Communication ROI Study Shows How to Get Bottom-Line
Results from Internal Communication
By Peter Vogt
Over the years, numerous studies have boasted the connection
between internal communication and bottom-line results.
These studies, though valuable for establishing a connection,
do not delve into the important question of how. How
does communication impact the bottom line? Which communication
practices add the greatest value? And what can communicators
do to make their internal communication programs contribute
to organizational success?
Watson Wyatt Worldwide -- a human capital consulting
firm -- launched its Communication ROI Study™ in
April 2003 to answer these questions and to give communicators
some concrete information on what they can do to evolve
their communication programs to world-class levels of
effectiveness.
What is Effective Communication?
As a starting point for the study, Watson Wyatt defined
communication effectiveness as doing a good job in these
key areas:
- Providing employees with financial information and
objectives
- Giving people information on the value of their
compensation programs
- Engaging employees in the business
- Bringing the voice of the employee into the business
- Exhibiting strong leadership by management during
organizational change
- Educating employees about organizational culture
and values
- Explaining and promoting new programs and policies
- Integrating new hires into the organization
- Aligning employee actions with customer needs
What is the Impact of Effective Communication?
More than 267 companies participated in the ROI study.
From the information received, Watson Wyatt researchers
categorized survey participants based on their level
of communication effectiveness. The top one-third of
all participating companies were designated as highly
effective communication organizations, while the middle
one-third and bottom one-third were placed in the medium-
and low-effectiveness categories, respectively.
The top one-third -- the highly effective communicators
-- are experiencing some astonishing results in terms
of shareholder value.
- Companies with the most effective employee communication
programs provided a 26 percent total return to shareholders
(TRS) from 1998 to 2002, compared to a minus 15 percent
TRS experienced by firms that communicate least effectively.
- A significant improvement in communication effectiveness
is associated with a 29.5 percent increase in market
value.
- Organizations that communicate effectively are 50
percent more likely to report employee turnover rates
below or significantly below those of industry peers.
What the Highly Effective are Doing Right
The Watson Wyatt study found that there are nine actions
organizations have to "get right" to make
it to the pinnacle of effective communication:
- Establishing a formal communication process
- Using employee feedback effectively
- Leveraging technology
- Integrating total rewards
- Aligning communication with business strategy
- Focusing on continuous improvement
- Facilitating change
- Creating employee line of sight
- Driving managerial behavior
Organizations in the high, medium and low categories
are already doing many of these things. It's just that
the highly effective organizations are doing them best.
They've laid the foundation for effective communication
by instituting a formal communication process, encouraging
free information flow to obtain employee input for decision
making, and leveraging technology to amplify their messages.
They've also engaged employees in the business, showing
clear links between desired behaviors and the rewards
program.
The highly effective organizations also do an excellent
job of aligning communication with business strategy.
They measure performance and solicit employee feedback.
They may use employee satisfaction, preference and other
soft measures, but they don't rely on them to gauge
the effectiveness of their programs. Hard measures such
as communication audits, the objective evaluation of
employee behavior, and the impact that communication
has on company performance are used. These organizations
also use communication to facilitate change, enabling
them to steer their way through restructurings, downsizing,
mergers and acquisitions without disrupting the business.
The top one-third excels at creating a line of sight
between employees and the customer. Consequently, employees
understand how their actions move the organization closer
to meeting its goals. Moreover, they excel at driving
changes in the behavior of managers and supervisors.
Managers and supervisors understand what is expected
of them, consistently display the appropriate behaviors
and do a better job of supporting leadership's vision
through their actions and enthusiasm.
Conclusion
If communication effectiveness in your organization
isn't as high as you'd like it to be, take a lesson
from the highly effective organizations. Start with
the basics: A well-defined communication structure and
communication programs that align with business strategy.
Then, look for innovative ways to motivate employees
and management to act on and achieve the business goals
of your organization. That's how you'll make the greatest
impact on the bottom line.
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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