The work-supervision to prevent slackers thing is only part of the problem, and pretty small.

If finding out if your employee is productive requires you staring at them all day then you're already a poor manager. An employee can be pounding on a keyboard all day looking productive and producing nothing, but thats the limit of the "butts in seats" method of management oversight. How about create KPIs that you can measure the actual output of an employee. Give them autonomy to get their job done with the resources they need with the time they need in whatever way works best for that employee. Create an environment that is most suited to that employee's ideal productive conditions. Each employee is different. Why are you treating them all the same? For some that maybe an office they commute to everyday, or many others its in their own home where they are comfortable and not being distracted by wandering co-workers.

Creating conditions that the employee likes not only increase productivity, but also employee retention. Employee turnover is very expensive to an organization, and losing top talent even more so. Management needs to check their ego at the door, and do what is best for their employee's needs. That is how you get the best employees, keep them, and get the most productivity out of them. Oh, also pay them more than your competitors will! Its not rocket science.