THE POWER OF EFFECTIVE INTERNAL COMMUNICATION

RESEARCH PAPER: THE POWER OF EFFECTIVE INTERNAL COMMUNICATION

Christopher D. Underwood

BUSI550_B03 Effective Executive Communication

Dr. Boyce

October 11, 2011

THE POWER OF EFFECTIVE INTERNAL COMMUNICATION Abstract Internal communications impact many areas of organizational culture including motivations, satisfactions, trust, commitment, engagement, and more. Developing effective strategies to meet the needs of internal constituents is essential in reaching goals. One of the main focuses of human resources department is retaining employees and reducing turnover. Much literature has developed from the research surrounding these two topics. Turnover and retention rates are related to organizational culture, work environment, pay structures, rewards systems, psychological and emotional perceptions, and more. HR managers and onsite management must develop strategies based on this research to ensure their success by lowering the turnover rate of their organization and increasing retention rates. They must look at employee levels of communication satisfaction, commitment, job satisfaction, engagement, and motivation in creating positive work environments and work experiences for future while preparing them for the future. Employees who feel valued, are given opportunity to further training and to advance in the organization, who are given autonomy on job task, and feel as if their job possesses meaning are more apt to stay in the organizations employ. The overall outcome for organizations that practice such positive internal communication activities will be more than favorable than for those than engage in apathetic methods.

THE POWER OF EFFECTIVE INTERNAL COMMUNICATION 1. INTRODUCTION Internal communications can create many opportunities for creating increased company value and can allow a firm to obtain high returns on their human capital. Internal stakeholder

communications impacts many areas of organizational culture including motivation, satisfaction, trust, commitment, engagement, and more. Developing effective communication strategies to meet the needs of internal constituents is essential in reaching goals. One of the main focuses of human resources department is retaining employees and reducing turnover. Much literature has developed from the research surrounding these two topics. Turnover and retention rates are related to organizational culture, successful communication strategies, work environment, pay structures, rewards systems, psychological and emotional perceptions, and more. Employees who feel valued, are given opportunity to further training and to advance in the organization, who are given autonomy on job task, and feel as if their job possesses meaning are more apt to stay in the organizations employ. The overall outcome for organizations that practice such positive internal communication activities will be more than favorable than for those that engage in apathetic methods. 2. INTERNAL COMMUNICATIONS 2.1 Internal Stakeholders Defined Internal communication thus involves the management of behaviors and relationships amongst internal stakeholders within a firm (Jackson and Welch, 2007, p. 183). All levels of stakeholders must be effective communicated with including: all managers (CEOs, strategic, middle and front-line managers), employees, supervisors, work and project teams, and

THE POWER OF EFFECTIVE INTERNAL COMMUNICATION shareholders. Each group represents different sets of values and contributes in unique fashions to the organization and its goals through various forms of communication and participation. 2.2 Forms of Internal Communication Discussed Similarly, the internal communication activities of an organization are an on-going

process and include the informal grapevine as well as managed communications such as memos, pamphlets, emails, meetings, and more. (Jackson and Welch, 2007, p. 178). Emails are cheaper and offer a faster paced response, however, the preference for communication among all groups of employees is face-to-face, interpersonal, dialogic interactions. Meetings, despite being acknowledged as time-consuming, [are] valued as a channel for feedback and providing face time with top managers (Stafford, Vance, and White, 2010, p. 65). Thus, forms of communication are numerous and are increasing in numbers due to new modes of communication being introduced through the advent of new technologies and capabilities. Nonverbal and verbal communications equally contribute to the success of an organizations internal communication efforts. Differences in culture due to globalization and increased workforce diversity are creating challenges and have also opened windows of opportunity for businesses to reap benefits out of such variety (Barker and Gower, 2010, p. 295). However, organizational leaders that recognize the culturally accepted practice of storytelling to convey messages have been successful. Stories help us to make sense of what we are, where we
come from, and what we want to be (Barker and Gower, 2010, p. 299). Stories, like any other form of communication must be well managed and articulated clearly which indicated that preparation will involve a time and effort investment.

3. FACTORS INFLUENCING INTERNAL COMMUNICATION EFFECTIVENESS 3.1 Resources Allocated By the Company

THE POWER OF EFFECTIVE INTERNAL COMMUNICATION Several factors affect the prominence of internal communications efforts. Among these is how the resources are allocated by the company. Choosing between face-to-face communication and quicker or cheaper alternatives can sometimes lead to cost-benefit analysis

as to which form to utilize. Face-to-face methods are appreciated, [but] the costs associated with this mode of communication require organizations to make decisions about when scarce resources should be allocatedand when the alternative, less costly resource of electronic communication could be substituted (Cowell and Kupritz, 2011, pp. 54 55). However, it is still notable that face-to-face meetings allow participants to witness both verbal and nonverbal cues which are often essential to trust development and relationship formation. 3.2 Management Style and Communication Directionality Furthermore, managers must utilize effective communication tactics to gain the trust, respect, and loyalty of employees. In 2008, Madlock found that leadership style and ability is a component of internal communications (p. 62). Furthermore the researcher indicated that leadership may be considered a form of competent communication composed of messages containing both affective and cognitive strategies (Madlock, 2008, p. 73). At every level of the company, managers deliver messagesboth verbal and nonverbalwhich contribute to employee perceptions of the organization and its abilities. 3.2.1 Communication Competence Managers must be consistent and ensure clarity in their messages. Lewis et. al. suggest that when management effectively communicates these same ideas, statistically, employees are more satisfied with their job and have no intention to leave their current position (2006, p. 122) suggest that each message must not only have these attributes but must also be delivered

THE POWER OF EFFECTIVE INTERNAL COMMUNICATION numerous times until the message has clearly been understood and absorbed by the constituents being targeted. However, employee satisfaction and retention levels can be increased when employers consistently provide feedback to employees concerning their job performance, are powerful in communicating vision, structure messages carefully, encourage bi-directional

communication, energetically explain change rationales, publicize reward structures, and include employees in decision making (Helpling, Koehler, and Philippe, 2009, pp. 51 -52). Employees that remain unclear on vision, goals, issues, and initiatives may offer resistance, engage in deviant behaviors, and may even decide to engage in separation activities. In structuring messages, leaders must determine the audience and determine the right message to deliver. Moreover, the exercise of leadership works better when leaders use cues which followers can grasp more easily (Brandts and Cooper, 2007, p. 1262). Also, Lewis et. al. suggest that leaders practice strategic and structured communication efforts and place emphasis on front-line managers and supervisors utilizing face to-face styles in their respective local venues to allow more involvement in the communication process (2006, p. 122). Successful internal communication will be mindful of the targeted audience and their perceptions of the message being delivered and the perception of being involved adds a buy in factor. That is employees can believe in more issues when they are actively involved. 3.2.2 Participative Style Therefore, employees find relevance in being hands on when organizations communicate needs such as in times of change or crisis. Human resource policies that are participatory in nature allow employees an opportunity to obtain deeper senses of satisfaction with job and self and achieve greater meaning from the job (Rehman and Waheed, 2011, p. 168). This is a

THE POWER OF EFFECTIVE INTERNAL COMMUNICATION domino effect which begins with communicating policies, practices, and needs in a manner which encourages discussion and active involvement to heighten employee satiety. Similarly, work teams further participative goals by keeping groups involved on the issues and projects at hand. This form of practice can be labeled participative centralization. Its participative because the collaborative enterprise seeks to mobilize everyones knowledge; its centralized because that knowledge must be coordinated so that it can be applied at scale (Adler, Hecksher, & Prusack, 2011, p. 100). Here the key point is that people stay active, engaged, and satisfied due to their sense of importance and level of activity. 3.2.3 Listening as a Practice Also, employees value being listened to by their employers. Thus, bi-directional communication can be an asset to companies. This internal communication practice can create opportunities for information exchange in both directions and deters employees from fearing retaliation when they voice an opinion or point out problematic areas (Cassano, 2011, p. 12 13). In 2010, Schell and Smith suggest that training should be provided to supervisors and

managers on being better listeners with standard questions forms being provided to assist them in probing issues. 3.2.4 Good and Bad Examples of Internal Communication A perfect example of good bi-directional communication is when conducting evaluations and performance assessments. Managers and supervisor should discuss topics and encourage feedback. To note, this is an excellent opportunity for employers to celebrate achievements (Schell and Smith, 2010, p. 15). On the other hand, an example of communication pitfalls is in situations where there exists a long distance power orientation. Under these circumstances

THE POWER OF EFFECTIVE INTERNAL COMMUNICATION Communication takes place vertically downwards; informal and horizontal communication is quite limited. A greater communication gap is likely between the superiors and their subordinates because it is very hard for the subordinates to air their views to their senior managers (Khatri, 2009, p. 7). Open communication lines are honest and professional, not top to bottom with no voice for the common worker, and create the idea that the employer cares for the employee. 3.3 Organization Structure and Culture Thus, another factor which aids in the determination of how effective communication is

conveyed, understood, and utilized is the organizational structure and culture. Employees desire a sense of having a shared purpose because such organizational environments are bases on trust and cohesion and focus less on self-interest (Adler, Hecksher, and Prusack, 2011, p. 96). In addition, Ahmad et. al. found that there are seven dimensions of organizational climate i.e. promotion, political climate, evaluation, regard for personal concerns, professional development opportunities, internal communication, and organizational structure (Ahmad et. al., 2010, p. 250). Businesses that serve employee interests through their recognition of these dimensions and promote them via their internal communication practices enjoy the benefit of having highly productive and satisfied workers. 3.4 Change Communication These organizational dimensions may be challenged during times of change which tends to bring much confusion and concern amongst employees. Employers must communicate effectively and often during these times and must explain the reasons for the necessary changes in order to increase job satisfaction and reduce the chance of losing employees (Helpling,

THE POWER OF EFFECTIVE INTERNAL COMMUNICATION Koehler, and Philippe, 2009, p. 54). Communications during periods of change is difficult and

quite often employers are hesitant to engage in heavy discussion and debate over the surrounding issues with their staff (Cuthbert and Watts, 2011, p. 18). Nevertheless, employees will not accept the change and support the organization until their fears have been eased. For instance, when organizations are undergoing management changes due to ineffectiveness and/or bad practices, change communication provides an excellent opportunity for realigning commitments to excellence, employees, quality, etc. These types of failures can be promoted through internal communications and there is good reason to expect that communication will be particularly effective in organizations afflicted by coordination failure as this is primarily a problem of beliefs (Brandts and Cooper, 2007, p. 1224). Thus, change can be positive and allow employers to regain lost image and reputation with their internal constituents. 4. BENEFITS OF EFFECTIVE INTERNAL COMMUNICATIONS 4.1 Bi-directional Communication (Benefits to Managers and Employees) As discussed, bi-directional communication channels provide organizations with added benefits. By using the proper multidirectional channel and choosing the right message creativity, idea communication, critiques, goal focus and more are heightened allowing for the successful completion of projects and programs (Stafford, Vance, & White, 2010, p. 65). Also, employees are more committed, energized, productive, and satisfied. 4.2 Employee Organizational Commitment (EOC) Next, employee organizational commitment (EOC) indicates that employees have bought in to the firms culture, vision, values, and goals. Employers that seek to possess high levels of

THE POWER OF EFFECTIVE INTERNAL COMMUNICATION EOC are staffed with committed individuals [and] see higher levels of employee motivation, lower levels of tardiness and absenteeism, and reduced turnover rates (Baird, Blair, and Su, 2009, p. 2495). Finding ways to increase EOC include: reducing work-related stress, minimizing employees doubts of job security, increasing job satisfaction, and providing high levels of organizational support. 4.3 Satisfaction As indicated earlier, worker job satisfaction can bring additional benefits to companies with healthy internal communications. Allen et. al. found through their research that job satisfaction can be directly affected by employee satisfaction with communication (2010, p. 155). Furthermore, Rehman and Waheed discuss that employee job satisfaction is boosted

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through human resource management activities such as team working, upward communication systems and problem-solving groups provide employees with greater autonomy and greater opportunities to contribute to decision making (2011, p. 168). Job satisfaction and performance can be linked to internal communication effectiveness (Stafford, Vance, & White, 2010, p. 65). Thus, it is clear that companies that are poor communicators to their workers do not gain the benefit of high production levels due to their lack of satisfied and motivated workers.

4.4 Motivation

Motivated employers are those who have gained a sense of trust for the organization because of the information they have gathered and rationalized. Therefore, providing information gives an employee the opportunity to develop trust, and lack of information can reduce trust (Hartman, Thomas, and Zolin, 2009, p. 290). Highly informed and motivated workers are often more satisfied and give the organization a higher quantity and quality of work.

THE POWER OF EFFECTIVE INTERNAL COMMUNICATION 4.5 Engagement

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Further benefits are gained when internal constituents are actively engaged. Markos and Sridevi introduce two key influences on employee engagement which provide that employees enjoy feeling valued and involved and also that they desire to be informed on organizational happenings and encouraged to communicate back (2010, pp. 92 93). Therefore, engagement means involvement with more than just job task; employees should be allowed to be active in decision-making and will support the organization by aligning with vision, goals, and initiatives. To accomplish this task Vlachoutsicos suggests that organizations deliver effective messages and that they should 1.) Be modest, 2. ) Listen Seriously And Show It, 3.) Invite Disagreement, 4.) Focus the Agenda (2011, pp. 124 125 ). The goal is to improve both the internal and external image, engage employees, improve the talent pool, and to further develop employees (Kunerth & Mosley, 2011, p. 25). Similarly, when monitoring employee engagement on an individual employee basis it is viewable that one of the most desirable behaviors is stay. Stay is the behavior an employee exhibits when they are satisfied and engaged to the point that they wish to remain with the firm even if they have other options (Markos and Sridivi, 2010, p. 93). This will ultimately reduce turnover and increase retention thereby reducing HR costs. 4.6 Retention and Turnover Rates Moreover, reducing turnover is a major benefit to organizations in todays mobile and migrant society. Numerous factors will increase the likelihood of an employee to remain with a firm. Ensuring that employees are a good fit for a position will decrease the opportunity for a high stress level, dissatisfaction, disengagement, and departure. Autonomy is another key factor. When employees feel that they have some level of independence and control they are more likely

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to remain satisfied with their position (Clawson and Haskins, 2011, pp. 47 49). Organizations win much when this occurs. Active HR practices of recruiting, staffing, and keeping the people that are a good fit for positions not only reduces turnover rates and costs, but increases the wealth of information found in a talent pool characterized by longevity and allows for employee loyalty to the brand. 4.7 Internal Branding (Identity, Image, and Reputation) In essence, employees are powerful walking advertising campaigns. The advertisement can be positive or negative. It is true that The competitive advantage of strategic internal communication comes not only from the obvious benefits of employee satisfaction and productivity, but also from the positive contributions that well-informed employees can make to a companys external public relations efforts (Stafford, Vance, & White, 2010, p. 66). Employees are the most visible and vocal touch-point for external stakeholders, especially existing and potential customers and investors. That is why employee branding is quickly become an imperative for HR departments and leaders (Kunerth & Mosley, 2011, p. 25). Businesses with successful internal communications practices can benefit from satisfied employees promoting their identity, image and reputation. 4.8 Financial Gain and Increased Value Lastly, effective internal communications guarantee that all stakeholders of an organization gain financially. Employees, managers, and investors especially gain profits as internal communications increase (Brandts and Cooper, 2007, p. 1224). Therefore, for company shareholders communication can be a more useful tool of increasing profits than financial incentives. As Yates explains , improving communication effectiveness can translate into tens

THE POWER OF EFFECTIVE INTERNAL COMMUNICATION or hundreds of millions of dollars in added shareholder value for small and large companies alike. (2008, p. 19). Employees are better sellers when they support the brand, consumers

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respond well to heightened reputation, and investors are more often willing to reinvest or at the least not sell their shares as rapidly. This translates into maximized value and profit gain. 5. IMPACTS OF INEFFECTIVE INTERNAL COMMUNICATIONS 5.1 General Results By contrast, poor internal communications strategies can often result in the erosion of employee trust and confidence, dissatisfaction, low morale, lower productivity, and less financial gain. For example, when employees are not informed about changes in a timely or positive manner they can feel that management [is] out of touch with employee concerns, that others were better informed than they were about the changes, andthey [may] not understand how the changes will affect them (Goodman & Truss, 2004, p. 224 225). Management must counter these types of undesirable responses through effective communication measures to not suffer losses. 5.2 Internal and External Brand Image Suffers; Brand Value Suffers Additionally, other consequences can surface. As Vlachoutsicos indicates, negative perceptions of management and managerial activities can be developed by employees who are not adequately communicated with (2011, p. 126). As a result, internal and external brand image begins to suffer and the brand value is decreased (Rood and Wagenheim, 2010, pp. 83 84). Customers change their perceptions about the company because the employees are not providing quality service or the product suffers due to lack of concern for quality. Investors begin to seek alternative stocks or other ways to gain profit for the cost of their investment dollars. Following

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this progression the share price drops hurting internal stakeholders alike and it is all simply due to a lack of successful internal communication. 6. CONCLUSION In sum, strategic leaders, HR managers, and onsite management must develop strategies based on this research to ensure their communications success in lowering the turnover rate of their organization and increasing retention rates. They must look at employee levels of communication satisfaction, commitment, job satisfaction, engagement, and motivation in creating positive work environments and work experiences for future while preparing them for the future. By developing effective communication strategies, corporations can ensure that both internal and external value, reputation, and commitment goals are realized (Rood & Wagenheim, 2010, p. 92). Lastly, future research should concentrate on determining the greater links between maintaining a content workforce by determining the effects of evolving online communication channels (blogs, tweets, instant messaging, etc.).

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Schell, R., & Smith, S. (2010). Communicating to employees during difficult economic times. Public Relations Strategist, 16(1), pp. 12-15. Retrieved from EBSCOhost. Schlosser, F. & McNaughton, R. (2007). Internal stakeholder views of a market orientation strategy: implications for implementation. Journal of Strategic Marketing, 15(4), pp. 307 - 325. doi:10.1080/09652540701320944 Stafford, G., Vance, A., & White, C. (2010). Internal communication, information satisfaction, and sense of community: The effect of personal influence. Journal of Public Relations Research, 22(1), pp. 65 - 84. doi:10.1080/10627260903170985 Vlachoutsicos, C. (2011). How to cultivate engaged employees. Harvard Business Review, 89(9/10), pp. 123 - 126. Retrieved from EBSCOhost. Yates, K. (2008). Becoming an ROI builder: Delivering effective employee communication. Employment Relations Today (Wiley), 35(1), pp. 19 - 23. doi:10.1002/ert.20184