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Effective corporate communication linked to better financial performance29 March 2006
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, according to a recent study conducted by Watson Wyatt Worldwide. The 2005/2006 Communication ROI Study(TM) also found strong correlation between a company's communications and its employee engagement and retention levels.
The study of 335 North American companies identified nine communication practice areas that affect market premium. Among these practice areas, managerial communication support that drives supervisors' and managers' behaviour -- which includes, among other things, formal communication training and tools and rewards for effective communicators -- was identified as the element with the highest impact on a company's market premium, contributing 3.8 per cent to the overall 19.4 per cent higher market premium. This communication element was also the main differentiator between Canadian and U.S. respondents. For example, the gap between top performers and poor performers on formally training managers on communications tools is much wider in Canada than in the U.S.
"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 Worldwide. "As companies begin their yearly planning cycles, they should carefully consider the resources they allocate to this important area."
Investing in internal communications also provides other organizational benefits such as improved employee engagement and retention. According to the study, companies that communicate effectively are 4.5 times more likely to report a high level of employee engagement and are 20 per cent more likely to report lower turnover rates than firms that communicate less effectively.
Most and least effective communicators by sector
The study found that firms within the financial and wholesale/retail trade sectors rank among the most effective communicators (45% and 40% respectively), while companies from the basic materials (18.2%), general services (21.4%) and healthcare (23.8%) sectors tend to rank among the least effective communicators.
Common traits of effective communicators
Although respondents came from various industry sectors, the findings revealed some interesting commonalities among highly effective companies. These firms were particularly effective in:
- treating managers as key audience, regularly providing communication
counsel to senior management;
- having a communication program in place and a documented internal
communication strategy;
- openly communicating with employees, sharing business plans and goals
as well as providing information about matters that affect them.
About the Study
The 2005/2006 Watson Wyatt Communication ROI Study, conducted between May and July 2005, examines the relationship between an organization's communication practices and its business performance. The study included 335 participants in large companies in Canada and the United States. Participants were asked to reply to questions on topics related to employee engagement, global communication, the communications function's relationship to senior management and emerging communication technologies. A multivariate regression and statistical analyses were conducted to determine the relation between companies' communication programs effectiveness and the magnitude of the effect these programs have on surplus market value.
About Watson Wyatt Worldwide
Watson Wyatt Worldwide (NYSE:WW) is a global human capital and financial management consulting firm. The firm specializes in employee benefits, human capital strategies, technology solutions, and insurance and financial services and has 6,000 associates in 30 countries. In Western Canada, the firm serves clients from Vancouver and Calgary; in Central Canada from Toronto and Kitchener-Waterloo; and in Eastern Canada from Montreal. For more information, visit www.watsonwyatt.com/canada.
For further information: Gal Wilder, Cohn & Wolfe, ph. (416) 924-5700 ext. 4074, gal_wilder@ca.cohnwolfe.com
Source: newswire
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