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Hard Measures are Key to Gauging the Effectiveness of Communication on the Bottom Line

By Peter Vogt

It's common knowledge that effective external communication is a key factor in business success. But a new study shows that internal communication, if coordinated with external communication, can also have direct bottom-line value.

Public relations (PR) professionals are well aware of the importance of effective external communication and have developed techniques for gathering hard data and measuring the business impact of external programs. Consequently, they can gauge the impact of PR efforts on the business and demonstrate their successes to senior management.

Internal communicators, on the other hand, have traditionally relied on soft measures, such as employee satisfaction or employee appreciation for the communication program, to determine the impact of internal communication. But internal communicators are changing their tune, and taking a page from their PR colleagues' songbook

In conducting its landmark 2003 Communication ROI Study, which focuses on the relationship between an organization's internal communication strategy and practices and its shareholder returns, Watson Wyatt — a leading human capital consulting firm — made some surprising findings regarding the relationship between effective external and internal communication:

• Organizations that coordinate their external and internal communication programs tend to communicate more effectively externally than organizations that don't coordinate these efforts.
  
• Soft measures for evaluating internal communication are not very effective; moreover, they may be detrimental and can potentially offset the impact of quality PR campaigns and processes.

These findings indicate that coordination and focus on strategic measurement can increase the value of external programs to business success.

Measurement — the cornerstone of effective communication

Objective measurement using hard data gives communicators the information they need to continuously improve programs in their quest for excellence. The Watson Wyatt survey of 267 organizations with an average of 6,300 employees found that organizations with effective internal communication don't rely on soft measures to assess the value of their programs. Instead, they exploit hard measures, such as communication audits, objective assessment of behavior change, and assessment of the impact communication has on job performance.

The findings clearly accentuate the need for hard, strategic measures. Organizations that use measurement to gauge the impact of their communication efforts were found to have a higher return on shareholder value than organizations that use only soft, tactical measures. In fact, organizations that use only soft, more tactical measures may actually see a negative return on shareholder value.

Like their PR counterparts, internal communicators need to understand company goals and objectives and create hard performance measures and assessment techniques that gauge communication's impact in achieving these goals.

The internal-external communication connection

Effective internal communication connects employees to the business and helps them understand how their actions support it. Connected employees become ambassadors to the outside world and favorably influence how others perceive the organization — thus impacting external communication.

Survey findings also indicate that it is important to coordinate internal and external programs. Survey participants were asked if the internal and external communication programs in their organizations were coordinated effectively. In companies identified as having high communication effectiveness, 76.5 percent of respondents answered yes. By comparison, only 40.4 percent of companies with low communication effectiveness agreed. In short, companies that effectively coordinate their internal and external communication activities are also far more likely to have high communication effectiveness.

Conclusion

The findings of the Watson Wyatt survey indicate that the effectiveness of internal communication influences the impact of external communication. By applying hard, strategic measures and coordinating internal communication programs with external campaigns, organizations can take full advantage of the enormous potential of their employees in helping to achieve strategic business goals and objectives.

Peter Vogt is a senior communication consultant and acting Asia/Pacific divisional practice leader for Watson Wyatt's communication practice. Based in San Francisco, Peter has extensive consulting experience in change management, global communication, mergers, diversity and linking business strategies to communication programs.

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Eight characteristics that define effective communication

The 2003 Watson Wyatt Communication ROI Study demonstrates that successful organizations structure the following tactics and processes in an integrated way to ensure the delivery of an effective, results-oriented communication program:

The impact of effective communication on shareholder value

Organizations with the highest level of communication effectiveness generate the highest levels of surplus value. This value is called total return to shareholders (TRS).

The chart below shows that companies with the highest levels of effective communication experienced 126 percent TRS over a five-year period. Further, the most effective communicator's shareholder returns were nearly 50 percent higher over the last five years, compared to those organizations that communicated least effectively.

2003 Watson Wyatt Communication ROI Study-Key findings - A significant improvement in communication effectiveness is associated with a 29.5 percent increase in market value.