'Service sweethearting' behaviour on the part of employees can cost organizations billions of dollars in lost revenue, a recent study has revealed.
The study led by two Florida State University marketing professors is the first to examine the employee and customer sides of this activity.
It identifies traits that may predispose some employees toward service sweethearting and may aid employers in weeding them out of the candidate pool.
The study also reveals that in cases of sweethearting, customer loyalty is tied to the rogue employee rather than the company, so that firing the employee actually hurts the firm's ability to retain customers.
The term service sweethearting describes the behaviour of employees who provide friends and acquaintances with food and beverages or other free services that never appear on the bill.
Though the practice is most prevalent in the hospitality industry, the potential for such behaviour exists in any industry in which employees interact with customers at the point of sale, according to the study. In a retail setting, for example, a cashier may slide a product around a bar-code scanner, giving the false impression that a friend is paying for the item.
"Sweethearting may seem like a relatively innocuous behaviour on the surface, but its financial implications are very serious," said Michael Brady, the Carl DeSantis Professor of Business Administration in Florida State's College of Business and one of the study's co-authors.
Brady cited studies that show employee theft is estimated to cost U.S. firms up to 200 billion dollars annually and is a contributing factor in from 30 percent to 50 percent of firm bankruptcies. For its part, sweethearting is estimated to account for up to 40 percent of revenue losses from theft - as much as 80 billion dollars - and represents 16 percent of losses attributed to customers.
Brady's partners on the study were Michael Brusco, the Synovus Professor of Marketing at Florida State, and Clay M. Voorhees, an assistant professor at Michigan State University.
Their research offered insights into personality traits that could indicate a prospective employee is more likely to engage in sweethearting. For instance, they found that the frequency of sweethearting is greater when employees have higher levels of need for social approval, higher levels of risk-seeking propensity and weaker ethical values.
The research indicates that managers attempting to control sweethearting should consider including measures of ethics and need for approval in their pre-employment screening and target applicants who are on the high and low ends of such scales. In addition, employee training should include reminders to workers of their ethical obligation to their employer. The research further suggests that sweetheart employees and customers downplay the moral and ethical ramifications of service theft as compared to physical-goods theft.
On the customer side, the study found that although sweethearting inflates a firm's customer satisfaction, loyalty and positive word-of-mouth scores by as much as 9 percent, any benefits in terms of customer satisfaction or loyalty initiatives are tied to the rogue employee. As a result, firms that take steps to eradicate sweethearting behavior could experience lower customer satisfaction and loyalty.
The researchers survey about 800 employees and customers in restaurants, hotels, car washes, cable television installation and repair companies, and other businesses.
The study will appear in the upcoming issue of the Journal of Marketing, a publication of the American Marketing Association.