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From
Incentive Magazine (3/28/06)
Study: Good Communication Adds to the Bottom Line
MARCH 28, 2006 - -- Companies that communicate well with employees provide shareholders with
dramatically better financial returns than those that keep the staff in the dark, according
to a recent study by the Canadian office of Watson Wyatt Worldwide, a Washington, D.C.-based
consulting firm specializing in human capital and financial management.
According to Watson Wyatt's 2005/2006 Communication ROI Study of 335 public North American
companies, firms with effective internal communications have a stock market premium 19.4
higher than competitors with poor communications, and deliver 57 percent higher shareholder
return. In addition, the study found a strong correlation between internal communications
and employee retention and engagement levels.
"The findings clearly demonstrate that internal communication is a significant business
function that directly affects financial performance," says Kathryn Yates, global director
of communication consulting at Watson Wyatt.
Of the nine communications practice areas identified in the study, the most important was
managerial communication that drives supervisors' and managers' behavior, including both
formal communications training and tools, as well as incentives that reward effective
communicators. This area was responsible for 3.8 percent of the overall percent market
premium, more than any other, according to Watson Wyatt.
Beyond that, companies with good internal communications are 4.5 times as likely to report a
high level of employee engagement, and 20 percent more likely to have low turnover rates,
than poor communicators.
Despite these findings, many of the companies examined by Watson Wyatt are doing a
particularly poor job communicating with overseas offices. Less than one-third have
dedicated communications staff in overseas divisions or require local managers to customize
internal corporate communications for their divisions. And fewer than one-in-five companies
have a documented global communications strategy.
"With more companies becoming global, the challenges of communicating effectively with
workers have become much more complex," says Robert Wesselkamper, Watson Wyatt's director of
international consulting. "To be truly global, employees throughout the world need to feel
like they are part of the company's overall strategy. Making sure all employees receive the
same information is crucial to that effort."
Among Watson Wyatt's recommendations for firms that want to strengthen internal
communications are:
•treat managers as a key audience and regularly provide communications counsel to senior
management.
•have a documented internal communications strategy in place.
•openly communicate with employees about business plans, goals and other company information
that affects them.
•include a global communication plan in the internal communications strategy.
•form a global advisory group to advise on customizing messages for overseas divisions.
Find this article at:
http://www.incentivemag.com
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