Michael D. Moberly July 9. 2017 firstname.lastname@example.org ‘A business intangible asset blog where attention span really matters’!
I am reminded of a ‘buy offer’ several years ago when Steve Balmer (Microsoft) expressed interest in purchasing Yahoo! for a reported $43 billion. And, according to multiple respected estimates, perhaps as much as $38 billion of the ($43b) purchase price, had the transaction been executed at the time, would be comprised of Yahoo’s IA’s (intangible assets), primarily in various forms of intellectual, structural, and relationship capital.
The $37b figure should come as no surprise to those even minimally familiar with the irreversible trend (economic fact) that companies are far less reliant on tangible-physical assets and instead, transitioning, at a rapid pace to IA intensity and dependency. The reason lies in the unchallengeable economic fact that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for competitiveness, growth, sustainability, and profitability today lie in – evolve directly from IA’s, particularly intellectual, relationship, structural, and competitive capital.
What I am suggesting is this, should the $38b figure noted above be reasonably correct, which I believe it is, it alone should influence c-suites and management teams to review a 2008 IDC ‘white paper’ study (www.congisco.com/downloads/whitepaper/uk_exec_summary.pdf ) commissioned by Cognisco which self-describes as ‘the world’s largest intelligent employee assessment specialist’. The studies’ findings provide evidence that for UK and US employers considered in the study, are losing an estimated $37 billion annually from their EBITDA, due primarily to actions or errors of omission by employees who, for various reasons misunderstand, have misinterpreted, or, were misinformed about company processes, practices, policies, or their job function.
The report, titled ‘Counting the Cost of Employee Misunderstanding’ revealed the scale of the impact, i.e., $37 billion annually, is attributable to employee misunderstanding, which the report defines 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 study indicates many businesses are generally aware of the costs attributed to (employee) misunderstanding, but, approximately one in three self-report they had taken actions to close the ‘misunderstanding gap’. From this, it’s certainly not a stretch then for company security directors and managers to assume businesses, are quite literally inviting risk through sustained employee misunderstanding.
Particularly noteworthy in the studies’ findings is that approximately two thirds of the ($37b) cost of employee misunderstanding by the 400 reporting companies in the 12 months encompassing the study were attributed to…
• loss of business due to unplanned downtime (32%).
• poor procurement practice (17%).
• costs – settlements incurred from regulatory penalties and tax or
revenue penalties (16%).
• placing a business at risk of injuries to employees and/or the
• loss of sales and reduced customer satisfaction.
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 (also intangible assets) are accounted for.
Mary Clarke, former CEO at Cognisco, notes rather obviously, if an employee misunderstands or misinterprets actions there will be repercussions from loss of business to impaired brand image. But what is often not measured, is the employee’s confidence to take the appropriate actions which can also have a significant impact.”