Straight Talk

Think your communication with employees is important? You don't know the half of it.

by Shel Holtz

As a rule, companies commit fewer resources to employee communications than any other communication function.

Leaders tend to take other audiences – the media, investors, government, customers, and consumers – more seriously. But while companies must communicate effectively with these audiences, employees represent a company’s single most important constituent group.

Leaders in many organizations relegate internal communications to the back of the line based on the belief that because they are paid, employees should automatically march in lock-step with organizational priorities, strategies and initiatives. Because employees have their own self-interest to think of – promotions and pay raises at best, not getting fired at least – communication resources are best directed at other critical audiences that aren’t so inherently supportive of the company’s efforts.

Organizations that communicated most effectively with employees yielded a return to shareholders of 26%

Overwhelming evidence suggests the contrary. Companies that improve the effectiveness of their internal communications experience a related increase in their market value.

According to a study conducted by the human resources consulting firm Watson Wyatt Worldwide, organizations that communicated most effectively with employees experienced a return to shareholders of 26%.

Those organizations that communicated least effectively produced a -15% return. That’s a 41% swing in returns between companies that communicate well and those that don’t.

What makes employees tick?

Effective internal communication is not a matter of slick publications or good-looking intranets. These are communication tactics that can facilitate the flow of information that ultimately should improve employees’ commitment to the company’s goals and objectives.

Employees decide whether they will commit their energy and effort to a company based on four factors. These factors must underlie any effort organizations make to communicate with their workers.

Trust - The degree to which employees trust the company’s leadership is the single biggest contributor to employee commitment, according to a variety of studies.

A study by the International Association of Business Communicators (IABC) found the most important elements of trust, as far as employees are concerned, include management that demonstrates a concern for employees, openness and honesty, and walking the talk. Three-year returns to shareholders are considerably higher at companies where employees trust the company’s leaders, according to one study.

Role Knowledge - Employees routinely hear broad, high-level pronouncements from management about strategy, goals, mission, vision, values, and a host of other issues. Equally frequently, they shrug off such missives because nobody has explained the link between the big-picture message and the day-to-day work they do.

Somebody needs to translate these top-level communiqués in order to make them meaningful at the level where work is done. Such translation creates employee “line of sight.” That is, employees see how their actions affect the company’s ability to achieve its big-picture goals.

Shareholder returns are higher at companies where employees understand the connection between the organizations’ objectives and the work they do.

Involvement - Employees are not content to sit back and let others make decisions that will affect them.

In a world where knowledge is the most important element of production, employees believe they know more about their jobs and how they contribute to the bottom line than management does—and they’re usually right! Thus, employees believe their input should be sought and incorporated into such decisions.

A connection to the marketplace - Employees who perform their work in a vacuum are usually surprised by change, resulting in resistance and, frequently, failure. On the other hand, employees who are well connected to the factors that drive company change not only are prepared for change, they can initiate it.

Companies need to promote business literacy among their employees, not just so they can read and understand the annual report, but so they can recognize the impact the economy, customers and competition have on the organization.

Making it happen

Sadly, too many executives believe communication is a soft function, one that requires few special skills beyond the tactical ability to produce a brochure or keep a Web site up to date.

Too many executives believe communication is a soft function

After all, while it may take an engineer to design a widget or an accountant to balance the books, everybody communicates, so how hard can it be? One Fortune 500 president told his top internal communicator, “I know exactly which three administrative assistants to talk to if I want a message to spread through the entire organization within a day.”

Communication is not just about spreading a message. Ultimately, it is about influencing employees’ actions.

The organization wants something from its workers. In general, companies want employees to support the strategy and contribute to the bottom line while embracing and reflecting the organization’s values. In the shorter term, the company wants employees to embrace new initiatives (e.g., quality improvement, one company, customer satisfaction), adapt quickly to a reorganization, or give the extra effort required to meet an important deadline.

Exerting influence requires a strategic approach to communication, one that begins with communicators who understand the outcomes their work is designed to produce. The longer-term outcomes – commitment to the company’s plans and satisfaction with one’s job – lead to the kinds of returns the Watson Wyatt study identified.

Committed and satisfied employees produce quality work and reflect the company’s values to other constituents, including customers. As a result, customers do more business with the company and refer others. That’s where return on assets, operating margin and revenue growth come from.

(Note that employees in companies that communicate well also tend to stay with the company, reducing turnover and the associated cost of replacing an employee, which runs on average about 2.5 times a single year’s salary.)

All these factors suggest that formal, strategic internal communication is no longer optional. Instead, it should be a core management function.

Unfortunately, business isn’t doing a great job of integrating employee communication into its operational mindset. Another Watson Wyatt study, “WorkUSA,” concludes that employees are suffering a crisis of confidence in their organizations.

Much of the problem is not the company’s fault, but rather fallout from other companies that have breeched employee trust. The Enrons, Tycos, and Worldcoms of the business world have left employee faith in management shaken. Fewer than half of workers have faith in their management, a drop from the 50% rate recorded in 2000.

While magazines, intranets and town hall meetings can be useful tools, opening the appropriate channels and directing the give-and-take of news and information are the keys to rebuilding trust and driving employee commitment.

As you raise the profile of your internal communication function, hold your communicators accountable for the results they achieve – insist on seeing the measurement that shows they are producing outcomes aligned with the organization’s goals and objectives.

Company leaders cannot leave internal communication to chance or relegate it to feel-good house organs. Those who do put hard-dollar ROI at risk.

Shel Holtz, ABC (Accredited Business Communicator), is principal of Holtz Communication + Technology, which focuses on helping organizations apply online communication capabilities to their strategic organizational communications. His books include Public Relations on the Net and his newest, Corporate Communications. For more details and a wealth of resources visit the company website and Shel's blog: A Shel of My Former Self.

Some Related Articles:

Seven Ways to Build Believability
Walking a Fine Line Between Inspiration and Intimidation
Six Ways to Solve the People Thing, So You Can Focus On Your Real Work
About Trust...and Manipulation
The High, High Price of Distrust
Three Basic Rules for Management Communication
Making Crises Worse: Biggest Mistakes in Crisis Communications
Conversations can be the Key to a Manager's Success