Retail sector counts the cost of employee misunderstanding

The cost was based on the findings of a new IDC white paper commissioned by Congisco - billion: Counting the Cost of Employee Misunderstanding - which revealed the scale and impact of employee misunderstanding for the first time. Employee misunderstanding is defined as actions taken by employees who have misunderstood or misinterpreted (or were misinformed about or lack confidence in their understanding) of company policies, business processes, job function or a combination of the three.

The research shows that whilst organisations 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, retail companies put themselves at risk for compliance, public safety and legal problems.

"An organisation's greatest asset is its' employees", said Mary Clarke, CEO Cognisco. "If an employee misunderstands or misinterprets actions there will be repercussions from security breaches to brand reputation. For example, one retail company told us that employee misunderstanding resulted in them interpreting market research inaccurately and imported goods attracted a higher rate of duty than anticipated. This hampered their ability to resell as they were uncompetitive when compared to local manufacturers."

Approximately two thirds of the total cost of misunderstanding reported by organisations was attributed to loss of business due to unplanned downtime (32 per cent), poor procurement practice (17 per cent) and settlements for industrial tribunals (16 per cent).

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 survey respondents reported that employee misunderstanding had placed their organisation at risk of injuries to employees or the public and reduced customer satisfaction in the last 12 months.

Of those organisations with an assessment programme in place more than 60 per cent reported fewer human errors, reduced employee churn and reduced health and safety breaches.

"This is the first time the cost of employee misunderstanding has been calculated. Large organisations are potentially losing millions of dollars each year to 'employee misunderstanding' yet very few are taking action or are even aware a problem exists," said Lisa Rowan, program director HR and Talent Management services, IDC. "The potential impact and repercussions from this misunderstanding should be addressed by all organisations and at the highest level."

The white paper recognises that a face-to-face approach in an organisation with employees in different locations is often logistically difficult, expensive and liable to errors. But, it suggests that the problem can be overcome by on-line assessments that employees can complete in their own time and which enables directors to assess quickly and cost effectively the location of the source of the problem. Surprisingly, the research revealed that only 6 per cent of the surveyed organisations had such a solution in place.