What Employees Don't Know Can Hurt You June 23, 2008 Edited by Jeremy Cohen
As if businesses weren't having a tough enough time of it these days, new research has revealed employees in the U.S. and U.K. cost their companies $37 billion every year…because they don't fully understand their jobs.
The new study by Cognisco, an intelligent employee assessment firm, demonstrates the scale and impact of employee misunderstanding on businesses. The research shows that while organizations are often aware of the costs of misunderstanding, only one in three claim to have taken any action to close the gap. By ignoring the issue, they put themselves at risk for compliance, public safety and legal problems.
Approximately two-thirds of the total cost of misunderstanding reported by organizations was attributed to loss of business due to unplanned downtime (32%), poor procurement practice (17%) and settlements for industrial tribunals (16%). Other costs incurred include regulatory penalties and tax or revenue penalties.
The findings also highlighted that the real cost of employee misunderstanding may be even higher when costs such as impact on brand, reputation and customer satisfaction are taken into account. All 400 companies surveyed reported that employee misunderstanding had placed their company at risk of injuries to employees or the public. A whopping 99% cited risk from loss of sales and reduced customer satisfaction in the last 12 months.
Other key findings from the research:
• Businesses with 100,000 employees are each losing approximately $62 million per year, averaging $624 per employee.
• The banking industry has the highest cost of misunderstanding due to the high risk associated with handling funds. The transport industry reports the lowest cost.
• 81% of banks reported exposure to impaired brand image and reputation in the last 12 months.
• 36% of transport organizations reported exposure to the risk of fatalities within the workforce or public in the last 12 months
• 52% of petrochemical organizations reported a risk to health and safety compliance in the last 12 months.
• 89% of pharmaceutical companies reported exposure to the risk of reduced productivity in the last 12 months.
"An organization's greatest asset is its employees," says Mary Clarke, CEO of Cognisco. "Obviously, if an employee misunderstands or misinterprets actions there will be repercussions from loss of business to impaired brand image. But what is often not measured is the employee's confidence to take the appropriate actions, which can also have a significant impact." Of those organizations with an assessment program in place, more than 60% reported fewer human errors, reduced employee churn and reduced health and safety breaches.
The paper acknowledges a face-to-face approach in an organization with employees in different locations is often logistically difficult, expensive and liable to errors. But it suggests that the problem can be overcome by online assessments that employees can complete in their own time, and which enable directors to assess quickly and cost effectively the source of the problem. Surprisingly, the research revealed that only 6% of the surveyed organizations had such a solution in place.
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