For Marijuana Companies, Biggest Security Concern Comes From the Inside

cannabis security

By John Schroyer

Robberies involving medical marijuana dispensaries, recreational stores and cultivation sites may make headlines, but the biggest security threat for cannabis businesses isn’t tied to unknown masked men hoping to make a quick buck.

Roughly 90% of financial and product loss in the marijuana industry can be chalked up to employee theft, according to security experts who work with cannabis companies.

“Almost all theft is internal that we’ve seen,” said Dan Williams, chief executive officer of Canna Security America, which operates in 12 marijuana markets across the country.

The other 10% of product loss results from either external theft, such as robberies, or simply poor tracking by companies, experts said.

Employee theft is prevalent in most industries but is particularly challenging for cannabis companies, which often deal with large amounts of cash and a product that is easy to pilfer. That increases the temptation among workers to divert some money or cannabis into their own pockets – and makes employee theft much more difficult for businesses to identify and prevent.

Inside Jobs

Businesses can lose tens of thousands of dollars a year to employee theft, which adds up to millions of dollars annually across the industry.

“If you look at it being a $700 million market in Colorado, (employee theft amounts to) probably 2-3% of that,” said Steve Owens, the founder and CEO of Adherence Information Management, referring to how much legal cannabis was sold in the state in 2014.

There are plenty of ways for employees to skim from cannabis companies to line their own pockets.

Owens said he had a marijuana client with an employee who lowered the price of high-quality cannabis flower for a friend, providing an enormous (and unauthorized) discount.

Owens’ company investigated, discovering more than 50 instances in a single month of the employee stealing with that method. The estimated loss to the company: $20,000.

“We do uncover theft, and then we find out that it’s pretty rife here in Colorado, just because of the part-time nature of the workforce,” Owens said. “And a lot of them are underpaid, so they feel that they’re owed something, quite frankly, and so they steal product.”

Williams said he had one marijuana shop client with an employee that actually facilitated an armed robbery.

“Two men who were armed with handguns came in, and it turned out that the person behind the front counter knew them. She actually texted them about three seconds before they came through the door, and said kind of ‘all clear,'” Williams said. “It was completely an inside job.”

Another story Owens offered was a time when a budtender simply took advantage of an unlocked vault at a cannabis shop where she worked, and walked out the door with $75,000 in cash.

“The vault was open, and the downstairs door was open as well,” Owens said.

But there are plenty of other instances that are much simpler: Employees pocket some flower or cash here and there, which often goes undetected.

Preventing Loss and Theft

There are plenty of ways that marijuana companies can avoid such situations, experts say. One of the top ways is to be diligent with tracking inventory and resources.

“Anything that they can do to create a time, date and attendance stamp on any time product moves” can help mitigate loss, said Rick Rolland, president of Rolland Lock and Safe Co., which works with the cannabis industry. “The technology is there. The question becomes, are the dispensaries savvy enough to adopt the technology and apply it to their products?”

For example, Rolland’s company is just beginning to roll out a new line of safes designed for the marijuana industry that include an automatic recording device of who opens the safe, and when.

Andrew DeAngelo, co-founder of Harborside Health Center in California, said shop owners need to be prepared to put significant financial resources into both employee salaries and security systems to mitigate losses.

During a speech at the Marijuana Business Conference and Expo in Chicago last week, DeAngelo advised those in the audience to purchase a vault, multiple safes to put in the vault, motion detector alarms, biometric locks, software for tracking cash transactions, armored car services, and even an in-house generator as a backup for power in case the electricity cuts out.

“Of course, all that adds to your security costs,” DeAngelo said. “They’re expensive, but they’re a lot less expensive than a robbery or a theft.”

It’s also important to have policies in place to deal with employee theft, because it’s essentially a foregone conclusion for nearly every business, DeAngelo said. That’s why Harborside has a three strikes policy regarding theft. Employees generally get two chances to set themselves straight, and then they’re terminated.

Additional Strategies

Williams said that if it isn’t already worth the investment to marijuana shops to spend money on technology upgrades for security, then it soon will be. He suggested that a good way to cut down on employee theft from the front counter is to obtain a kiosk that accepts payments, instead of a regular salesperson with a cash register.

And a good way to mitigate theft from cultivation areas (which is where he sees a lot of theft) is to install electronic access doors that use keycards and badges, and record who’s entering cultivation areas along with a time stamp, Williams said.

“Because you have a log of anybody who’s entered those rooms, and you’re able to pull that up and video and figure out who’s stealing pretty quick,” Williams said.

Many marijuana businesses are also too lax when it comes to taking stock of where their products are, Owens said.

“Owners should be doing hard-count inventory at least twice a day – when they open and when they close. If it was a pure retail operation, they’d be doing it when they open, before shift change, after shift change, and again when they close, so periodic inventory four times a day,” Owens said.

That way, if something goes missing, it’s easier to narrow down what may have happened and when.

Another suggestion: Avoid hiring part-time staffers, and pay employees decent wages to reduce the temptation to steal.

“The most successful dispensaries around here hire full-time employees and offer them a small part of profit-sharing,” Owens said. “If you’re continually hiring part-time people, and you have turnover, and you’re going through new staff every three to six months – which I see out here a lot – they’re trying to put Band-Aids on the problem. You need to bring them in and make them part of the solution, and reward them for good work.”

John Schroyer can be reached at johns@mjbizmedia.com

13 comments on “For Marijuana Companies, Biggest Security Concern Comes From the Inside
  1. Lawrence Goodwin on

    It’s really discouraging to read stories about such unethical employees in the cannabis industry, Mr. Schroyer. Here in New York, the “diversion” of cannabis flowers is exactly what Gov. Andrew Cuomo cites as his main reason for opposing their production, sale and consumption for medical purposes. I hope this problem gets resolved expeditiously, and that cannabis thieves/employees will stop thusly tarnishing the whole industry.

    Reply
  2. Clifton Middleton on

    Those that work with the herb deserve and have a right to as much as they give thanks for, welcome to the Ganja World. The biggest thieves are the cops, regulators and legislators who have institutionalized robbery, racism and disenfranchisement of the people for a plant, a plant of reknown.

    Reply
  3. Michael Aberle on

    good afternoon Lawrence,

    I would agree that employee theft is a large part of the losses we see and this is why I added employee dishonesty coverage to the new Hannover cannabis program. Cannabis and Hemp Businesses should look for policy’s that offer “Employee Dishonesty Coverage”. Our Hannover program offers the insured up to $25,000 per claim.

    Reply
  4. Sandra Hinchliffe - Author of The Cannabis Spa at Home on

    There’s nothing righteous about stealing because you are underpaid. If you don’t want to work for the wages offered, don’t work there. That being said I see a lot of pathetic wages being offered to retail cannabis workers for a job that still has a lot more risk than a cashier at Target.

    Furthermore, “stealing” goes both ways. I’ve had my copyrighted work stolen on more than one occasion and numerous incidences with cannabis companies trying to pick my brain for free. I did not volunteer to work for free or for cheap!
    So when the article here talks about “insider” theft, for someone like me, an entrepreneur, it has a whole other meaning in addition to the “employee” theft that seems to be the focus of this article.

    Reply
  5. steve on

    MY MY! Here we go again, I cannot believe, either how ignorant these shop owners are, or even how ignorant some of the comments above are, by this so called security expert.. Of course some of the employees are going to try to steal, especially if they are not paid well & treated right. Even if they are, some will give in to the temptation, if they think they can get away with it.. 3 strikes for dishonest employees? Are you kidding me? That is the most ignorant comment & policy of all, if you want to stay in business that is.. When you hire someone, you should make it very very clear, that any type of stealing, any type whatsoever, will not be tolerated, & not only any employee caught stealing will be terminated immediately, make it very very clear, that you will also press charges against them.. fire them, put them in jail, & establish your reputation for doing so, & that will end most any thief even attempting from getting a job with your business, but if they do steal, it will eliminate them & put them in jail also, period.. No chances, no nothing, steal, be fired, & go to jail all in the same instance.. Also,, businesses do have to go to some expense to make sure of “what is going on” in their establishment, however, it does not have to be all that extensive, or expensive, it just hast to be done the “smart way”.. Just ridiculous, how it seems there is a huge lack of common sense being displayed, & reported on, here & elsewhere, in this industry, & the owners of some of these new establishments, from using pesticides, to not knowing how to deter & avoid employee theft, & yes, even security. As owners, especially in shops of this nature, they should be present at all times possible, be absolutely accurate with their stock, & be personally keeping a very good eye on what is going on with their business! Even most of the smallest stop n go’s or 7 – 11’s, etc,, have steps in place to check staff, the changing of staff, the sales & receipts & money, etc.,, & if something does not jive, it is usually dealt with immediately! All very simple to do. Sounds like those guys need some people that know what they are really doing..

    Reply
  6. John Cox on

    It has been a life long dream for marijuana to be legal in all states .I know I would be honored to grow cannabis legally .If I had the chance to work for a grow operation .I would be honored and I sure would not steal any product from them .I have been always wanted to grow it legally .I just wish I had the chance to do so .I am now 47 and started growing it when I was around 13 but it has always been outdoors .I would love to be able to grow for one of the grow sites where it is legal to do so .I want to learn from some of the best growers there are .I sure would not steel any of there product .I only want to learn from them .

    Reply
  7. Sandra Hinchliffe - Author of The Cannabis Spa at Home on

    “. Of course some of the employees are going to try to steal, especially if they are not paid well & treated right. ”

    Low wages are the perfect formula for attracting underachievers to a risky job involving expensive products and cash (and cannabis is still a risky job, not like working at Target) that already have their sights set on whatever they can get away with. Background checks do not screen this out unless they’ve been caught before.

    Reply
  8. William on

    It should surprise no one that security is a primary consideration for any MJ business.

    Personally, I wouldn’t twice trust any employee proven to have pilfered product or receipts, any more so than I would if they had pulled a gun on me to do it. Its simply not affordable.

    Stealing is unacceptable generally, and this particular emerging business carries a heavy burden of accountability to regulators.

    If unscrupulous employees can easily pilfer product or steal cash from your MJ business, then sooner or later they will do exactly that.

    In addition to the lost inventory and cash, a proprietor so harmed will also be liable for regulatory fines and possible revocation of license.

    Until the banks and Feds can reach agreement regarding the legality of handling proceeds, the Biz will continue to be roughly similar to what has been the norm for the long existent Black Market. Excepting – of course – the tax and licensing part of that equation.

    To quote Warren Buffet, “In looking for people to hire, you look for 3 qualities: Integrity, Intelligence and Energy. If they don’t have the 1st, the other 2 will kill you”.

    Reply
  9. Colorado 420 Websites on

    Well, we did label the campaign “regulate like alcohol” and it seems logical that the cannabis business would have similar problems to bars and pubs.

    I think its a matter of marketing too – recreational cannabis as a whole is still marketing and hiring to the “stoner” crowd. The more legitimate these business make themselves to the population as a whole, the more legit workers they’ll find.

    Our business hopes to improve our local cannabis shop’s marketing as a whole to represent it as the safe, legal industry it should be!

    Reply
  10. Ivan Constable on

    I’m from AUS so am not familiar with nature of Colorado’s rec industries’ marketing efforts however, excuse me Colorado 420 Websites? The “stoner crowd”? Are you referring to the comprehensive community of individuals across the globe whom have championed the capacity of cannabis for decades in the face of vigorous and violent repression? And are you asserting that this community is composed of dishonest, thieving people whom do not constitute “legit workers”? Perhaps in the course of your entrepreneurialism you do not encounter responsible, regular cannabis users- “stoners” as you castigate them- however we are many. Please do not denigrate the community on the basis of the actions of a few.

    Reply
  11. ghost on

    pay a living wage and benifits and trustworthy employees will beat a path to your door .

    Pay sub standard wages w/o benefits and many employees will look at you with the same callous eyes with which your view them.

    bottom line is if your screw your employees out of a worthy hire and wage they will smile all day and rip you off day and night.

    Reply
  12. Rick Fague on

    Theft is always going to be a problem as long as money or valuable materials are involved.

    The best way to stop theft is right at the source, and the best way to do it is with cameras and employee tracking software.

    We’re all human beings and none of us is immune to temptation, so I believe the best approach is to make it extremely difficult for prospective thieves to steal. If someone REALLY wants to steal from us, they’ll figure out a way. The best we can do in that situation is make them work for it, then make it easier for us to identify and catch them if they succeed.

    I was initially reluctant to embrace employee tracking, it seemed like overkill, but I’m glad my company offers it as part of our suite of MJ industry products and services.

    It’s an uncomfortable fact of life but sometimes people need to be reminded to do the right thing

    Reply

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