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Derek Bishop

Director

Risking the organisation

Date added: 14th May 2014
Category: Employee Engagement

According to the Chartered Institute of Purchasing & Supply (CIPS), supply chain risk reached its highest level in 2013.  The CIPS Risk Index was developed to provide businesses with a method of tracking supply chain risk in the UK and around the world.  It will be updated on a quarterly basis.

According to CIPS, although the risk to supply chains has stabilised in the first quarter of 2014, thanks to strong growth within the UK, USA and Germany; those businesses which trade in the wider world are still vulnerable to a variety of factors including the impact of volatility within Eastern Europe and the developing world.  Commenting on the index, CIPS Group Chief Executive, David Noble, said: “Supply chains have a critical role to play in both operational profitability and economic stability… Global supply chains have scarcely been at greater risk than today. Business leaders must sit up and take notice.”

For businesses as a whole, the risks of supply chain failure are just one element of an encompassing risk management strategy.  Depending on the nature of the individual business the strategy might include cyber risk, infrastructure risk, market forces risk, operational risk and so on.  But there is one risk which tends to fall outside of many risk management spheres and yet is an ever-present danger to organisations.  That risk relates to disengaged employees.

Potentially more damaging than any other risk, when employee engagement fails, the potential for business failure soars.  Think we are wrong?  Let’s look at a few examples.

  • Employee costs.  When employees become disengaged their productivity falls.  So much so that a survey by the contact Centre Association revealed that every disengaged employee costs the organisation the equivalent of 46% of their salary in lost production.  Add in the fact that disengaged employees are more likely to leave (at an average replacement cost of £30,614) and disengaged employees could easily be the difference between profit and failure.
  • Production costs.  In addition to extra sick leave, slack working and so on, disengaged employees also care far less about what they do on a day to day basis.  Ordering incorrect supplies, increased wastage, production faults, damage to machinery:  all this an more can lead to falling production and faulty goods.
  • Reputational costs. When the product starts to fail, so does the reputation.  Customer complaints mount up, social media chat is increasingly negative and the chance of winning new customers flies away.  Downward spirals are incredibly hard to turn around and with every fresh customer complaint comes a renewed lack of enthusiasm on the part of employees.
  • Loss of investment.  What the business hasn’t lost in soaring employee costs, falling production and a haemorrhaging of customers it will soon lose as investment dries up.  Banks will be more reluctant to lend, suppliers will demand faster payment times and the value of shares will nosedive.

All this and more, simply because inadequate attention was paid to engaging employees in the aims and values of the organisation.  Quite simply, you can have the strongest business strategy in the world but if employees are not aligned then the strategy is mere words on a page.  Culture Consultancy, the U.K.’s leading practitioners in business culture, have seen only too often the risks and failures which follow on from inadequate attention being paid to engagement.  Whilst acknowledging that there are some risks, such as an Icelandic Volcano blowing up, over which organisations have no control, the team strongly believes that many of the other risks can be mitigated once adequate attention is paid to engagement.

Supplier – engaged employees work closely with suppliers to strengthen the relationship

Client – engaged employees go out of their way to provide outstanding levels of customer service

Investment – engaged employees create such positivity about the organisation that investors flock to become involved

If you think your risk planning is complete, take a look again.  If your number one risk mitigation tactic is not creating the conditions for employees to be fully engaged in the beliefs and behaviours of the organisation – you are in for a fall.

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