NEW YORK ( MainStreet) -- Companies are on the lookout for employees who give products or services away for free, a practice known as "sweethearting."

If you're giving your friends or families a discount or a freebie without your employer knowing about it, your job could be at risk -- and that could be the least of your problems.
That free beer from your bartender friend is costing companies big time, and they want to stop the practice.

In a white paper titled Service Sweethearting: Its Antecedents and Customer Consequences, the Journal of Markets gives a more detailed definition of what constitutes the practice and how it affects commerce.

"Employee theft and fraud cost U.S. firms up to $600 billion annually. Within the retailing sector, approximately two-thirds of these losses and 35% of annual profit losses are attributed to an act of employee deviance in which frontline employees give unauthorized free or discounted goods or services to a friend or acquaintance," the paper reads. "This behavior, which we term service sweethearting, is common in hospitality industries where staff members may provide food and beverages that never appear on the bill. However, potential exists for this behavior in virtually any industry where employees interact with customers at the point of sale."

The report, penned by three Florida State University academics, tries to pin down the costs of sweethearting to employers and employees -- and reveals some alarming results.

Some immediate takeaways from the study:
  • Service sweethearting is a "clandestine practice that costs employers billions of dollars in lost revenue."
  • Certain traits of employees engaging in the practice are now available to employers, allowing them to "weed" potential employees out of the "candidate pool."
  • Customer loyalty, ironically, is tied to service sweethearting. Businesses that fire employee "sweethearts" risk losing otherwise good customers.

"Sweethearting may seem like a relatively innocuous behavior on the surface, but its financial implications are very serious," explains Michael Brady, a business professor at FSU.

Brady adds that about 40% of all employee theft cases are tied directly to sweethearting, so companies have a huge financial interest in curbing the practice.

How can companies do that? Study researchers advise looking at an employee's (or a potential employee's) need for social approval, a big indicator that someone is open to service sweethearting, the FSU report says.

Also, employees who demonstrate a big appetite for risk may be candidates for the cash-draining practice, as do workers with "weak ethical" standards. You don't want to paint too broad a brush, but based on the FSU research, a job candidate who says his favorite hobby is visiting Las Vegas may be more open to service sweethearting and shouldn't be hired.

Ironically, removing a service sweetheart-prone employee may hurt business in its own way. Customers love a deal and a discount, and if they're getting one from a rogue employee and that employee is removed, the customer may go away, too, the FSU academics report.

The report, which surveyed 800 employees and customers in (primarily) restaurants, hotels, car washes and cable installation and repair companies, is a real eye-opener for retail service providers.

If sweetheart deals are going on under their noses (and they likely are), those retailers may have a tough time removing those rogue employees while keeping good customers at the same time.

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