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I Spy . . .

Workplace surveillance is coming to small and midsized businesses.

Not sure what your employees are up to during working hours? Big companies are doing everything from installing monitoring software on employee computers to hiring undercover actors to pose as new hires and collect evidence of wrongdoing. But what are smaller companies doing?

Only about 20 percent of employers actively monitor e-mail and Internet usage, while another 20 percent are thinking about it but not actively monitoring, according to Mallary Tytel, president of Healthy Workplaces LLC, a workplace issues consulting firm in Bolton, Connecticut. In fact, 50 percent of employers monitor employees only if a complaint or problem arises. "It depends on resources," notes Tytel. Small to midsize companies are more likely to use technological surveillance (i.e., computer spy programs), as they're more readily available than undercover detective agencies, which can get a bit pricey.

But smaller companies can readily monitor e-mail, Internet, telephone, PDAs and even GPS systems in company cars while an employee works off-site. David Fertell, president of Pearl Software Inc., a manufacturer of employee surveillance software in Exton, Pennsylvania, says the trend has moved away from blocking employee access to inappropriate sites to actually watching where employees spend their time online. "Employees were finding ways to get around filters," he says.

Monitoring can happen either covertly or out in the open, say experts, but the thinking as to which is better is mixed. Some advocate secretly monitoring employees, while others believe communicating openly with employees about monitoring policies fosters a more productive working environment. Says Tytel, "[Monitoring] policies should be part of the employee handbook."

This story appears in the August 2003 issue of Entrepreneur. Subscribe »