Instead of Monitoring Employees, Try Motivating Them

Employee theft costs the economy up to $200 billion a year. In the hopes of putting a stop to stealing, many managers have turned to surveillance systems. According to new evidence from a rigorous study led by strategy professor Lamar Pierce, surveillance can work. After restaurants installed monitoring software that sent electronic theft alerts to managers, weekly revenue climbed by about 7 percent. Servers appeared to give out fewer free drinks and focused their energy instead on selling more food.

But what if there’s a less expensive, less risky way to eliminate employee theft? Several years ago, a forest products company was losing about $1 million a year due to employee theft. After a few simple policy changes, theft dropped to near zero, and it stayed there for at least three years -- with no monitoring at all.

Employees were stealing equipment from the sawmill. When managers threatened to start video surveillance with hidden cameras, employees began plotting ways to steal the cameras. The managers responded by hiring an organizational psychologist, Gary Latham, to identify a solution.

Latham discovered that the thieves weren’t stealing for the usual reasons. They weren’t trying to take revenge on the company, or even earn a profit; they didn’t bother using or reselling the items they stole.

Employees were stealing for the thrill. When Latham interviewed the thieves under confidentiality, they reported pride in their skills (“We are so good we could steal a head-rig from a sawmill” -- which weighs more than a ton) and even offered to show them off (“Tell us what you want, and we will get it out within 45 days”).

Instead of putting the employees under surveillance, Latham and the managers decided to kill the thrill. They announced a library loan policy: employees could borrow equipment from the mill. Suddenly, “the thrill was gone,” explains organizational psychologist Bob Sutton in his book Good Boss, Bad Boss (Business Plus, 2012). “Stealing something you could get for free wasn’t anything to brag about.” The bosses also set up a return policy that allowed employees to give back previously “borrowed” equipment without punishment. When employees returned equipment, managers wouldn’t ask any questions, under the assumption that they were doing it on behalf of a friend.

“The material was returned by the truckload,” Latham writes. Much of the legwork was done by spouses, who were tired of hiding the bulky equipment in their garages.

This brilliant example shows how it’s possible to eliminate theft without surveillance. First, find out why employees are stealing in the first place. When Latham interviewed employees, he was able to understand their motivations by asking them four questions:

• What are the benefits of stealing?
• What are the costs of stealing?
• What are the benefits of honesty?
• What are the costs of honesty?

Most managers try to eliminate theft by increasing the costs of stealing. Latham’s insight was that this problem could be effectively solved by reducing the benefits of stealing, and then changing the cost/benefit ratio of honesty. The library policy eliminated the main benefit of stealing (it was no longer a challenge, so it wasn’t fun). The return policy made honesty more beneficial (spouses were thrilled to have their garages back) and less costly (amnesty on returns: no punishment, no questions asked).

Cleverness aside, this strategy for curbing theft avoided several major complications of surveillance:

Distrust. In the words of social psychologist Robert Cialdini, a surveillance system “sends a clear message to those under surveillance: ‘We don’t trust you.’” The result is resentment, an “us versus them” mentality, and decreased morale, especially among employees who weren’t stealing in the first place.

Managerial cynicism. Social psychologist Rod Kramer cites several studies showing that the act of surveillance makes managers more suspicious. If you’re busy enough looking for bad behaviors, you’re sure to find some. Pretty soon, your field of vision will be dominated by untrustworthy employees, and you’ll become increasingly skeptical of most people’s motivations. Ironically, evidence suggests that skeptical managers are poor judges of character.

Encouraging theft when no one’s watching. The decision to implement a surveillance system communicates to employees that theft is common. “If my colleagues are doing it,” some employees will think, “it’s probably not a big deal.” In one study, Cialdini’s team tracked the theft of petrified wood from a national park. When a sign mentioned that “many past visitors” had taken wood, theft rates spiked from less than 3 percent to nearly 8 percent. As behavioral economist Dan Ariely reveals in The Honest Truth About Dishonesty (Harper, 2012), plenty of people are able to steal a little bit without compromising the morality of their self-images. Under surveillance, Kramer notes “employees may become less committed to internal standards of honesty and integrity in the workplace.”

Surveillance has its time and place. But as I wrote a few months ago, the best way to encourage trustworthy behavior is to show trust. So next time you’re trying to stop theft, it might be good to focus less on raising the costs, and instead find creative ways to lower the benefits -- or set up a policy that makes honesty more attractive and less costly. There’s an excellent model already in place at your nearest library.