New employee monitoring tools regularly emerge that allow retail organizations to keep a closer eye on employees. What is your sense of these products? Does technology-based employee monitoring reduce misconduct? Does it dampen or enhance worker productivity?
Researchers at the Massachusetts Institute of Technology examined these questions by analyzing two years’ worth of employee theft and sales transactions at 392 restaurants in 38 US states.
Restaurant servers can steal from their employers and customers in many ways, including voiding and “comping” sales after they pocket customers’ cash payments. Transactional monitoring software, such as NCR Corporation’s Restaurant Guard, attempts to alert managers to egregious examples of such actions via frequent reports.
An obviously important question for loss prevention practitioners is whether such monitoring reduces internal theft.
On that criterion, the researchers found that the monitoring product worked: “Our empirical models identify a 22 percent (or $24 per 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,” according to the MIT Sloan research paper, Cleaning House: The Impact of Information Technology Monitoring on Employee Theft and Productivity (2013).
Although the amount seems modest, the effect on total revenue seemed to be much larger, said researchers. Following implementation of Restaurant Guard, total revenue increased by $2,975 per week, or about 7 percent of revenue for the average location. The results suggested “either a considerable increase in employee productivity or a much larger latent theft being eliminated by the IT product,” concluded the study. Additionally, implementation of Restaurant Guard increased drink sales—the primary source of theft—by $927 per week, or 10.5 percent.
Finally, researchers also observed an increase in average tip levels, suggesting that the implementation of monitoring technology improved the level of customer service provided by restaurant servers. Although the exact reason why is unclear, the researchers think that waiters’ level of service probably drops when they are “multitasking” between stealing and serving customers.
So, the employee monitoring technology proved to be effective in reducing theft—but researchers also wanted to answer the following question: Did the reduction in theft result primarily from changing worker behavior or instead result from more honest workers replacing less honest ones? In other words, did dishonest employees quit when they couldn’t steal as freely, to be replaced by more honest workers?
No, said researchers. “Individual worker models show that our restaurant-level model results can be explained by employees changing their behavior, as opposed to a change in the group of employees working at the restaurant,” the study concluded. Indeed, the researchers found that employee attrition dropped significantly following IT monitoring implementation.
The researchers state their findings are important for expanding what is known about the impact of technology on worker productivity: “Other studies show that IT can improve productivity by reducing mild forms of misconduct such as shirking and absenteeism. [This] is the first to show both the direct impact in reducing explicitly illegal behavior such as theft as well as the secondary effect of incentivizing increased productivity.”
This post was originally published in 2017 and was updated November 13, 2017.