Good Communicators Make Financially Successful Companies

November 8, 2005 ( - Communicating with your workers isn't just idle chatter; it can help your company financially outpace those who play things close to the vest, a new study asserted.

A Watson Wyatt news release said its study of US and Canadian firms found that between 2000 and 2004, companies with the most effective communication programs returned 57% more to their shareholders than companies with the least effective. Firms with the most effective communication programs achieved a 91% total return to shareholders (TRS) during the same time frame, while companies with the least effective earned a 58% TRS during that same period.

“The results of our study confirm that communication is a critical element in creating successful business results,” said Kathryn Yates, global director of communication consulting at Watson Wyatt, in the news release. “The more effectively a company communicates with its employees, the better off its shareholders will be.”

Watson Wyatt had more good news about companies who routinely and effectively gab with their workers. The study also found that a significant improvement in communication effectiveness is associated with a nearly 20% increase in a company’s market value. Specifically, the study identified nine communication practices that are directly linked to an increase in market value. According to the study, the three practices associated with the largest increase in shareholder value are:

  • driving managers’ behavior to communicate effectively
  • connecting employees to the company’s business strategy
  • following a formal communication process.

Companies that communicate effectively are much more likely to give workers the opportunity to provide input into how the business is run. High-performing companies also consistently measure the communication function’s contribution to their strategic business goals.

Lower Turnover

Other key findings from the survey include:

  • Companies with high levels of communication effectiveness were 20% more likely to report lower turnover rates than their competitors.
  • The number of companies using “formal” communication measures increased from 73% in 2003 to 81% in 2005, mostly because of a jump in the use of focus groups and surveys.
  • Three-quarters of all respondents increased their use of electronic communication over the previous 24 months, while 30% decreased the use of print communication.

More information about the study is here .