A study released last week provided some interesting insight into the impact of surveillance on employee theft, a subject that comes up frequently in the HR investigations space. But just as interesting as the employee theft data, were the secondary results showing an unanticipated effect of surveillance, one that might give employers even more reason to consider it in situations where it is legal and ethical.

The study, entitled Cleaning House: The Impact of Information Technology Monitoring on Employee Theft and Productivity, was conducted by Lamar Pierce, an associate professor at the Olin Business School at Washington University in St. Louis; Daniel Snow, an associate professor at the Marriott School at Brigham Young University; and Andrew McAfee, a research scientist at the Sloan School of Management at the Massachusetts Institute of Technology.

Decreased Employee Theft

The researchers installed software that monitors employee theft and sales transactions in 392 restaurants in 39 states, then looked at the before and after results. Analysts estimate losses from employee theft in restaurants at one per cent of revenue. It’s traditionally a high-theft industry, with many opportunities for employee theft, both large and small.

The study’s authors found the following:

Our empirical models identify a 22% (or $24/week) decrease in identifiable theft after the implementation of IT monitoring. This treatment effect is persistent, with the magnitude growing from $7 in the first month to $48 in the third month. The treatment effect on total revenue, however, is much larger.

Total revenue increases by $2,975/week (about 7% for the average location) following implementation of Restaurant Guard, suggesting either a considerable increase in employee productivity or a much larger latent theft being eliminated by the IT product.

Behavioral Influence

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The researchers concluded that the productivity increase, rather than being a result of termination or resignation of the employees prone to stealing, was based on behavior changes due to the monitoring.

We find significant treatment effects in reduced theft and improved productivity that appear to be driven by changing the behavior of individual workers rather than selection effects. Although workers with past patterns of theft appear more likely to leave treated locations than others, individual behavioral changes by existing workers drive restaurant-level improvements. These findings suggest multi-tasking by employees under a pay-for-performance system, as they increase effort toward sales following monitoring implementation in order to compensate for lost theft income. This suggests that employee misconduct is primarily a result of managerial policies rather than individual differences in ethics or morality.

I’d be interested to see a longer-term study on surveillance to see whether it affected employee morale and turnover. Short-term benefits could be overshadowed by a long term-morale problem when employees tire of feeling they aren’t trusted.

Monitoring for Better Business

Nevertheless, for the time being, because the servers knew they were being monitored they acted more ethically and, as a bonus, engaged in significantly more upselling, making the restaurant more in sales and themselves more in tips. A win-win situation, it seems.

If the results of this study are correct, employers who implement workplace monitoring programs stand to reap significant benefits in employee honesty and productivity, at least in the short term. It would be interesting to test whether other types of monitoring, such as increased management oversight or video surveillance, would have the same effect.