CGF ARTICLES, OPINIONS & EDITORIALS
Absenteeism: Eroding company profits (2013-07-29)
February 20,
2015 3777 3777 
As the world economy struggles to regain its former pace and growth since the onset of the financial crisis in 2008, companies and their leadership may have overlooked a growing area of risk which could be costing them dearly.
In almost all cases companies are able to count their losses in, for example, a line item which has an attached
tangible value on their balance sheet from one period to the next. And these losses -- or profits as the case may be -- are invariably linked to a known risk which has been, or is still in the process of being managed. The point being that whether such a loss (or profit) is made, is normally directly linked, defined and clearly understood by the people responsible for ensuring the financial health of a company. Indeed, these people -- who comprise the chief executive officer, the financial director and even the internal auditors -- are generally considered the core leadership team who are responsible for the proper governance of the company’s daily operations, which entails both the
financial and
non-financial aspects of the company. Whilst there have been numerous corporate governance recommendations documented across the world, notably those such as the King Report on Governance for South Africa 2009 (‘King III’) which emphasizes the need for integrated reporting amongst other issues; one can’t help but wonder whether or not the company’s leadership have sufficiently applied their minds and reported the costs attached to their Human Capital, especially when employees are absent from their workstations and without proper permission?
In many companies, Human Capital has been considered a ‘soft issue’ and not much attention is allocated to this critical ‘asset’, unless of course there is a blatant problem, say for example a looming strike or a contagious health outbreak amongst employees or worse, the death of an employee. Clearly these types of examples pose tremendous risks to a company and its sustainability, and they are not such ‘soft issues’ especially when the business’ continuity is negatively affected. On the contrary, whilst these risks -- which are quite obvious and visible -- can also have significant impact upon a company’s productivity and its profits, there is yet a further risk which is much greater than these already mentioned, namely
absenteeism.
At the face of it, absenteeism may initially be completely undetected, and in fact not known about, or completely misunderstood and not managed. In many respects, absenteeism can be likened to a ‘silent cancer’ that slowly erodes the company’s profits, productivity, morale and even its culture. In the workplace, absenteeism is one of the most common problems facing South African (‘SA’) companies and it is estimated to be costing the South African economy -- according to the South African Chamber of Commerce (‘SACOB’) -- between R12bn to R20bn each year. In its most common form, employees will claim to be ‘sick’ and then stay away from their workplace to maximize their days for annual sick leave, and even exceed their benefits well beyond reason. Expectedly, an unsuspecting company may not at first easily detect such abuse against the company (especially in larger companies and state owned entities), mainly because the stay-away may have appeared legitimate as the employee may have produced a doctor’s certificate to validate their ‘illness’.
