Effective communication can help organizations emerge from economic challenges ahead of the pack. Companies whose communication emphasizes courage, innovation and discipline are the best at keeping their employees engaged and are the most successful financial performers, according to new research. For most organizations, talking is easy. However, communicating to inform and engage requires much greater skill.

For most organizations, talking is easy. However, communicating effectively — ensuring that business processes let information flow vertically and horizontally — requires much greater skill.

“We’re taught to clearly and rationally express our needs, desires, requests and expectations. And we’re taught to listen carefully. But how often do we do either?” Peter Bregman, leadership consultant and author of Point B: A Short Guide To Leading a Big Change, recently wrote at Harvard Business Review online. “How do we know when there’s something deeper and more significant going on?”

“Open, honest communication” is the clear leader in terms of what workers personally consider to be the most important factor in fostering employee engagement, according to 1to1 Media’s latest annual Employee Engagement survey (free registration required).

Yet clear, concise and frequent communication offers more to companies than driving employee engagement — it also helps achieve desired business results.

According to a recent study from Towers Watson, effective employee communication is “a leading indicator of financial performance.”

The global HR consultancy’s 2009/2010 Communication ROI Study explains that companies that communicated effectively had a 47 percent higher return to shareholders over a five-year period (mid-2004 to mid-2009):

If you invested $100 in 2004 in the companies that have less effective communication programs (bottom 25 percent), your investment would be worth $83 today. If you had invested that same $100 in the companies with moderately effective internal communication (middle 50 percent), it would be worth $116 now. However, if you had invested $100 in the companies with highly effective communication, the value of your investment would have risen to $130.

Especially during times of economic challenge and change, organizations that link communication with three performance levers in particular — courage, innovation and discipline — are the best financial performers, according to the study.

Towers Watson considers courageous communication to be “telling it like it is,” including explaining the rationale behind difficult business decisions. Full and open communication not only helps employees do their jobs, but is also a powerful sign of respect. Leaders should consider placing minimal restrictions on information flow, holding back nothing of interest to employees except those very few items that are confidential.

One reason some companies give for shielding employees from bad news is a belief that workers will lose heart and under-perform. Towers Watson’s research shows just the opposite: Tell people what they need to know and they will reward you with solid performance. Another excuse for holding back may be that employers simply underestimate their audience’s intelligence.

High-performing companies are also innovative. By delivering messages on customer feedback and increasing productivity, they make sure employees see how they affect the business. “Successful communicators explain how employees can make a difference to the business — especially when times are tough,” the study says. They understand that failing to do so now “will compromise their ability to move ahead quickly when the business environment improves.”

However, the study found that less than half of firms say they are effective at communicating to employees how their actions affect the customer or increase productivity.

Innovation is not exclusive to a person or group. Rather, it is the product of an organized culture open to breakthrough thinking. In this context, employees should be encouraged to rethink processes, streamline tasks, implement productivity measures and continue to think creatively.

“Have consistent messaging across an organization, but customize delivery to meet local needs,” Towers Watson advises. “Highly effective communicators customize their messages to maximize their impact. They strive for a balanced approach — communicating big-picture, company-wide messages for information and perspective alongside site-specific information for relevance and impact.”

Finally, high-performing companies are disciplined. “They take the time to document their communication plans and develop metrics to assess their success and identify areas for improvement,” Towers Watson says. “The best tie their measures to the organization’s strategic business goals and have a communication advisory group.”

According to the findings, high-performing companies are up to three times more likely than low-performing organizations to have a documented communication strategy.

With a sense of normality returning to certain sectors, there could be a greater impetus for companies to focus on developing the skill-sets they lack, so as to steer the business back toward growth. Effective communication often tops the list of missing skill-sets.

Effectively communicating goals and expectations can help ease employees’ concerns, empower staff and improve financial performance. Now more than ever, employers should be reaching out to their employees in meaningful ways.

“High-performing companies don’t shy away from tough messages. They make communication a priority and use every tool available to reach out to a workforce in desperate need of information and direction,” Towers Watson concludes. “In the absence of consistent messages, employees will fill the void with rumors and speculation. And it takes 10 times the effort to correct misinformation than it does to deliver correct information in the first place.”

Managers often get a bad wrap for poor communication, but employees also have an obligation to be clear, confident and flexible when communicating their ideas to employers.

Resources

Capitalizing on Effective Communication: How Courage, Innovation and Discipline Drive Business Results in Challenging Times
Towers Watson, December 2009

How to Avoid (and Quickly Recover from) Misunderstandings
by Peter Bregman
Harvard Business Review, July 21, 2010

The Secrets to Engaging and Retaining Employees (registration required)
by Elizabeth Glagowski
1to1 Media, Dec. 7, 2009