Monitoring employee behaviour rather than punishing lapses brings productivity gains

By September 12, 2013

In US restaurants, implementing computerised monitoring technology has led to a drastic reduction in theft, plus gains in productivity.

“Employee theft and fraud are widespread problems in firms, with workers stealing roughly $200 billion in revenue from US firms to supplement their income.” These are the opening lines of a report entitled Cleaning House: The Impact of Information Technology Monitoring on Employee Theft and Productivity just published by researchers from Washington University in St. Louis, Brigham Young University, and MIT. So are these losses unpreventable? The report thinks not, and tries to show that computer-based monitoring should be able to transform some of this theft activity into more productive behaviour on the part of employees, simply by turning around the balance of motives.

Higher income

The study looks at five restaurant chains which decided to integrate a loss prevention tool, the NCR Restaurant Guard into their traditional monitoring systems. The tool focuses directly on employee theft. Using a special algorithm, this tool identifies instances of employee error that seem to form a deliberate pattern of repeated fraudulent action. The results are impressive: after just a few weeks the restaurants showed a net reduction in theft and other fraud. It appears that the fear of being caught red-handed encouraged staff to direct their efforts towards improving the service they provide to customers. This initiative appears to rely on the idea that waiters can replace their illicit complementary earnings with customer tips, and indeed in this case the overall increase in their take-home pay did seem substantial, with increases in total pay after several weeks ranging from 13% to more than 37% over and above the federal minimum wage. This staff pay hike was also coupled with an overall increase of 7% in the total revenue of the firms investigated. The increase in the sale of drinks, the main source of profit for restaurants, was over 10%.

A matter of changing habits?

In the restaurant example, employees were clearly able to compensate for illicit activities with extra customer tips. However the general thrust of the study is to de-link in-company theft entirely from purely ethical concepts, at least when it comes to small-scale theft, suggesting that it is really a matter of turning people’s motives around. Changing waiters’ habits actually resulted in their providing better customer service, which then not only led to extra income for them but also boosted their employer’s profits. Which brings us back to the whole question of the usefulness of computerised theft monitoring. However, although small-scale theft seems to be endemic in companies, the theft prevention business seems to have been slow to seize the opportunity. The authors of the ‘Cleaning House’ report seem to be arguing that if everyone can get over the fear of Big Brother, such practices could improve the working environment and bring productivity gains.

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