Effective Communication Generates ROI and Happier People

Some say the recession is behind us. Whether in good or bad times - what is important is effective communication in good or bad times.

Dr. Gary Latham, an organizational psychologist at the University of Rotman School of management views a lack of clear communication one of the key reasons for our current economic failures.

Bad news according to Gary needs to be relayed in a way that is factual, frank and avoid hype. If communication is based on fluff - people see through it. Avoiding terminology or softening the language often adds more pain to the process vs. short, to the point and clear.

Recently Starbucks came under blogging scrutiny with their message in an employee memo " As part of our commitment to transparency throughout this process, we wanted to inform you that approximately 100 non-store partners are being notified today that their positions have been eliminated."

The bloggers went to town on the memo mocking its ridiculous use of the term "non store partners" when referring to employee layoffs.

Effective communication is the lifeblood of a successful organization. It reinforces the organization’s vision, connects employees to the business, fosters process improvement, facilitates change and drives business results by changing employee behavior. No matter how you look at it, communication is an important part of the business landscape and cannot be taken for granted.

A study that is not too old that I like to promote is the 2003/2004 Watson Wyatt Communication ROI Study™ which clearly demonstrated the correlation between communication effectiveness, organizational turnover and financial performance.
The more recent 2005/2006 study confirmed their earlier study findings and went a step further, by showing that effective communication is a leading indicator of an organization’s financial performance.

Key Findings
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1.) Companies that communicate effectively have a 19.4 percent higher market premium than companies that do not.

2.) Shareholder returns for organizations with the most effective communication were over 57 percent higher over the last five years (2000-2004) than were returns for firms with less effective communication.

3.) The 2005/2006 study found evidence that communication effectiveness is a leading indicator of financial performance.

4.) Firms that communicate effectively are 4.5 times more likely to report high levels of employee engagement versus firms that communicate less effectively.

5.) Companies that are highly effective communicators are 20 percent more likely to report lower turnover rates than their peers.

Other Survey Findings

* Two-thirds of the firms with high levels of communication effectiveness are asking their managers to take on a greater share of the communication responsibility, but few are giving them the tools and training to be successful.

*Global firms are not customizing their messages to meet local needs or cultural sensitivities.

*On average, firms within the financial and retail trade sectors rank among the most effective communicators. Health care, basic materials, telecommunications and other service companies rank among the least effective communicators.

In summary, organizations that develop strong employee engagement and communication practices generate higher ROI, develop strong employee and partner relationships, and fuels customer loyalty.

So how many MBA, CA, etc classes teach employee communications as a mandatory course? How many CEO's and C level executives when they are writing their board of director training programs take an employee communications mandatory module?

We know HR executives often don't get it right - is this because they too have not had sufficient training.

Increasing shareholder value is linked to Effective Employee Communication and Engagement Practices - time for reflection as this weakness impacts our Innovation and growth capabilities.