Benefits November 3, 2003

Better Corporate Communicators Have Higher Shareholder Return

November 3, 2003 (PLANSPONSOR.com) - Companies that effectively communicate with employees enjoyed a total return to shareholders (TRS) that was 41% higher than those that bollixed their communications program, according to a new study.
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The Watson Wyatt study showed that well-communicating firms enjoyed a 26% TRS from 1998 to 2002 – towering over the -15% suffered during the same time frame by those companies without best practices employee communications in place. A significant improvement in communication effectiveness is associated with a nearly 30% increase in market value.

“The survey results clearly demonstrate that the better a company has communicated with its workers, the better its shareholder returns have been,” said Kathryn Yates, global practice director of communication consulting at Watson Wyatt and one of the study’s co-authors, in a news release. “The bottom line is that employee communication is no longer a `soft’ function but rather a business function that drives performance and contributes to a company’s financial success.”

The survey also found that high levels of effective communication have a positive impact on employee turnover. According to the survey, companies that communicate most effectively are more likely to report turnover rates below those of their industry peers than companies that communicate less effectively (51.6% vs. 33.3%).

The study identified nine communication practices that are directly linked to an increase in shareholder value. The three practices associated with the largest increase in shareholder value are driving managers’ commitment to effective communication, having a formal communication process in place (including a documented communication strategy and implementation plan) and creating a clear line of sight between business objectives and employees’ jobs.

Specific communications practices and their estimated resulting shareholder value changes include:

  • drive supervisory/managerial behavior, 7.3%
  • follow a formal process, 5%
  • create employee line of sight, 4.8%
  • facilitate change, 4.3%
  • focus on continuous. improvement, 2.8%
  • connect to the business strategy, 2.1%
  • use employee feedback, 1.4%
  • integrate total rewards, 1.3%
  • leverage technology, 0.5%.

The survey also found that it matters how a company measures communication. Companies that use hard measures such as productivity, behavior change and achievement of business goals show a positive impact on ROI. Companies that use only soft measures such as awareness, understanding or satisfaction to measure their communication effectiveness actually show a negative impact.

A total of 267 US companies participated in the Watson Wyatt Communication ROI Study. The respondents were primarily large companies representing all major US industry sectors.

Copies of the study are available at http://www.watsonwyatt.com/research/resrender.asp?id=w-698&page=1 .

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