Internal Communication Vital to Company Performance: Study

By Allan Pulga

Better internal communication makes for higher profits, according to a recent study conducted by Watson Wyatt consulting firm.

Companies with effective internal communications have a 19.4 per cent higher market premium and deliver 57 per cent higher shareholder return compared to organizations with less effective internal communications, reported Watson Wyatt.

The study also found that companies that communicate effectively are 4.5 times more likely to report a high level of employee engagement and 20 per cent more likely to report lower turnover rates than firms that communicate less effectively.

“The findings clearly demonstrate that internal communication is a significant business function that directly affects financial performance,” said Kathryn Yates, global director of communication consulting at Watson Wyatt.

By examining 335 North American companies, the study identified nine communication practice areas that affect market premium. Of those, “managerial communication support” (formal communication training and tools and rewards for effective communicators – things that drive supervisors’ and managers’ behaviour) had the biggest impact on a company’s market premium, contributing 3.8 per cent to the overall 19.4 per cent advantage.

The study compared industry sectors and generated the following results for percentage of effective communicators:

Financial                                  45%

Healthcare                               23.8%

General services                      21.4%

Basic materials                        18.2%

Lastly, the findings revealed a few common traits of companies that communicate effectively:

• Focus on managers by regularly counseling them on communication skills,
• Have documented internal communication strategy in place,
• Openly communicate with employees, sharing business plans and goals and providing information about matters that affect them.