Employers looking to increase shareholder returns and reduce employee turnover might want to look at how well they are communicating with workers, says a new Watson Wyatt study.
It found that companies with the most effective employee communication programs provided a 26% total return to shareholders (TRS) from 1998 to 2002 compared to a -15% TRS experienced by firms that communicate least effectively. A significant improvement in communication effectiveness is associated with a nearly 30% increase in market value.
“The bottom line is that employee communication is no longer a ‘soft’ function but rather a business function that drives performance and contributes to a company’s financial success,” said Kathryn Yates, global practice director of communication consulting at Watson Wyatt.
A total of 267 US companies participated in study, which examines the relationship between an organisation’s communication strategy and practices and its shareholder returns.
The survey also found that high levels of effective communication have a positive impact on employee turnover. Companies that communicate most effectively are more likely to report turnover rates below those of their industry peers than companies that communicate less effectively (51.6% vs. 33.3%).
The three practices associated with the largest increase in shareholder value are driving managers’ commitment
to effective communication, having a formal communication process in place (including a documented communication strategy and implementation plan) and creating a clear line of sight between business objectives and employees’
jobs.
“While these activities are crucial to enhancing communication, each alone does not guarantee a successful communication program,” said Yates. “Instead, the most successful organisations structure these initiatives in
an integrated way to deliver a results-oriented and effective program. The right kind of communication at the right time not only drives behaviour change but also offers tremendous potential for creating shareholder value and generating significant ROI.”
Another key finding is that it matters how a company measures communication. Companies that use “hard” measures such as productivity, behaviour change and achievement of business goals to measure their communication effectiveness show a positive impact on ROI. Companies that use only “soft” measures such as awareness, understanding or satisfaction to measure their communication effectiveness actually show a negative impact on ROI.
For copies of the 2003/2004 Watson Wyatt Communication ROI StudyT, Connecting Organizational Communication to Financial Performance click here and look under ‘Research Reports’.
