You don't have to be a savvy entrepreneur to realise that no company in any business sector can hope to be successful if it lacks competent and confident employees. A strong, reliable workforce is the base on which profitable corporations are built, and employee training and monitoring is of the utmost importance to ensure that workers perform to the best of their ability.

Yet, according to recent research by analyst IDC, one in four employees misunderstands at least one critical aspect of their job. This knowledge gap equates to a staggering $37bn (£25bn) in annual losses for UK and US businesses.

This research, summarised in the white paper ‘$37 Billion: Counting the Cost of Employee Misunderstanding', represents the first formal calculation of what simple employee misunderstanding is costing British and American companies. 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", so the calculated costs in this study exclude those incurred due to accidents related to human error or blatant disregard for the rules, neither of which can be effectively measured. Part of IDC's research was designed to explore how employers can get a clear understanding of their employees' skills, competencies and confidence levels, as well as how they're affected by everyday business pressures, such as regulations, compliance and security demands.

IDC's primary research was conducted through a series of interviews with senior HR, finance and operations executives in 400 companies across the UK and US. While the study was focused on the pharmaceutical, petrochemical, financial, and transportation sectors, it ultimately revealed that employee misunderstanding is a pressing issue that affects all industries and could be costing large businesses tens of millions of pounds annually.

Most of the 400 UK and US businesses interviewed admitted that within the last 12 months alone they had been exposed to either employee or public injuries and loss in sales due to employee misunderstanding. Addressing these issues should be a top priority for executives and business owners concerned about the future of their enterprises.

One area in which employee misunderstanding could wreak havoc across business sectors is the IT department. Misunderstanding company processes and procedures could result in the corruption of critical data, the release of confidential information, and myriad other threatening circumstances. For example, one UK bank reported trading losses as a result of IT downtime initially caused by employee misunderstanding.

It is of the utmost importance that IT employees fully comprehend what is required of them, know the procedures in place, and have total confidence in their ability to do the job. It is the job of senior IT directors to ensure all of these, and one way in which they can do this is to introduce an employee assessment and knowledge development programme.

Customised employee assessment programmes provide insight into workers' understanding by examining individuals' strengths and weaknesses. They are specifically designed to take a holistic view of individuals rather than focusing completely on outcomes. Confidence and competence are assessed, and areas where development is needed are noted. Taking these steps to assess employees regularly helps greatly with individual knowledge development and the formation of effective training programmes. Possessing a complete understanding of the employees' needs is critical, and employee assessment programmes can deliver this understanding and assist in the creation of effective formal training processes. Without this knowledge, training programmes can often be costly and misguided.

Confident and competent

In most cases it is the job of the IT department to assist the wider employee base and educate them on the proper use of technology in compliance with set company rules and regulations. Thus, the competence and confidence of IT workers affects not only their own department but also has a direct impact on employees in other departments. It is vital for the health of the company as a whole that IT executives ensure that their department's employees have the ability to not only complete their individual IT tasks, but that they also possess the confidence to teach others.

Imparting knowledge is often far more challenging a feat than using what you already know, and it can carry with it greater risks. IT executives can help mitigate these risks by utilising employee assessments to better understand what each of their employees knows and where their confidence lies. They can also aid in determining who is best prepared to assist and educate the general population of company employees. Confident and competent IT employees reduce general IT risks throughout the corporation by imparting accurate knowledge and assistance to the larger employee population.

Unsurprisingly, IDC's research revealed a large similarity in numbers between survey respondents without employee assessment programmes (73 per cent) and those that said that they felt their HR systems didn't provide a single view of the employee (72 per cent). These results indicate that in companies lacking assessment programmes, a low awareness level of employees' knowledge, understanding and confidence is likely.

IDC's research has revealed that there are clear and measurable benefits to be earned from taking the correct approach to employee assessments. Some of the highest rated results reported by survey respondents include reduced errors (63 per cent), reduced data policy breaches (52 per cent), increased policy compliance (48 per cent) and improved regulatory compliance (29 per cent): all areas that can be directly related to IT issues. Reduced employee churn and increased productivity were also reflected. These results help reduce company losses not only in a financial sense, but also with regard to company reputation. Lost or corrupted data often results in a loss of confidence among customers, which can be difficult to regain. Negative publicity could also result in the decline of future business, an intangible cost that's impossible to accurately measure but must still be considered.

The current cost of employee misunderstanding is overwhelmingly high, and mitigating risk associated with this misunderstanding should be a primary concern for senior IT directors. Regularly assessing employees is crucial, especially in IT departments where knowledge is not only applied in daily tasks but is also consistently shared with other non-IT employees. Having a complete picture of what your IT employees understand, feel confident in, and what needs improvement is critical. It could mean huge financial savings for your company, and in today's volatile economic environment, it could also mean the difference between a successful enterprise and another market failure.

About the author:

Mary Clarke is CEO of Cognisco, a developer of online knowledge assessment and learning solutions