HOW COMPANIES SPY ON EMPLOYEES Done right, monitoring performance by computer or telephone improves service, productivity, and profits. Done wrong, it just bugs the staff -- in both senses.
By Gene Bylinsky REPORTER ASSOCIATE William E. Sheeline

(FORTUNE Magazine) – DOES TECHNOLOGY make service workers more productive? Maybe not always, but using it to help supervise them can sure improve their performance -- and often yields increased sales and profits. At General Electric's gleaming Answer Center in Louisville, Kentucky, for instance, more than 200 agents field over 14,000 telephone inquiries a day from potential appliance buyers and fix-it-yourselfers. Ten ''coaches'' record the agents' calls and later play back some of the conversations to the agents ! to enhance the quality of their dealings with the public. This so-called silent monitoring, along with other management techniques, pays off in 96% Answer Center customer satisfaction, as measured by outside survey firms. Center manager William E. Waers reports that while it costs GE $4 to answer each call, the center generates an average of $16 a call in appliance sales and service savings. The company can often avoid sending out repairmen to fix products under warranty. Silent monitoring, where the employee doesn't know exactly when the ''coach'' is listening, is spreading among U.S. companies that use service workers. The practice isn't new with telephone companies; AT&T was using it in the late 19th century. But it has now spread to airlines, banks, insurers, computer manufacturers, appliance makers, and others that all told operate at least 5,000 incoming telephone call centers around the country; most use monitoring of one kind or another. At many companies, from biggies like Southern California Gas to small fry like Data Entry Services, a Baltimore payroll and ledger processor, managers deploy computerized devices and software programs that count the keystrokes of their data entry clerks and telephone operators to gauge productivity. Others take surveillance to Big Brother extremes: They secretly watch the screens of desktop computer operators -- and have even been accused of reading employees' electronic mail surreptitiously. No one knows exactly how many American workers are being monitored. After surveying several hundred public and private offices in the mid-1980s, the congressional Office of Technology Assessment put the number at six million. Last year a study of 186 New York metropolitan area companies by two state university professors found 73 -- roughly 40% -- using electronic surveillance. WHATEVER the total these days, the number and variety of workers falling under electronic surveillance are clearly growing. Waiters, nurses, and hotel maids are beginning to be monitored, often by hand-held computers they carry around themselves. But it's not only relatively low-paid workers engaged in repetitive tasks who are having their moneymaking effectiveness checked this way. Surveillance is expanding to cover highly paid professionals as well -- stockbrokers, loan officers, lawyers, even veterinarians. At the Charles Schwab discount brokerage, experienced stockbrokers who earn as much as $70,000 a year are routinely listened in on through computerized voice- ^ recording systems. The purpose is to improve performance by having supervisors appraise the quality of customer service, as well as to create a permanent record of the transaction.

''The effect of this expansion of computing is to make management more far- reaching in its grasp on the life of the corporation,'' concluded sociologists James Rule of the State University of New York at Stony Brook, and Paul Attewell, a former colleague, who did the survey of companies in the New York area. Says Rule: ''Computers can reveal certain types of information that otherwise simply would not be available to managers. Now they can make better-informed decisions.'' Surveillance -- properly done -- can help people do their jobs better. But as employers' needs for more information about employee performance bump up against workers' desire for privacy, the negative aspects of electronic monitoring and telephone surveillance are getting more attention. Legislation to limit secret monitoring is moving through Congress. Unions point to studies that show the stress electronic monitoring puts on employees (see chart). Some business groups, including the National Association of Manufacturers, are fighting the proposed law. A growing number of class-action lawsuits by employees accuse employers of overstepping the bounds of decency and privacy in the workplace by scrutinizing electronic mail or eavesdropping on telephone calls. Some employers face suits for firing workers supposedly because the bosses didn't like electronic mail messages they had read -- sometimes after assuring employees of privacy. In Carson, California, software specialists Bonita B. Bourke and Rhonda L. Hall are suing Nissan Motor Corp. in U.S.A. for allegedly forcing them to quit after a supervisor had read their electronic mail and objected to their using it for personal correspondence. Nissan calls the charges unfounded. The most extensive case of alleged corporate spying on employees now in the courts pits the Communications Workers of America (CWA) against Northern Telecom Inc., the U.S. subsidiary of the Canadian telecommunications giant. To thwart the union's organizing activities, the CWA says, Northern Telecom riddled a plant in Nashville with telephone bugs and hidden microphones that remained in use for 13 years. The CWA claims that the company tapped not only business phones but also public phones in the employee cafeteria, and recorded private conversations of workers with people outside the company. & The federal judge in the case has in hand tapes of recorded conversations, some produced by a former company security officer. Northern Telecom spokeswoman Linda Henson responds, ''We do not condone, nor have we ever condoned, any kind of illegal or unauthorized use of electronic surveillance equipment or any other sort of improper eavesdropping.'' She says the company does not comment on lawsuits. Despite the horror stories, managers are finding plenty of legitimate ways to use monitoring to improve productivity without alienating or harassing workers. The best adopt some of the following techniques: -- They select and train employees with considerable care. -- They make clear to all employees how and why they will be monitored. -- They use monitoring as an aid to coaching and counseling, not as a disciplinary tool. At the big Avis car-rental reservation center in Tulsa, for instance, the top performers work directly with newer agents who ask for help by sitting next to them and taking turns handling calls. ''You invest your time where you can improve performance,'' says Charles Bell, vice president for reservations at Avis. ''You don't waste it monitoring superstars.'' -- They involve employees in setting up a fair, workable system. A shining example: AT&T is cooperating with the CWA in five pilot projects in the eastern U.S. involving about 1,000 telephone operators. AT&T's idea is to set up ''self-managed'' telephone call centers where employees work in teams. Workers now do the listening in to coach less experienced operators, and much less frequently than supervisors did in the past. -- Finally, the best users emphasize quality rather than quantity. At the Answer Center, GE bases 70% of its operators' grades on the quality of their responses, 15% on such matters as showing up at work on time, and the remaining 15% on how many calls they handle. GE imposes no restrictions on how long an operator -- or a technical expert, who stands by for particularly tough questions -- spends with a caller. Some complex queries have taken as long as an hour and a half; the toughies have included how to clean a dishwasher after using it to thaw frozen fish, how to remove marbles from an icemaker, and how to fix a broken generator on the Alaska pipeline. ''I don't have to worry about numbers to get a good performance review,'' says Diane Book, a ten-year veteran at the center. By contrast, at some telephone and airline companies such as the Baby Bells < and TWA, some operators are restricted to short ''talk times,'' and productivity is measured primarily by the number of calls handled. Quotas are anathema to such experts as Gordon MacPherson of the Incoming Calls Management Institute in Annapolis, Maryland; Laura Sikorski, partner in Sikorski-Tuerpe & Associates of Centerport, New York; and other consultants. They say quotas can lead to a decline in both productivity and quality of response, and impose unnecessary stress. ''I have personally witnessed how my workplace has been turned into an electronic sweatshop by monitoring,'' TWA reservations agent Harriette Ternipsede told a congressional subcommittee hearing on the subject. (TWA says its monitoring doesn't differ from that at other airline reservation centers.) MacPherson and his fellow consultants try to coax call center managers away from indiscriminate monitoring and steer them toward the dictum of W. Edwards Deming that quality generates quantity. It's catching on, MacPherson says: ''We're in for a period of enlightenment.'' ENLIGHTENMENT is overdue in the way some employers apparently monitor their employees' use of desktop computers. A PC may be personal, but it's far from private, especially if it's part of a network. A password keeps out the hackers but not necessarily the boss. The Norton-Lambert Co. of Santa Barbara, California, which makes CloseUp networking software, takes out trade journal ads to urge employers to ''look in on Sue's computer screen . . . In fact, Sue doesn't even know you're there! Hot key again and off you go on your rounds of the company. Viewing one screen after another, helping some, watching others. All from the comfort of your chair.'' Software suppliers such as Networking Dynamics Corp. of Glendale, California, which sells programs called Peek and Spy, boast that dozens of FORTUNE 500 companies use them -- most merely to peek, others to spy. Peek requires an employee's approval on each occasion for a supervisor to see his PC screen; Spy allows access to the screen without the employee's knowledge or approval. Each program can cost anywhere from $800 to $8,000, depending on the size of the computer system. Corporations are no more likely to admit to outright spying on employees than they would be to interrogating them about wife beating or child abuse. Peek users, on the other hand, are somewhat more open. National Semiconductor says it employs Peek in its South Portland, Maine, customer response center to help supervisors troubleshoot remote PC screens. Often the aim is simply to make networking easier: Chevron is installing a Peek program in its Richmond, California, research facility to allow researchers to look at colleagues' screens so they can collaborate more readily. The use of computer surveillance programs is soaring. According to Gartner Group, a Stamford, Connecticut, computer data analysis firm, they will hit $175 million in sales this year and should continue to grow at about 50% a year until at least 1996. One major customer is American Airlines, which is installing remote-screen surveillance software to supplement its listening in on telephone calls at its big reservation center at the Dallas-Fort Worth airport. American says the idea is to enable supervisors to help agents use its global Sabre reservation system more effectively. In addition to hearing what agents are telling customers on the phone, supervisors will be able to see what agents are entering on their PC screens. By contrast, executives at GE's Answer Center elected not to buy programs of that sort. ''It just goes against our philosophy of professionalism and trust,'' says manager Bill Waers. Unrequested assistance risks driving employees up the wall. Several years ago one Midwestern newspaper reporter was interrupted in the middle of writing a story by an unseen editor who suddenly complained right on her screen: ''I don't like your lead.'' The fast-growing local area networks that tie many PCs together, along with the introduction of new telecommunications systems, make monitoring a lot easier for supervisors who are so minded. Two Apple Macintosh models appeared last year equipped with built-in microphones. The goal was to allow Mac users to store a limited number of voice commands that the computer would recognize. But that same feature offers unlimited opportunities for eavesdropping. There's no evidence that it's been done, but with the right software a distant manager could turn on the microphones and listen in on the Mac users' conversations. As the Macintosh example suggests, and as managers and telecommunications consultants never tire of emphasizing, it's not the technology that's evil. How it's used makes all the difference. EVEN CRITICS concede that silent monitoring can be a great aid in teaching new employees how to deal with the public on the telephone. What they object to is its use once training is over. Karen Nussbaum, director of the 9 to 5 National Association of Working Women, says she has never heard a telephone operator or agent say that silent monitoring is helpful to experienced workers. Her group has compiled workers' complaints that such monitoring is ''degrading,'' ''demoralizing,'' and ''hard on the nerves.'' Says Jack Carsten, a venture capitalist who in the mid-1980s ran Intel's 12,000-person components division: ''Management that listens doesn't need any listening devices.'' Legal protection against surveillance for employees in American companies is almost nonexistent. The legislation now before Congress would not ban silent monitoring as a quality-control technique, but it would require employers to notify workers in advance and to alert them with a beep or a computer screen signal when monitoring is in progress. Many managers feel that would leave them without a reliable way to measure the quality of telephone responses. Thomas Flood, a vice president of Pacific Bell, worries that the practice ''may reduce the quality of service currently provided to customers.'' But not quite two years ago US West, the Baby Bell that serves 14 Western states, started informing its operators in advance of individual monitoring. They can choose to be monitored either remotely or by a supervisor sitting next to the operator. Despite fears in the industry that workers would slack off when they knew they were not being monitored, and that service would decline, US West has actually seen a rise in service quality. The company now measures quality primarily by surveying thousands of customers each month. Says Arnold Manseth, US West vice president for employee relations: ''You don't go into this with the assumption that everybody is there just to put in their time and that unless you somehow or other trick or force them to do a good job, they are not going to do it. Our thinking is just the opposite -- we assume that people are going to do a good job. We know our employees are responsible and trustworthy.'' He adds, ''We're probably breaking new ground in this area of service observing. We're really trying to form a partnership with our employees.'' Part of the solution may lie in yet another new kind of technology: voice processing, the hottest trend in telecommunications, which allows the use of an ''automated attendant.'' Combined software-hardware systems that incorporate this technology answer calls automatically and permit callers to route themselves directly by pressing various buttons in response to recorded instructions. A customer, for example, can Touch-Tone his way to, say, the current price of a stock and then, if he wishes, buy or sell the shares. A growing number of banks use the systems. American Airlines offers a special 800 number that lets a traveler check flight schedules with uncomplaining machines before ordering a ticket by talking with a monitored agent. The result, says consultant Laura Sikorski, is reduced telephone costs and payrolls. And less of the friction that comes with spying on the staff.

CHART: NOT AVAILABLE CREDIT: FORTUNE CHART CAPTION: DANGEROUS TO YOUR HEALTH Knowing that somebody may be listening in can make stress-related complaints more common. Some results of a 1990 University of Wisconsin study of 762 telephone operators: