Staff errors costing pharma firms millions, report warns

UK pharmaceutical companies are paying a hefty price for errors made by their staff, new research has unveiled.

Losses are estimated at $46.8m (£23.9m, Euro 29.8m) a year [1], with 85% of pharmaceutical companies reporting exposure to impaired reputation in the last 12 months due to employee misunderstanding.

The findings, outlined in the IDC white paper "$37 billion: Counting the Cost of Employee Misunderstanding" " also cite unplanned downtime as the biggest impact of employee misunderstanding for pharmaceutical companies, with 37% reporting loss of business as a result.

The paper, commissioned by intelligent employee assessment specialist Cognisco, reveals for the first time the scale and impact on businesses of employee misunderstanding, specifically among the pharmaceuticals, banking, petrochemical, and transportation sectors.

According to the report, both UK and US employees are costing businesses $37bn (£18.7bn, €23.53bn)[2] every year because of a lack of understanding.

One UK pharmaceutical company surveyed for the white paper learned an expensive lesson when "a procurement error resulted in significant production downtime. A dedicated production facility could not function without a chemical catalyst. This oversight left us with no option but to shut down production."

Respondents from the sector also said their company was affected by poor procurement practice (18%); industrial tribunal settlements (17%) and personal injury (11%).

Cognisco ceo Mary Clarke said: "The UK pharmaceutical sector is under increased pressure to remain competitive, from the threat of developing countries entering the UK market through to the NHS driving cost efficiencies and pushing down prices. The news that their bottom line is under further attack will not be welcome. However, the board of pharmaceutical companies can take action to reduce the cost of employee misunderstanding."

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.

Nine out of ten pharmaceutical companies said employee misunderstanding increased exposure to injuries to their personnel or the public, and loss of sales (96% over the past 12 months. Plus, around 89% said they had been exposed to reduced productivity and 85% cited impaired reputation.

"An organisation's greatest asset is its employees but if any one of them misunderstands or misinterprets their role, this significant asset can be easily eroded." said Clarke. "This can have serious repercussions in the boardroom, ranging from loss of business to impaired reputation, as demonstrated by the response from the pharmaceutical companies surveyed for the white paper."

Lisa Rowan, program director HR and Talent Management services, IDC, said: "This is the first time the cost of employee misunderstanding has been calculated. Large enterprises are potentially losing millions of dollars each year to "employee misunderstanding" yet very few organisations are taking action or are even aware a problem exists.

The potential impact and repercussions from this misunderstanding should be addressed by all organisations and at the highest level - the ceo."

IDC conducted a series of telephone interviews with senior HR, finance and operations staff at 400 companies with more than 5000 employees across the UK and US between February and March 2008.

Reference

References
[1] The average cost of misunderstanding per employee in the pharmaceutical sector was $600/£307. The Association of the British Pharmaceutical Industry estimates that 73,000 people are employed directly by the sector
[2] IDC research into ¢ “The cost of employee misunderstanding¢ among 400