Employers feel no love for unscrupulous practice of 'service sweethearting'

Feb 10, 2012
This is Michael Brusco (left) and Michael Brady. Credit: Florida State University Photography Services

A new study led by two Florida State University marketing professors finds that some frontline service employees who are rewarded for hikes in customer loyalty and satisfaction also may engage in "service sweethearting," a clandestine practice that costs their employers billions of dollars annually in lost revenue.

The study, the first to examine the employee and customer sides of this activity, will appear in the upcoming issue of the Journal of Marketing, a publication of the American Marketing Association. 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, 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 behavior 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 behavior 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 behavior 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 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 from theft — as much as $80 billion — 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 , 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.

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More information: Brady, Brusco and Voorhees' study, titled "Service Sweethearting: Its Antecedents and Customer Consequences," can be downloaded here: www.marketingpower.com/AboutAMA/Documents/JM_Forthcoming/antecedents_consequences.pdf

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Vendicar_Decarian
3.7 / 5 (3) Feb 10, 2012
"As a result, firms that take steps to eradicate sweethearting behavior could experience lower customer satisfaction and loyalty." - Article

Translation: It is good for business.

Magnitude of the issue?

Total U.S. economy 14.5 trillion.
"Cost" to business 80 billion (but of course the cost is negative, since the researchers have admitted that it is good for business." But let's say 80 billion.

Fractional "cost" per dollar of GDP 0.5 cents

It would appear that the bean counters have discovered themselves a new non-problem.
kochevnik
1 / 5 (1) Feb 10, 2012
Golly an AUSTERITY PROGRAM for customers. Let's weed out the friendly employees so we can massage the CEO's bottom line. Come watch that pig fly.

Why do corporations even have accountants? Oh yeah, TAX PREPARATION. Such a vital service. Not like 80% of them could be replaced by Quickbooks overnight. At least accountants in Russia have other useful functions.
Vendicar_Decarian
3 / 5 (2) Feb 10, 2012
If you screw the customer for every nickel and dime you can get from them then they will feel as if they are being screwed for every nickel and dime you can get from them, and will be less likely to return.

This is a bean counter study that ignores the reality of customer loyalty and focuses only on the fractions of a penny a retailer can gain by treating their customers badly.

"In the United States, employee theft costs firms about $200 billion a year 40 percent of which stems from sweethearting" - Article

Here we see the study authors equating rewarding customer loyalty with "theft". What is next? Charitable donations being equated with theft? Free coffee at muffler shops equated with theft?
Vendicar_Decarian
3.7 / 5 (3) Feb 10, 2012
This research is part of a body of work that explores how rotten you can make a company before customers jump ship.

Got to save that 0.5 cents after paying lip service to the idea of Customer service.

Bean Counter Filth.
axemaster
not rated yet Feb 11, 2012
Fractional "cost" per dollar of GDP 0.5 cents

Just thought I'd point out that .5% of the US economy is actually a pretty huge number all considered. Not that that justifies the sentiment expressed in the article, but still...
Vendicar_Decarian
3.7 / 5 (3) Feb 11, 2012
It isn't even 0.5 percent of the economy. The value the bean counters come up with is 80 billion, which translates to $235 per American per year.

When was the last time you received $235 in free stuff given to you by a store clerk?

It's all just corporate bean counter filth.
Bigbobswinden
not rated yet Feb 11, 2012
The amount of theft by employees is huge. It is not a discount to all but some thieving employees giving their "friends" freebies to the detriment of the company, and therefore putting all the employees jobs at risk as an honest workforce of a competitor will put you out of a job. Bosses pay is a different question and not relevant to this sort of theft.
Vendicar_Decarian
1 / 5 (1) Feb 11, 2012
"The amount of theft by employees is huge." - BigBobTard

The article places a figure on it at $200 billion a year in the U.S. The also include in that $200 billion $80 billion for customer relations they call "Sweethearting".

$80 billion represents 0.5% of GDP, so the bean counters have identified a non-problem.

Further much of what they call "Sweethearting" induces customer loyalty and return sales as they themselves admit.

Finally their estimate of $80 billion a year is clearly a lie as it would require that every american on average would receive $235 in Sweethearted retail products every year, which is clearly nonsense.

So the 80 billion figure is itself a Filthy Bean Counter Lie.
TheGhostofOtto1923
1 / 5 (1) Feb 11, 2012
This research is part of a body of work that explores how rotten you can make a company before customers jump ship.

Got to save that 0.5 cents after paying lip service to the idea of Customer service.

Bean Counter Filth.
Translation: its ok to steal from your employers if its for your friends and not yourself.
http://www.pwc.co...-a.jhtml

-You do seem to have a larcenous proclivity n'est pas? I bet you favor gun control too.

"...is a contributing factor in from 30 percent to 50 percent of firm bankruptcies."
Vendicar_Decarian
1 / 5 (1) Feb 12, 2012
"Translation: its ok to steal from your employers if its for your friends and not yourself." - OttoTard

Theft and "Sweethearting" is distinguished from one another by the researchers. But they do seek to dishonestly re-label "sweethearting" as theft.

Management as it turns out is responsible for most "sweethearting" by providing customers breaks on product prices through the extension of sale prices on excess stock, etc.

This these filthy bean counters wish to redefine as "theft".

Filth.

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