more
frequently .
2. Broader distribution base - mass
retail merchants such as grocery, depart-
ment, drug, and other retail outlets, as well
as new arcades have expanded the distri-
bution of video games .
Unfortunately, these trends appear to be
softening. The distribution of video games
via mass merchants may be reaching a state
of saturation . Recent indu try statistics
suggest that consumer demand for playing
video games may be leveling off.
Given these signs of a maturing industry,
operators may find their profits starting to
stagnate unless the y find more effective
T
ways of getting a firm handle on operating
expenses . Indeed , successful operators will
likely be those who find new ways to con-
trol expenses, ways that many operators
might think are impractical today.
Take, for instance, the problem of
collection shortages. Many shortages are
due, of course, to the use of slugs, strings,
and other tricks devised by dishonest
players . But let's face it , whether we like it
or not, many shortages are due to employee
embezzlement.
What makes matters worse is that some
operators take a laissez-faire attitude
toward low-levels of employee embezzle-
ment. While few operators will tolerate a
flagrant violater who embezzles say $25 a
whack, many operators simply ignore sus-
pected violaters who occasionally pocket a
dollar her and a few bucks there.
Charles , Charles & Associates (CCA)
recently took on the task of assisting one of
its clie nts in coming to grips with the pro-
blem of shortages in video game collec-
tions. For obvious reasons, CCA's client
wishes to remain anonymous . He was,
however, willing to share this case study
with other operators who are interested in
pulling in the reins on employee embezzle-
NUMBER OF OVE RAGES & SHOR TAGES
BEF ORE AND AFTER DISMISSA LS
# Before
# After
39
25
209
33
49
597
Subtotal
273
679
Exact Count
110
198
$ 0.25 to $ 4.75 shortage
$ 5.00 to $25.00 shortage
$25 .25 or more shortage
742
113
36
305
44
41
891
390
$25 .25 or more overage
$ 5.00 to $25.00 overage
$ 0.25 to $ 4.75 overage
Subtotal
14
ment. To facilitate the discussion, the
client is referred to as Video Vending.
Background on Video Vending
Video Vending had operated for
almost three years in a large midwes tern
city when it first became associated with
CCA. Like many operators who got an
early start on the video boom, Video
Vending's revenues and profits had grown
geometrically.
With the aid of CCA , Video Vending has
recently computerized many of its oper-
ating procedures. For example, the move-
ment of machines from location to location
has been optimized through the use of a
unique program which provides informa-
tion for maximizing game revenues by
minimizing the effect of "game wearout."
In addition, more effective accounting
procedures have been developed and com-
puterized to enhance employee produc-
tivity and to provide management with
crucial sales analyses . A collection pro-
gram outputs shortages and overages for
each machine and for each routeman twice
a month . The following information is
provided by the collection program :
location #, machine , service #, new meter,
old meter, coin read , shortage, overage,
and cash counted .
Computer programs are written in
Applesoft basic for an Apple computer.
Collection problems
Several months after the owner of
Video Ve nding began using the collections
program, he suspected that some employees
were embezzling money during route
collections. The suspicion was based on a
high number of shortages exceeding $5
which could not be attributed to unreliable
meter readings . In addition , there were a
lot of shortages under $5 which, at first ,
were not as important to the owner as the
shortages over $5. (Later we will see that
these were more important than the owner
thought.)
Since the owner now had factual evi-
dence to back up his suspicion, he con-
fronted the employees and asked them to
submit to ;>olygraph tests. As things turned
out , all but one employee failed the test.
By itself, a polygraph does not give con-
clusive evidence. When interviewed after
PLAY METER , June 15. 1982