Many business executives know intuitively that communicating effectively with employees is crucial to achieving goals, but they have had little data to confirm their instincts. Two recent studies provide proof, showing a robust relationship among effective communication,employee behavior and financial performance. Effective employee communication can make a big difference when it comes to implementing a total rewards strategy ?linking employees?goals to those of the company. This article shares key findings from this research and explores the communication practices high-performing companies use to successfully attract, retain and engage their employees.
Research Shows Communication Matters
Before focusing on employee communication抯 role regarding total rewards, let us explore the broader view of how effectively it serves the entire organization.
Watson Wyatt Worldwide抯 ?005/2006 Communication ROI Study,?which surveyed 335 companies averaging 13,000 employees, uncovered a strong link between effective communication and financial performance. The companies that communicated the most effectively produced a 57-percent higher total return to shareholders from 2000 to 2004 than those that did not. Implementing or improving communication practices was associated with a 19.4-percent higher market premium.
Perhaps the most important discovery in the study was that effective employee communication is a leading, rather than lagging, indicator of financial performance. The correlation between communication effectiveness and the following year抯 financial performance was twice as large as the correlation between financial performance and subsequent communication effectiveness. This suggests that communication effectiveness is a driver rather than an outcome of strong financial performance.
Communication and Total Rewards
If accepting total rewards includes everything that an employee perceives to be of value resulting from the employment relationship, then employee communication plays at least two important roles.
First, many employees value clear communication, be it from the senior leadership about the company抯 direction, from their manager about their job performance or from human
resources about getting the most out of their benefits. The advantages for a firm that does this well may include higher employee engagement, lower turnover and ultimately stronger financial performance. According to the study, companies that communicate effectively are 4.5 times more likely to experience a high level of employee engagement than those with low communication effectiveness. Those same highly effective companies report 20-percent lower turnover relative to competitors than those who communicate less effectively.
Second, if employees do not understand their compensation and benefits programs, how can
executives expect them to appropriately value their rewards package and aptly respond to
the underlying incentives? Truly effective employee communication can influence what employees value, and in turn influence their behavior. Watson Wyatt抯 揥orkUSA 2004/2005 Study?of 12,703 U.S. workers across all job levels and in all major industries found that more employees are more satisfied with a below-average benefits package that is communicated well than those with an above-average benefits package that is communicated poorly.
Communication Practices That Deliver Results
Most companies could benefit from simple improvements to their employee communication
regarding total rewards. Following are specific total rewards communication practices
that can change employee behavior and influence financial performance:
?Connect all communication about total rewards to the business. Senior leaders should keep
employees aware of how decisions about their rewards programs align with the organization抯 vision, strategy and goals.
?Give managers and supervisors the tools, training and information they need to communicate effectively with their employees about their total rewards programs. Involve managers and supervisors early on when major change occurs, especially changes to the 揺mployment deal?that employees agreed to when they were hired. This gives managers and supervisors time to understand the change and to develop context for their employees so they can deal with resistance, address employee concerns and drive behavioral change.
?Create a total rewards communication strategy that is linked to the business and focuses on deliverables and measurable results. Update the strategy annually to align communication practices with the realities of the business and the needs of a constantly changing workforce.
?For global companies, form a total rewards global advisory group to identify and voice local requirements about reward programs, to customize rewards messages to meet local and cultural needs, and to secure buy in among managers at the local level when change occurs.
Putting It All Together
Many executives understand the need to communicate effectively with employees. However, they sometimes find themselves fighting an uphill battle to convince others in the firm that it is worth the investment. But it can be done. One organization recently surveyed executives, managers and employees about the effectiveness of communication. Once they compared that information to their organization抯 results from the communication ROI study, they had a complete picture of communication effectiveness and areas for improvement. They plan to incorporate the measurement of these communication-improvement areas into the incentive plan for managers and directors.
Another organization measured the effectiveness of its employee communication as part of a broader effort to evaluate its company culture and how it fits with its company抯 vision and business strategy. It used the information it gathered to develop a new company vision and a new employee-engagement survey effort. Sharing the results from these recent studies and the actions of other companies can help make the case for investing in communication, particularly as part of a total rewards package. The statistics support what is known: If employees understand their rewards, they will value them and be more engaged in the business, which will realize more value for the dollars invested in total rewards programs. The company will also likely see lower turnover and improved financial performance. Such outcomes make clear that it pays for employers to place a priority on communicating effectively with employees.