The Threat Within: The True Cost of Employee Error

In my last blog, I cited research showing that enormous gap between what American corporations spend on employee training (well over $70 Billion this year) and the fact that experts who have researched how the brain learns (and forgets) report that it’s not uncommon for employees to forget 90% of what they are taught in training after just one week.

That’s not just a bad ROI ⎯ it’s a bad ROI that just keeps on spending.

Let’s start with the fact that corporations provide training because it’s critical that employees learn the specific skills they need to correctly and safely execute the tasks their jobs require.

The problem is that, despite the enormous money corporations continue to pour into it, the training being provided to employees generally fails to implant the critical information in the employee’s brain that will result in him or her correctly performing the on-the-job tasks necessary to do their job satisfactorily.

The enormous costs related to lack of training and the employee error that results from this failure cut across all industries and have a profoundly negative impact on employees’ careers, morale, and lives ⎯ and most assuredly on the bottom lines of the corporations employing them.

Let me share some of the information I’ve uncovered.

Symantec recently cited research showing that the majority of security breaches are caused by simple employee error ⎯ not by cybercriminals, “hacktivists” and spies. These statistics also show that the “insider threat” leading to data breaches is rising.

The “employee error” cited includes:
• Mishandling information
• Violating industry and government regulations
• Inadvertently dumping data
• Not securing laptops that are then stolen
• Wrongful access

Even more alarming is the fact that these “trusted insiders” are usually unaware that they’re doing anything wrong.

Research cited in the article uncovered this shocking statistic: A whopping 62 percent of employees said it is “acceptable to transfer corporate data outside the company on personal devices and cloud services.” To make matters even worse, the majority never delete the data, leaving it vulnerable to data leaks.

OSHA estimates that employers pay almost $1 billion per week (my emphasis) for direct workers compensation, which includes workers compensation payments, medical expenses, and costs for legal services.

This figure does not include the huge additional costs of training replacement employees, accident investigation and implementation of corrective measures, lost productivity, repairs of damaged equipment and property, and costs associated with lower employee morale and absenteeism.

Private industry employers reported 3.0 million nonfatal workplace injuries and illnesses in 2013 and over 4400 fatal occupational injuries in the same year.

Of course, the enormous problems caused by employee error aren’t unique to the US.

PharmaTech reported findings from a study of 400 UK and US businesses that have more than 5000 employees. It found that:
• 23% of employees did not understand at least one critical aspect of their job. The
financial ramifications were huge: an estimated US$29.9 billion, assuming an exchange
rate of $1.60 to the British pound).
• The pharmaceutical industry to be one of the four industries with the greatest level of
employee misunderstanding, largely because employees are constantly dealing with
substances that can prove lethal if mishandled.
• The greatest cost associated with employee misunderstanding in the pharmaceutical
industry was unscheduled downtime, which had a shattering financial impact on the
companies affected.

Employee error is a serious problem that’s global in scale. It’s extremely costly. It’s highly dangerous, as the figures regarding the UK pharmaceutical industry make clear. And it’s growing.

We need better solutions ⎯ but first, we need to understand more about why employee training is failing.

In my next blog, I’ll discuss a significant and often hidden cause of employee error that is highly resistant to corporate training.


  • David Grebow

    In my company the problem has been obvious for years. If the definition of insanity is doing the same thing over again and expecting a different result then companies have been doing the same crazy thing for years – training people and tossing them into the workplace expecting them to know what they are doing. Great blog. Hopefully someone will realize it and wake up and smell the coffee break. Thanks!

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