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Talent Management Perspectives

Published September 2008

Measuring the Cost of Employee Misunderstanding

 

  Mary Clarke

It goes without saying that confident and competent employees are the cornerstones of any successful organization. Thus, employee training and monitoring is of the utmost importance. Yet, on average, one in four employees misunderstands at least one critical aspect of their job.

In June, IDC released research data gathered from 400 companies across the U.S. and the U.K. in the pharmaceutical, petrochemical, financial services and transportation sectors. These industries were chosen for the study because they're particularly high risk in different ways, such as dealing with funds, dangerous substances or transportation hazards.

Most businesses interviewed admitted within the last twelve months alone they had been exposed to either employee or public injuries and loss in sales due to employee misunderstanding. The data also revealed U.S. and UK businesses are losing an estimated $624 per employee every year due to the same issues. That number equates to a staggering $37 billion in annual losses incurred because workers misunderstand one or more crucial aspects of their jobs.  

These losses are generated in a number of ways, such as business downtime, poor procurement, personal injury claims and tribunal settlements. The IDC definition of misunderstanding is to have "understood incorrectly while thinking to have understood correctly," and the calculated costs in this study exclude those incurred due to accidents or blatant disregard for the rules.

Most employees have some uncertainties about their role, but one of the most common approaches to address how they're affected by everyday business pressures such as regulations, compliance and security demands is to institute and adapt training programs. Such programs also help talent managers explore how best to get a clear understanding of their employees' skills, competencies and confidence levels.  

Naturally, people respond best to training when they're aware of the need for it and of the personal benefits they'll reap. A common roadblock, however, is employees don't always know what they need. And if they do, they're not always willing to admit it. Establishing real training needs is critical, and challenges related to scale, consistency and coordination across the enterprise arise when creating appropriate development opportunities.  

Instituting effective employee assessment programs can help combat these training challenges. Thoroughly inspecting employee understanding is important, and assessments provide insight into this understanding by examining individual employees' strengths and weaknesses.

Quality assessments are specifically designed to take a more holistic view of individuals and not focus completely on outcomes. Confidence and competence are assessed, and areas where development is needed are noted, which in turn helps shape the creation of effective, formal training processes. Without this knowledge, training programs may be ineffective and therefore unnecessarily costly.