There is this project management concept called 'The Mythical Man/Hour' which is a huge freaking eyeopener if you actually make the effort to internalise it. As a former project manager I found it quite scary initially, but it has served me pretty well in the long run. At the core of the concept is the paradigm shift away from counting hours and towards tracking productivity.

Project Managers have a tendency to believe that if a task is logged at 30% complete and has a duration of 10 weeks then it could be brought in within 3.5 weeks if only the amount of staff working on it could be doubled. Following this logic to the point of absurdity, a AAA shooter that took 100 people 2 years to complete could be brought in within a week if only the company would assign 10,400 people to the project.

In reality, most creative tasks rely on a period of iteration and a period of inspiration. The iteration can be figured out based on extrapolation, but the inspiration just happens when it happens. When it comes to finding that inspiration sitting at your desk is no more productive than having a shower, a nap, watching a movie or taking a smoke break. If only we could convince management that people are basically honest and would rather do well at their job than badly at it, we could probably get rid of a lot of bullshit about getting in on time, leaving on time and the number of times we go for a pee, browse imgur or take a smoke break. Unfortunately a lot of people aren't fundamentally honest, so it kinda breaks down at that point.

STILL. The point is that it's best to track your employees productivity and not their attendance. It is simplicity itself to take micro-breaks whilst sat at your desk. Everybody does it. Anyone who thinks that their workers are productive seven to ten hours each workday is basically fooling themselves and nobody else. So, if your coworker smokes but meets all his targets, worry about hitting all yours rather than tracking his smoke breaks.