1.6 – Costs of Miscommunication
The costs of miscommunication at the workplace can be destructive for a business. Productivity, trust, innovation, and employee turnover may all suffer due to various communication barriers. As a result, businesses may lose millions in profit. Luckily, certain strategies can help cut these losses.
George Bernard Shaw once said: “The problem with communication is the illusion that it has taken place”. And, he was right. We assume we have communicated want we wanted or understood what others were trying to communicate to us. However, various communication barriers often stand in the way of our effective communication at the workplace. They bring confusion, misunderstandings, misinterpretations, and other forms of comprehension issues. As a result, businesses lose a lot of money. The only solution is to learn how to communicate effectively and bridge communication barriers. In this article, we’ll dissect the topic of miscommunication costs that may befall a business — and highlight ways to cut these costs.
What is the cost of miscommunication?
Miscommunication affects both smaller and larger businesses.
Debra Hamilton addressed the effects of miscommunication on smaller businesses.1 Her survey that covered companies with 100 employees or less showed each loses $420,000 per year on poor communication.
David Grossman addressed the effects of miscommunication on larger businesses.2 His survey that covered 400 companies with 100,000 employees found that each loses $62.4 million per year due to inadequate communication.
Holmes, the voice of the global PR industry, showed that the total estimated cost of miscommunication stands at $37 billion.3
What causes miscommunication?
At the workplace, various communication barriers emerge as a reason for poor communication:
| PHYSICAL BARRIERS |
Physical communication barriers represent the external elements that obstruct effective workplace communication.Example: Different time zones can make collaboration a challenge for remote teams. |
| PERCEPTUAL BARRIERS |
Perceptual communication barriers represent the internal blocks that influence how people interpret events and topics.Example: Misinterpretations of someone’s body language. |
| EMOTIONAL BARRIERS |
Emotional communication barriers represent the emotions that obstruct effective communication.Example: The feeling of anger that makes people difficult to communicate with. |
| GENDER BARRIERS |
Gender communication barriers involve stereotypes about how different genders talk and behave. These stereotypes affect communication patterns.Example: Basing communication with women on the belief that “Women are more emotional”. |
| CULTURAL BARRIERS |
Cultural communication barriers represent various culture-based obstacles that arise in diverse teams.Example: Different mother tongues. |
| LANGUAGE BARRIERS |
Language-communication barriers are language-based challenges that arise between people who have the same mother tongue.Example: Jargon words that defy universal comprehension. |
| INTERPERSONAL BARRIERS |
Interpersonal communication barriers involve distancing oneself from situations that require communication.Example: Having no desire to participate in certain conversations. |
How do companies lose money due to miscommunication?
The money loss that happens due to communication barriers happens in several different, but often interconnected ways.
Lower Productivity
In the workplace, productivity is a complex concept that can fail for several reasons. And, miscommunication is one of them. When individuals fail to express their thoughts and opinions clearly, a lot of time can be wasted on seeking clarity. This wasted time may include re-reading emails and instant messages. It may include in-person requests for clarification. It may include all the time you spend frustrated over the need to seek clarity in the first place.
When you need to invest extra effort into bridging a communication gap, you waste time and energy you could be focusing on more actionable tasks — such as your share of the work on a profitable project. As a result, you may breach deadlines. Research shows that 28% of employees blame poor communication for missing their deadlines.4 You may also reduce the overall quality of your work. Such faults in your professionalism will reflect negatively on an organization’s credibility. This is likely to decrease your chances of landing other profitable projects and clients in the future.
Lower Trust
The money loss may also start with lower trust, which leads to a lack of innovation. When individuals fail to convey the intent of their messages properly, trust between teammates takes a hit. Misunderstandings lead to misinterpretations. Misinterpretations lead to confusion, frustrations, and even hurt feelings. All this can lead to reluctance to collaborate with certain teammates. And, a lack of collaboration may lead to a decrease in team innovation. After all, when teammates don’t trust each other, they don’t feel safe sharing their ideas. This leads to a lot of profitable ideas not getting realized, or even discussed.
Higher Employee Turnover
People who feel frustrated over wasted time, lack of trust, and scarce potential to discuss great ideas are more likely to feel dissatisfied at their workplaces. And, dissatisfied employees are more likely to leave their jobs. The effect of this increased turnover does not show only in the potential money companies lose when hard-working employees leave. It also translates to the actual money companies lose while trying to replace said employees. A study by Employee Benefits News shows that losing an employee costs 33% of the employee’s annual salary.5
Let’s put that percentage into dollars, based on average salary data in the United States:6
For every employee who makes an average of $66,665 per year, that’s a potential loss of nearly $22,000. Numbers show that 52% of people are planning to leave their jobs.7 For companies that employ 100 employees, that’s a potential loss of $1.14 million — which can be avoided via better communication practices.
An example of a company that lost money because of miscommunication
In 2016 and 2017, the company Yahoo came forward with a series of confessions.8 Namely, they had data breaches that exposed user accounts to hackers. They first claimed that 500 million user accounts had been compromised. Later on, they confessed to having one billion user accounts compromised. In the end, they admitted that hackers have accessed 3 billion accounts. Understandably, people were perplexed. This was not just because hackers had access to user accounts. But, also because Yahoo failed to communicate the problems to users — until a couple of years after the incidents. Because of this lack of willingness to communicate problems, Yahoo suffered damage:
- Its value decreased. Yahoo was in the process of selling a part of its company to Verizon and lost $350 million in the asking price due to the incidents.9
- Its reputation took a plunge. Some users likely migrated to other email providers that offer better risk management and communication with users.
- Employees lost trust in the company. Some Yahoo employees likely questioned the integrity of their company and the values it represents.
The communication barrier Yahoo encountered was interpersonal in nature — and it really did cost millions of dollars.
How to cut the costs of miscommunication?
To start cutting miscommunication costs, you can implement the following 3 strategies.
Organize Communication Training
Establishing effective communication in a workplace starts with proper training. Managers can organize dedicated training sessions and provide additional resources that explain how people can better communicate. Let’s look at some of the main points such training should cover.
First, employees must understand how to effectively communicate their thoughts, opinions, and ideas. For this purpose, they need to get acquainted with the 7 Cs of effective communication:
- CLARITY. To be clear, converse indirect, short sentences;
- COHERENCE. To be coherent, present thoughts in a logical order;
- CONFIDENCE. To be confident, be assertive;
- CORRECTNESS. To be correct, grammar-check and fact-check everything;
- CONCISENESS. To be concise, stick to the topic at hand;
- CONCRETENESS. To be concrete, provide the appropriate amount of details;
- COURTESY. To be courteous, polite, and considerate.
Second, people need to understand how to become engaged listeners. After all, effective listening is likely to minimize the time people waste seeking clarity subsequently. For this purpose, employees need to get acquainted with the rules of active listening:
- Be patient. Refrain from interrupting the speaker mid-sentence;
- Be open. Enter dialogues with the intention of learning something new;
- Provide nonverbal feedback. Smile and nod to signal interest and encourage the speaker to continue;
- Reflect on what you’ve heard. Ask the right questions at the right time, to dispel any confusion.
Other points training can cover include exercises that highlight the importance of:
- Transparency:
- Empathy;
- Accountability;
- Responsiveness.
These communication skills will help improve comprehension, minimize misunderstandings, retain company credibility, and save valuable time and money in the process.
Centralize Communication
Knowing the details about project deadlines, task assignees, available resources, and team goals is crucial for business success. However, what happens if only half of the employees know this information? Well, the frequency of misunderstandings, confusion, and the wasted time and money they bring soars.
The key is to centralize communication and provide access to vital business-related information to all employees. This is easy to accomplish if you have the right tools.
When it comes to everyday communication concerning workflows and requests, you can use a team communication app. One such example is Pumble,10 which is a free Slack alternative, great for those who want to keep business costs down. Such apps let you create topic-based channels where you can add all teammates relevant to a topic and hold discussions, make arrangements, or ask/answer questions. This way, everyone of importance will always be in the loop about everything they need to know on a daily basis.
To communicate project details, you can use a project management tool with Kanban functionalities, such as Trello.11 Such tools let you parse projects into tasks, assign tasks, and then track their progress. This way, everyone will have insight into who is working on what, and when — which will minimize the chances that two people will waste time performing the same task.
When it comes to static information such as office rules and procedures you can use a wiki software, such as Confluence by Atlassian.12 Such software lets you create, view, and edit interlinked pages detailing everything employees need to know about office policies: business hours, available resources, vacation policies, or anything similar you want to add.
A clear communication system will help everyone stay informed at any time. It will help people waste less time providing or looking for information, and help them focus on priority tasks that bring a profit.
Have strategies for different communication barriers
Both managers and employees will need to address the individual communication barriers that plague their work environment.
| PHYSICAL BARRIERS |
With physical communication barriers, make some rearrangements and think in advance.Example: To bridge the gap between remote teammates working in different time zones, invest extra effort into scheduling. If there is a time slot that falls between 9-to-5 for all teammates, reserve it for collaborative tasks. |
| PERCEPTUAL BARRIERS |
With perceptual communication barriers, manage your assumptions.Example: To avoid misinterpreting someone’s body language, pay attention to what they say first. Use body language only as a guideline. |
| EMOTIONAL BARRIERS |
With emotional communication barriers, address the problematic emotions.Example: If anger is your problem, try removing yourself from situations that cause you to react angrily. Return to them only once you’ve calmed yourself and assessed matters rationally. |
| GENDER BARRIERS |
With gender communication barriers, assess your stereotypes.Example: Don’t assume a female coworker will be more emotional about negative feedback. Instead, get to know her as an individual. This will help you better anticipate her reaction. |
| CULTURAL BARRIERS |
With cultural communication barriers, find common ground with teammates.Example: If your teammates have different mother tongues, identify the language you all know. Then, make it the official language for team communication. |
| LANGUAGE BARRIERS |
With language communication barriers, standardize the team’s language of choice.Example: In team-level communication, discourage the use of profession-based jargon expressions. Instead, use descriptive phrases every teammate can understand. |
| INTERPERSONAL BARRIERS |
With interpersonal communication barriers, make the effort to participate in conversations.Example: Instead of shying away from conversations you don’t like, engage in them. As a result of repeated participation, you’ll likely find a way to iron out whatever it is that makes you uncomfortable. Plus, you’ll want to communicate uncomfortable matters sooner, rather than later — to avoid Yahoo’s problems. |
KEY TAKEAWAYS
- Poor communication may manifest in various ways. But, it always makes a business lose money, in one way, or another.
- To cut miscommunication costs, organizations need to improve the effectiveness of communication. To do so, organize communication training across the organization. Centralize communication, and help people get the right information, at the right time. Personalize your organization’s approach to communication barriers, and address each challenge separately.
- Effective communication eases everyday work processes and increases the chances of retaining the most valuable employees.
The process of understanding and sharing meaning.