Careers & People
downtime. More than one third of pharma
Table 1: Cost of misunderstanding per employee
companies reported loss of business as a
result of downtime caused by employee
Banking $742
89% of pharmaceutical companies reported exposure to
misunderstanding. This has the potential to
the risk of reduced productivity
cripple a business, particularly in a diff_i cult
Petrochemicals $680
81% of banks reported exposure to impaired brand image
market. A prime example was one pharma
and reputation
Pharmaceuticals $600
company that reported a misunderstanding
36% of transport organisations reported exposure to the
which resulted in the Enterprise Resource
Transport $349
risk of fatalities within the workforce or public
52% of petrochemical organisations reported a risk to
Planning (ERP) system alert ticket being
Other $610 health and safety compliance
overridden. That company lost four days’
Source: IDC
production time on a line that outputs over
£200,000 per day.
Nearly one in f_i ve (18%) UK and
levels, but its implications for the business can their jobs – is increasingly being recognised
US pharma companies said employee
be more extreme if it occurs within senior as a business-critical issue, rather than
misunderstanding also affected their
management. It should, therefore, be a vital purely an area for HR directors to consider.
procurement practice. The impact of
part of any organisation’s operational priorities Its importance was highlighted in recently
procurement misunderstanding can be
to quantify all risks including the impact of commissioned research by independent
equally as devastating as it has the potential
employee misunderstanding. analysts IDC.
to affect a vast range of vital operations.
Work over the past 10 years with hundreds The white paper, ‘$37 billion: Counting
For instance, a procurement error at one
of companies, including 12 of the world’s top the Cost of Employee Misunderstanding’,
UK pharma company resulted in signif_i cant
100 brands, has produced a wealth of data revealed for the f_i rst time the scale and
production downtime when a dedicated
based on more than 1.2 million employees. impact on UK and US businesses of
production facility could not function without
The research will shock many – on average, employee misunderstanding, specif_i cally
a chemical catalyst that had not been
23% of employees do not understand at least among the banking, petrochemical,
ordered.
one crucial aspect of their job. This has massive pharmaceutical and transportation sectors.
Other manifestations of employee
implications for any organisation regardless of Shockingly, IDC found that the pharma
misunderstanding cited by the survey
size or industry sector. industry had one of the highest potential
respondents included industrial tribunal
Employers have a responsibility to their costs of employee misunderstanding. When
settlements (17%) and personal injury (11%).
staff and customers to ensure that each extrapolated to the whole sector, research
If any of those personal injuries resulted
and every member of their workforce found that UK pharma companies could
in death, then the senior management would
understands the requirements of their job, lose £23.9 million ($46.8 million) each year.
be liable under the Corporate Manslaughter
and that they are assessed regularly to identify (The average cost of misunderstanding
Act introduced in April 2008. Under the Act,
underperformance and skills gaps. If nearly a per employee in the pharma sector was
courts now look at management systems
quarter of staff are underperforming in their £307/$600. The ABPI estimates that 73,000
and practices across the organisation and
job, what impact is that having on company people are employed directly by the sector.)
prof_i ts and business risk? The biggest impact of employee
The opposite of misunderstanding – misunderstanding for pharma companies
Box 1: Top tips to address
employee understanding and competence in surveyed by IDC was unplanned
employee misunderstanding
1. Accept that it is the senior management team’s
responsibility – do not presume it is the sole
Figure 1: Breakdown of costs resulting directly from misunderstanding
domain of human resources;
Thinking of your company’s total exposure to unforeseeable risks and eff_i ciency shortfalls,
2. Look beyond training as the solution – some
what proportion would you say was due to employee misunderstanding?
staff are good at learning by repetition but
cannot put the lessons learnt from training into
practice. Simply relying on the learning and
Tax/revenue penalties 3%
development team will not identify or address
misunderstanding;
3. Regularly assess employees’ understanding of
Ineff_icient f_inancial practice - eg. treasury or tax 5%
their jobs – this should cover each employee’s
level of knowledge, understanding and
confidence in the areas important to their
Regulatory penalties 6%
organisation’s overall operational performance;
4. Evaluate confidence as well as competence –
Loss of business due to disaster 10% high confidence when employees are right is
good, but confidence combined with
misconceptions can put an organisation at risk;
Personal injury claims settlements 12%
5. Assess every employee – unintentional human
error occurs at every level from the shop floor to
Industrial tribunal settlements 16%
the boardroom;
6. Look to automate assessments as a cost-
effective solution providing greater objective
Poor procurement practice 17%
analytics as opposed to the subjective measures
seen in many performance reviews; and
Loss of business due to downtime 32%
7. Remove blame – employee assessment is not
about pointing the finger, it is effective risk
management.
Source: IDC
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