New research suggests that senior executive performance would benefit from the same sort of monitoring increasingly applied to blue-collar workers
Amazon has been experimenting with putting Artificial Intelligence (AI) enabled video cameras inside of its delivery vehicles to watch the drivers and provide them with feedback on their driving. In fulfillment centers, employees’ activities are closely monitored. They’re only allowed a certain number of bathroom breaks (so workers sometimes resort to peeing into a bottle). Further, Amazon has patented a wrist device to more closely monitor fulfillment center workers, and the system uses AI to provide those workers with helpful haptic feedback — to make them more productive. This trend is beginning to extend to white collar jobs, where senior management increasingly monitors usage of employee computer systems (e.g., to verify when they log on, and what they do during the day).
Traditionally, senior executives (particularly, the C-suite of CEO, CFO, etc.) are not monitored this way. They typically receive compensation primarily based on the company’s performance (relative to targets set by the company’s board), rather than on any observed number of hours the senior executives worked.
However, a fascinating new research paper Uncovering the Hidden Effort Problem (by Professors Ben-Rephael, Carlin, Da, and Israelsen) suggests that the C-suite might benefit from the same sort of monitoring that is applied to more junior staff. The authors received access to Bloomberg account usage data for senior executives (i.e., the C-suite) of publicly traded firms. In very simple terms, the assumption underlying their analysis is that executive usage of Bloomberg accounts is correlated with work. Less usage implies less intense work, more usage implies more intense work. The authors then used SEC filings to assemble a database of senior executive compensation and performance targets for the companies in their sample. The authors used machine learning to analyze the senior executives’ Bloomberg account usage data (literally, on a minute-by-minute basis) to study how the work effort, of top executives in public corporations, impacted their firms’ value.
The authors found that, when executives paid increased attention to their firms and showed higher work intensity, it was associated with positive earnings surprises and abnormal positive stock returns. They also found that when weather conditions made it attractive to engage in outside activities (e.g., golf, sailing, etc.), CEO and CFO efforts decreased (the researchers were able to match location data with weather data). The authors note that: “For a CEO and CFO, a one-standard-deviation increase in good weather is associated with about 20 and 18 fewer hours in the office per quarter, respectively.” They also found that senior executives’ efforts decreased when corporate outcomes were likely beyond the senior executives’ control. For example, if the company had a disastrous first half (such that no matter what the CEO did, the company was unlikely to reach its annual targets), the CEO was likely to reduce effort in the second half — after all, why work hard if it won’t impact compensation.
Given what we know about human nature, common sense, and this new research — all point to the same hypothesis: Corporate profitability could be increased by improved monitoring of the senior executive team. Creating the software platform and hardware to properly monitor senior executives could be a fantastic new business opportunity. It could be achieved by monitoring executives’ communications and calendars, their location with GPS, as well as audio and visual recording of their activities, together with advanced AI to provide feedback to them in real time.
So, imagine on some sunny summer Friday, a CEO (after reminding everyone else to work hard), cancels his afternoon meetings and has his limo drive him to his favorite golf course. The system in real time could easily monitor this, and an AI system could send some helpful feedback to the CEO such as — “get back to the office or you will be docked part of your pay!” The system could also be used to avoid corporate embarrassment. For example, with this sort of monitoring, when the CEO asks out the 22 year old summer intern for dinner, it could text the CEO a reminder of the company’s policy on sexual harassment. Or just as importantly, senior executives who know they’re being monitored are less likely to engage in inappropriate behavior.
Time is money after all, and for that reason, Amazon measures fulfillment center employees’ bathroom breaks. Given that the C-suite’s time is far more valuable, shouldn’t their breaks also be monitored? With the monitoring system described above, it would be easy for AI to provide senior executives with helpful feedback such as — “I notice you are going to the bathroom a lot — maybe you have a problem we should discuss?” If the C-suite objects to the restroom time limitation, just give them the same sort of plastic bottles fulfillment center workers and delivery drivers use.
This could be a great opportunity for an independent tech entrepreneur to develop a product line around AI monitoring of senior executives, and market it to activist investors. Or, perhaps Amazon’s founder Jeff Bezos could have Amazon jump start this trend by monitoring its senior team and new CEO Andy Jassy — in a manner analogous to the way Amazon monitors its drivers and fulfillment center workers. Amazon prides itself on being data driven, and the available data suggests this approach could improve profitability — so why not give it a try? After all, how could the same Amazon senior executives who pioneered AI monitoring of low wage workers object to similar technology being applied to themselves? After Amazon perfects the software and technology on their senior team, they could sell the system to other companies.
Of course, some CEOs might balk at being subjected to what’s already being done to the rest of us. Senior executives with the most incentive to object — are the ones most likely to have something to hide. So maybe it wouldn’t be a loss if they resign. And, anyway, since the average CEO of an S&P 500 company makes around $15.5 million/year — anyone who resigns can be replaced — no one is indispensable. Alternatively, start the initiative by monitoring all the senior team, except the CEO. Some CEOs could likely be persuaded that this would be a good way to monitor their own teams.
Finally, if you’re a CEO and think this is appalling, the best way to protect yourself is by advocating for laws and policies that protect your workers’ privacy. Because (jokes aside), whatever monitoring is applied to them can, and will, be applied to you.
Steven Strauss, Ph.D. is a Lecturer and John L. Weinberg/Goldman Sachs & Co. Visiting Professor at Princeton University.
A version of this story originally appeared on my blog at Medium and is cross posted here with my permission