The Biggest Hidden Cost In Business

September 28, 2018


People in business and industry are often driven by returns, revenues and profits.


Management discussions in corporations revolve around costs, performance and returns.


So much business and industry literature emphasizes quantifiable metrics, to assess the growth and progress through performance-related figures.


Even at a Government level, considerable consideration is given to monitoring and management of research-backed facts and figures.


Amidst all of this, most entrepreneurs, business owners, decision-makers, leaders, policy-makers and stakeholders fail to identify the biggest hidden cost that affects individuals, departments and organizations.


It is not because the hidden cost is not quantifiable. It is because it’s a lot easier to measure straight-forward numbers in business, which produce noticeable short-term outcomes.


The biggest hidden cost that continues to affect employees, employers, industries and government, that practically no one is talking about, is ‘The Hidden Cost Of Lack Of Trust’.


Most people consider themselves to be honest. Majority of people would shudder at the thought of stealing from their neighbours , colleagues or employers.


However, it’s interesting that most of us are very good at making twisted rationalizations about engaging in purely self-interested transactions, when it comes to certain business-related scenarios.


Notable and common examples are:


Most people in business would not feel guilty about delaying payments to suppliers. It is common practice with small businesses to hold payments for as long as possible and wait for reminders before a payment is finalised. Most small business owners would consider this practice normal and would certainly not consider themselves to be acting out of integrity in these types of matters.


Another example is that most insurance claimants feel entitled to big payouts for the premiums they pay, even if they don’t meet the eligibility criteria for a claim. There is a general perception that insurance companies have a lot of money, so to fleece or dupe them is not entirely dishonourable.


A third example is that many employees who do not trust their employers and feel their employers withhold transparency, or are only looking out for their best interest, feel justified in stealing from their employers, breach confidentiality as it relates to intellectual property or even feel entitled to unwarranted absenteeism through misappropriate exploitation of labour laws, where they happen to be employee favouring.



Why do I share these examples?


To simply highlight how trust and integrity are undermined in our business world on a daily basis, without us being conscious about it. How often do people in business (employee and employers) emphasize placing high value on integrity-based behaviours?


Let’s discuss the cost of these hidden biases?


Where there is lack of trust, three things happen naturally:


  1. The need for scrutiny increases, resulting in increased suspicion, friction and mistrust.

  2. The cost of doing business increases, because of all the balances and checks required to monitor and secure processes.

  3. The time to make and implement decisions increases, because increased scepticism and due diligence delays production of outcomes.


Not many organizations have taken the time to quantify the above scenarios.


With that in mind, why don’t our educational and work institutions talk about ‘trust’ actually making commercial and financial sense?


It is because trust takes time. As a topic trust is not as enticing, compared to topics which provide quick or short-term outcomes in business.


The fact is, trust is more than a just a nice virtue, it is commercial wisdom.


Commercial wisdom, which when understood, embraced and applied, produces the biggest financial rewards in the long-term.


- Ron Malhotra



Ron Malhotra is a Thought Leader,  Entrepreneur, a Wealth and Business Advisor, International Speaker and a Best-Selling Author.

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