Business Communication

Unit 3

Unit 3

The Nature of Business Communication

Structure: 3.1 Introduction Objectives 3.2 Types of Business Communication 3.3 Communication Network in Organizations 3.4 Summary 3.5 Terminal Questions 3.6 Answers

3.1 Introduction
Our discussion so far has been focused more on the general nature of communication. In this unit we will go into the specifics of business communication and what it involves. We will see how a manager has to maintain communication linkages with different entities, both within and outside the work environment. In continuation with what we discussed in the last unit, some of the appropriate channels for communication with different audiences will be explained. Finally, we will examine how communication flows within an organization, both through official and unofficial channels. Objectives After studying this unit, you will be able to: List the different stakeholders of an organization, or the publics with whom a manager has to communicate. Explain the primary reasons for communication with each stakeholder Select the most effective channel for communication with each stakeholder Describe how information flows within an organization Discuss the advantages and limitations of formal and informal communication networks

3.2 Types of Business Communication

Business communication is diverse and involves both internal stakeholders within the organization, as well as external stakeholders outside the
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organization. A manager has to constantly communicate with and maintain good relations with each of these stakeholders or publics, so as to achieve the overall goals of the organization and to project a favorable image. The figure below illustrates the wheel of business communication-

The Wheel of Business Communication

Bankers Media Superiors Peers Society Subordinates Management Government

Intermediaries Customers Suppliers Unions

Shareholders Employees/

The wheel of business communication reinforces what we discussed in the very first unit communication is like breathing, it never stops and is a constant process. A manager has to stay in continuous touch with his internal stakeholders on the one hand superiors, peers, subordinates, shareholders, employees and their unions; at the same time, he has to communicate with external stakeholders such as customers, intermediaries (distributors and retailers), suppliers of materials and components, government, bankers, society at large and the media. Effective business communication therefore involves both internal as well as external communication. We will now look at some of the reasons for communication with internal and external stakeholders, as well as the appropriate channels to be used in each case. 3.2.1 Internal Business Communication As illustrated in the diagram, this involves interaction with the following Superiors Every organization has a formal reporting system. Superiors are the higher ups in the organization to whom you report. The frequency of interaction with them will vary, depending on your position and
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responsibilities, as well as their need for information. As a salesperson, you may have to submit daily or weekly reports of sales progress. As a marketing manager, you may be required to make periodic presentations on marketing strategy for new product launches to the Vice President, Marketing. Occasionally, you may also approach your superiors to communicate your feelings about your job, unsolved problems with coworkers and your suggestions for improvement of the organization. Communication with superiors could be through written channels, such as reports, or through oral face-to-face channels, such as presentations and one-to-one meetings. When trying to solve problems or improve relationships, oral face-to-face channels are most effective, as explained in the previous unit. Peers Peers are your co-workers, or people at the same level within an organization. For example, a marketing manager and an HR manager are peers, since they work at the same level within different departments. Communication between peers is essential for functional coordination. An Advertising Manager for example, will need to communicate with the Finance Manager regarding approval of the advertising budget for a new product launch. Information sharing is another reason for communication between peers. The Advertising Manager and the Sales Manager in the Marketing department may need to communicate regarding the special features of a product to be highlighted in an advertising campaign. Regular communication between co-workers in different departments is also essential to ensure that they work together as a team to achieve the common goals of the organization. The most appropriate channel of communication between peers is the oral face-to-face channel, since it helps to build good rapport and improves work relationships. Subordinates These are people in the organization who work below you or report directly to you. For example, as the Marketing Manager, you may have Assistant Managers reporting to you, who in turn may have Marketing Executives reporting to them. The most common reasons for communication with subordinates are on disciplinary matters, such as
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organizational procedures and policies. Other reasons include performance appraisal and feedback, reward and recognition aspects, subject to good performance. Appropriate channels of communication with subordinates may be both oral and written, depending on the situation. Communicating about organizational procedures is best done through written communication; on the other hand, performance appraisal and feedback should be done through an oral one-to-one meeting and discussion. Employees/Unions Employees unions can be quite powerful, therefore communication with them is essential. The reasons for communication include welfare aspects, disciplinary aspects and terms of employment. All these should be clearly spelt out and kept on record. Hence written channels such as written contracts are the most appropriate channels. Shareholders Shareholders are very important internal stakeholders, since they are the owners of the company. Therefore, it is essential to be completely transparent with shareholders and to keep them informed of both positive and negative developments regarding the company. The reasons for communication with shareholders include keeping them informed about the Companys progress on different fronts, development programs and new projects undertaken by the company and new capital issues. At the same time, any major problems faced by the company and the steps being taken to tackle these problems should also be communicated. This is part of public relations, through which the company projects a positive image of itself in the eyes of shareholders. The appropriate channels of communication with shareholders include oral and written channels shareholder meetings and conferences, letters, brochures and advertisements. Before we move on to external business communication, let us sum up our discussion on internal communication. The table given below highlights the appropriate channel(s) to be used and the primary objective of communication with each of the internal publics.

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Stakeholder Superiors

Channel Written Reports Presentations Meetings Face-to-face meetings Written Communication Face-to-face meetings

Overall Objective Awareness of progress Suggestions & feedback Problem solving Coordination Teamwork Information sharing Compliance with instructions & policiesReview of work progress Feedback Employee satisfaction & welfare Building trust and confidence

Peers

Subordinates

Employees/Unions Shareholders

Written Communication Meetings Advertisements Brochures

Self Assessment Questions Are the following questions true or false? 1. Peers are co-workers who work only in different departments of an organization. 2. Criticizing an employee may be done in public. 3. A policy of openness is essential for good public relations. 4. Suggestions should only be given by superiors to subordinates. 3.2.2 External Business Communication Before we discuss the reasons for communication with external stakeholders, it is important that you understand the overall importance of external business communication. External business communication is essential for the following reasons For Successful Marketing Organizations need to inform and create awareness among consumers about their existing and new products. This is largely done through advertising, which is a form of mass communication. This is very much a part of external business communication. To build a Favorable Corporate Image Today, organizations need to focus on projecting themselves as responsible corporate and social
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citizens. This is known as corporate social responsibility. For example, they need to communicate the fact that they are involved in social development or in environmental protection. This involves being in touch with various external stakeholders, especially consumers, media and the society at large. To Increase Shareholder Value If customers have a positive image of the company, the companys share price will go up and shareholders wealth increases, thereby enhancing shareholder value. Shareholder confidence in the company also drives shareholder value. When shareholder value increases, they will participate in the companys expansion and growth. To Overcome a Crisis Sometimes when a company is facing a crisis, a public relations campaign may be needed to manage the situation, put things in a proper perspective and restore the image of the company in the eyes of consumers, the media and society at large. Public relations require effective communication with various external stakeholders.

Examples A few years ago, Reliance was prosecuted by the government for irregularities in the stock market. Shareholders lost confidence in the company. Reliance then mounted a counter campaign against the government, where they told the truth, gave the facts and figures and denied the allegations made against them. This helped them to regain lost confidence and salvage their image. Similarly, when Coke and Pepsi were accused of pesticides in their soft drinks, they had to undertake a massive public relations exercise to set right their image in the eyes of the public. * To Enhance Credit Rating An organizations credit rating will also go up if it maintains good external communication. This way its borrowing ability will increase and more money can be raised for expansion and growth. Having emphasized the importance of external business communication, let us now go into the reasons for communicating with external stakeholders and the channels used to communicate with them, just as we did with internal communication.

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The wheel of business communication illustrates that external business communication involves interaction with the following stakeholders Consumers Organizations need to communicate with consumers to provide information about their products and services, special promotional offers and new product developments. They also need to redress consumer complaints, so as to maintain consumer preference and confidence in their brands. The written channel is the most appropriate medium for communicating with consumers. This could take the form of letters, or mass media advertising. Intermediaries This refers to the trade distributors, wholesalers, retailers, franchisees, etc. It is necessary to communicate with them to provide information about product availability, special offers, incentives and allowances, contractual aspects, order processing, delivery aspects and merchandising, or the visual display of products. Keeping intermediaries aware and informed and motivating them to meet targets through competitions, prizes and incentives is extremely important for the success of any product. The appropriate channels of communication with intermediaries could be both oral and written channels. Written contracts, advertisements announcing special offers and incentives and dealer newsletters inviting dealers to share their experiences, are examples of written channels. Periodic review meetings and continuous communication through sales staff are examples of oral channels. Suppliers These are suppliers of raw material, components, power, water or other utilities. Communication with suppliers is essential to give technical specifications, ensure quality and timely delivery. Today, due to outsourcing or relying on outside sources for raw materials and components, there is need for more sophisticated and direct communication and a more continuous, on-going relationship with suppliers. The internet now plays an important role in communication with suppliers, through Business to Business (B2B) communication. Many organizations today enter into a partnership with their suppliers, whereby there is total involvement on both sides. For example, a company engineer might train the shop floor technical staff of a supplier of automotive
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components, in order to improve the quality of the components. The supplier on his side, may suggest a change in the companys specification process. Direct, one-to-one communication is required with suppliers to ensure transparency and clarity, with respect to specifications. The oral face-to-face channel is most appropriate, although the online channel is being increasingly used in supplier communication. Government Communicating with the government is particularly important in the Indian context and is a part of public relations. Many Indian companies even appoint a PR officer for maintaining good relations with the government. The reasons for communicating with the government include compliance with tax matters and legal aspects, seeking clearances for new activities such as joint ventures, borrowing from overseas banks, foreign exchange requirements and so on. Communication with the government could take place through both oral and written channels. Periodic meetings may be held with regard to statutory compliances such as licensing. However, most of the time, written communication through formal letters is more appropriate. This is because clearances for various activities have to be sought in writing. Society As pointed out earlier, organizations need to communicate with the community at large to project themselves as responsible corporate citizens. Corporate social responsibility as it is called, is top priority with many organizations today. Supporting womens education, building hospitals for the disabled, schools for children, family planning and nonpollution of the environment are some of the ways in which companies are participating in social development and then communicating this to society. The channels of communication with society could be oral and direct for example, talking to elders in a village or locality, about family planning or schools for children. Mass media advertising in the form of public service advertising could also be used to spread these social service messages Example United Breweries ran a public service campaign with the caption Drinking and driving dont mix, to spread the message of avoiding drunken driving. There is a large element of public relations in communication with society.
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Bankers Like shareholders, organizations need to communicate with bankers both in good times and bad times. The reasons for communicating with bankers are the same as those for shareholders. In addition, advance notice needs to be given to bankers regarding any dislocation in repayment schedules and justification has to be provided for any additional fund needs. The overall purpose is to build rapport with the bank, so as to increase borrowing ability. Communication with bankers could take place through oral channels for example, periodic meetings with the Finance Manager of the company to keep them informed of stock build up trends, or future trends that could affect working capital needs. Special meetings may also be held to keep them posted about expansion, contraction and diversification plans, lockouts, strikes and anything else that may affect cash flow. In addition to oral channels, periodic written reports need to be submitted to the bank on overall business conditions. Transparency is needed in dealings with the bank and failure to keep them informed could lead to the companys collapse. Example The Enron Company did not communicate with their shareholders and bankers about the difficult times that they were going through. This ultimately led to the companys ruin. Media Today, the media are becoming more powerful and investigative and are intruding into peoples personal lives. If wrongly informed, the media can destroy an institution. Therefore, the primary reason for an organization to communicate with the media is to maintain good relations. If the company projects a favorable image to the media, the media in turn will carry a positive story about the company for free. This is known as publicity and is part of public relations. For example, a press release in a newspaper may highlight some of the achievements or awards won by the company. This type of publicity is highly credible and can have a powerful influence on public opinion. Communication with the media takes place through both oral channels such as press conferences, as well as written channels such as letters and news releases.

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As we did with internal business communication, let us sum up our discussion on external business communication in the form of the matrix given belowStakeholder Consumers Channel Advertisements Letters Written Contracts Newsletters Advertisements Review Meetings Direct Oral Communication Online Communication Periodic Meetings Formal Letters Direct Oral Communication Advertisements Periodic & Special Meetings Written Reports News conferences News Releases Overall Objective Awareness Information Persuasion Awareness Information Motivation On-going Relationship Partnership Government Cooperation Corporate Social Responsibility Good Rapport More borrowing ability Good Relations

Intermediaries

Suppliers

Government Society

Bankers

Media

Activity Describe the nature of your current job or a job that you would like to take up in future. List out the primary stakeholders that you have to communicate with and the reasons for communication with each stakeholder.

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Self Assessment Questions 5. Match the following i) Mass communication ii) Corporate Social Responsibility iii) Crisis PR iv) Distributors v) Internet vi) Statutory compliance vii) Transparency viii) Credit rating ix) Publicity x) Persuasion a. b. c. d. e. f. g. h. i. j. Government Advertising Suppliers Social development Bankers Borrowing ability Media Consumers Motivation Restoring company image

3.3 Communication Network in Organizations

A communication network refers to how information flows within the organization. Information within an organization generally flows through a system, rather than being a free flow. In the words of Adler, Communication networks are regular patterns of person-to-person relationships through which information flows in an organization. This means that the flow of information is managed, regulated. and structured. Communication networks may be formal or informal. We will deal with each of these in some detail. 3.3.1 Formal Communication Network A formal communication network is one which is created by management and described with the help of an organizational chart. An organizational chart specifies the hierarchy and the reporting system in the organization. Therefore, in a formal network, information is passed on only through official channels such as memos, bulletins and intranet (email within the organization). The organizational chart implies that information can flow in any of three directions vertically, i.e., upward or downward, and horizontally. 1. Upward Communication This may be defined as information that flows from subordinates to superiors. Some of the reasons for upward communication include discussing work related problems, giving
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suggestions for improvement and sharing feelings about the job and coworkers. This type of communication has both benefits and disadvantages. One of the biggest benefits is problem-solving. Once a subordinate has brought a problem to his superiors notice, chances are that the problem will not recur, since the subordinate learns from his superior how to tackle it the next time. Thus, his ability to solve new problems and therefore his managerial ability, improves. Another benefit that could arise from upward communication is that valuable ideas and suggestions may sometimes come from lower level employees. Therefore organizations should encourage this kind of communication. A third benefit is that employees learn to accept the decisions of management and thereby work as a team. The biggest problem associated with this type of communication is that it may lead to handing down of decisions by superiors. When subordinates frequently seek the superiors guidance, the latter may adopt an authoritarian approach and merely give instructions, disregarding the subordinates opinion completely. 2. Downward Communication This may be defined as information that flows from superiors to subordinates. The most common reasons for downward communication are for giving job instructions, explaining company rules, policies and procedures and giving feedback regarding job performance. A number of studies have indicated that regular downward communication in the form of feedback given to employees is the most important factor affecting job satisfaction. Therefore organizations today are trying to encourage more of this type of communication. There are both benefits and disadvantages associated with this type of communication. Downward communication that provides regular feedback will be beneficial if the feedback or review of performance is constructive. A constructive review is one where a manager counsels an employee, or advises him on how to improve his performance. On the other hand, a destructive review can destroy employee morale and confidence. Regular downward communication also creates a climate of
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transparency or openness, where information is passed on through official channels, rather than through rumors. Thirdly, downward communication boosts employee morale, since it indicates that management is involved in their progress. The problems with this type of communication are the danger of doing destructive reviews, as mentioned, and that of message overload. This means that superiors many sometimes burden their subordinates with too many instructions, leading to confusion. 3. Horizontal Communication This type of communication is also known as lateral communication. It may be defined as communication that takes place between co-workers in the same department, or in different departments, with different areas of responsibility. For example, Sales Managers and Advertising Managers in the Marketing department, or Marketing Managers and Finance Managers. The reasons for this type of communication are for coordination of tasks, sharing of information regarding goals of the organization, resolving interpersonal or work related problems and building rapport. The biggest potential benefit of horizontal communication is the sense of teamwork that is created. Regular communication of this type ensures that all co-workers work together towards achieving a common goal in the overall interest of the organization. The biggest potential problem is that conflicts such as ego clashes are bound to arise, when co-workers at the same level communicate on a regular basis. In spite of these problems, horizontal or lateral communication has become more important in todays business scenario than upward or downward communication. This is because the organizational pyramid indicating the different hierarchies or levels in an organization has flattened. This is illustrated by the diagrams given below.

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Multi-layer Organizational Pyramid

General Manager

Manager

Manager

Asst Manager

Asst Manager

Asst Manager

Asst Manager

Executive

Executive

Executive

Executive

Executive

Executive

Executive

Executive

Compressed Organizational Pyramid

General Manager

Manager

Manager

Manager

Manager

Manager

Manager

The first diagram illustrates the previous organizational pyramid which was a multi-layer pyramid. In this type of pyramid, vertical, i.e., upward and downward communication still plays an important role. This is still the case in many traditionally run organizations today. However, this has been replaced by a compressed or flattened pyramid where the hierarchy has diminished, as shown in the second diagram. Thanks to technology and computers which help in faster decision making, a manager today has a larger span of control. He or she can supervise and control more number of people than before. This in turn has led to greater empowerment, which means that even lower level employees are now being given decision making authority. Therefore, in the absence of several layers, there is greater lateral communication than before.

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3.3.2 Informal Communication Network Another name for informal networks is the grapevine. In this type of network, information does not flow in a particular direction, as we have seen with formal networks. The information is also not passed on through official channels such as memos, notices or bulletin boards. The information need not be circulated within the organization, but could be passed on outside the work environment, wherever co-workers or colleagues meet socially. Thus, informal networks are based more on friendship, shared personal or career interests. Example Co-workers may meet outside the work environment at a company picnic, party or a car pool and discuss areas of common interest that may or may not be work related. Information may then be passed on to each other about happenings in the company, such as layoffs, the companys plans for acquisitions and so on. This type of informal network is not just for idle rumors and may be useful in many ways. First of all, it sometimes fills in the transparency gaps left by formal networks. Such gaps usually occur during times of crisis such as strikes or layoffs. The strikes and layoffs may not be officially announced. Secondly, it may help to confirm important information, such as the fact that the company is going in for a major acquisition. Thirdly, the grapevine can be used for a constructive purpose by the organization. Example The government could get the press to publish news in the local paper that there is going to be a petrol price hike soon, just to test the reactions of the general public. If the reaction is negative, then the news may be withdrawn on the basis that it is just a rumor. Similarly, organizations could deliberately plant proposals in the minds of their employees, just to test their reactions. Given that informal communication networks have their advantages, they should not be suppressed as rumors. On the contrary, competent managers should accept the informal network. At the same time, they should make efforts to counter false rumors and to ensure transparency through the formal network. This means making all types of information - both positive and negative, available to everyone in the organization through official channels.

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To conclude, it should be remembered that both formal and informal networks should be cultivated and allowed to co-exist, so that information of all types flows freely to all levels in the organization. Self Assessment Question Fill in the blanks 6. A formal communication network is characterized by ___________ ______________. 7. The most valuable ideas and suggestions often come from _______________ communication. 8. An advantage of regular downward communication is _____________. 9. In a multi-layer organization, _________________ communication is more important than __________________ communication. 10. While ________________ should be suppressed, _______________ networks should be accepted.

3.4 Summary
While the first two units dealt with communication in general, this unit has focused entirely on the nature of organizational communication. A manager has to stay in constant touch with several publics or stakeholders, both inside and outside the organization. Therefore there are two aspects to business communication internal and external communication. The internal publics include superiors, peers, subordinates, shareholders, employees and their unions. The external publics include consumers, intermediaries, suppliers, government, society, bankers and the media. Some of the most common reasons for communication with each of these publics were explained, along with the appropriate channels of communication to be used. Communication with superiors is primarily for reporting progress, providing feedback or solving work related problems. Peers need to communicate for coordination and information sharing. Communication with subordinates is mainly to review progress and give instructions. Among the internal publics, shareholders are particularly important. The main reasons for communicating with them are to keep them informed about positive and negative developments regarding the company and to win their confidence.
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Communication with external publics such as government, society and the media involves a large element of public relations, or projecting a favorable image of the company. Today, organizations are focusing on corporate social responsibility by participating in social development. Since the media are becoming more powerful, it is essential to maintain good relations with them. Communication with the government and bankers should be of a more formal nature and largely through written channels. Supplier communication is becoming more sophisticated through online (B2B) channels. Consumers and intermediaries also need to be informed about the companys products. This unit also dealt with communication networks, or the system through which information flows within the organization. There are two types of networks formal and informal. A formal network is determined by an organizational chart and hierarchy. Here information flows only through official channels and can flow in three directions upward, downward and horizontally. The main advantage of upward communication is that valuable suggestions could be given by subordinates to superiors. The disadvantage is that the opinions of subordinates could be disregarded. Downward communication has the advantage of constant feedback being given to subordinates and a climate of openness being created. The drawback is that feedback may not always be constructive. Horizontal or lateral communication has assumed more importance today, due to the organizational hierarchy becoming flatter. While its main benefit is teamwork and coordination, it may lead to conflicts between co-workers. An informal network or grapevine refers to information flow through nonofficial channels outside the work environment. It is based on friendship between co-workers. The informal network is not just for rumors and has several benefits. It may fill in the gaps left by the formal network, or help to confirm important news regarding the organization. It could also be used constructively to test the reactions of employees on a particular issue. Therefore the informal network should not be suppressed by managers.

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3.5 Terminal Questions

1. In your opinion, who are the most important internal and external stakeholders that a manager needs to communicate with and why? 2. Explain why Public Relations is an important part of external business communication. 3. What are the relative advantages and disadvantages of formal and informal communication networks?

3.6 Answers
Answers to Self Assessment Question 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. F F T F i) b, ii) d, iii) j, iv) i, v) c, vi) a, vii) e, viii) f, ix) g, x) h Official channels; Upward; Transparency/openness Vertical; horizontal/lateral Rumors; informal

Answers to Terminal Questions 1. Refer 3.2.1, 3.2.2 2. Refer 3.2.2 3. Refer 3.3, 3.3.1, 3.3.2

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