Employee theft is on the rise and it is costing businesses big bucks. With 75 percent of employees admitting to stealing at least once from their employer, an estimated $50 million is stolen annually from U.S. businesses, having an annual impact of more than $200 billion on the economy.
Though there are several ways to prevent employee theft, information technology (IT) monitoring is a "strikingly effective" method in reducing theft and fraud, a new study finds.
In the study, Lamar Pierce, Ph.D., associate professor of strategy at Olin Business School at Washington University in St. Louis, found that mining data from employee point of sale transactions using IT monitoring software increased revenues by about 7 percent.
"In this paper, we study how firm investments in technology-based employee monitoring impact both misconduct and productivity," Pierce and co-authors Daniel Snow, associate professor at the Marriott School at Brigham Young University, and Andrew McAfee, research scientist at the Sloan School of Management at the Massachusetts Institute of Technology, wrote.
To conduct the study, the researchers installed Restaurant Guard, a monitoring software developed by NCR, at 392 restaurants in 39 states. After measuring the effect of theft and fraud before and after installation, the researchers found that revenues increased by an average of $2,982 per week per restaurant.
"The NCR system works with data directly from the point of sale," Pierce said in a statement. "It reduces the need for managers to use cameras and constantly watch their employees. In that sense it’s not more surveillance — it’s better and less intrusive monitoring."
In a broader context, IT monitoring or similar technology and managerial systems may also be used by other establishments — such as retailers and other businesses with POS systems— to effectively deter employee theft. According to the researchers, the study indicates that despite individual propensities to steal, employee misconduct is mostly due to managerial policies, not ethics or morality. Organizational design is what ultimately prevents employee theft, the study revealed.
"Our results suggest a counterintuitive and hopeful pattern in human behavior," the researchers wrote. "Employee theft is a remediable problem at the individual employee level. While individual differences in moral preferences may indeed exist, realigning incentives through organizational design can have a powerful effect in reducing corrupt behaviors in a way that benefits both the firm and its workers."
The paper, "Cleaning House: The Impact of Information Technology Monitoring on Employee Theft and Productivity," was published in the MIT Sloan Research Paper.
Originally published on BusinessNewsDaily.