The Financial Impact of Employee Communications Part 2

From the Desk of the CFO

Part 2:  Trying to save money by not investing in employee communications usually ends up costing an organization far more in the long run.  

As I shared in my last newsletter, many organizations are reluctant to spend money on employee communications. They think they are saving in the process, but it's not true. Organizations actually make more money when they invest in employee communications. In fact, research proves a direct correlation between effective communication practices and organizational success.

Effective internal communication serves two essential functions. It provides information employees need to do their jobs, and it helps to build trust and commitment. Without it, employees wind up working in a vacuum with no clear direction, vague goals, little if any initiative and limited opportunity for advancement.

Morale plummets when communication is ambiguous, unfocused, lacks information and purpose, and doesn't provide an opportunity for genuine two-way dialogue. The negative impact reverberates throughout the organization and employees' lack of commitment is reflected in every relationship: coworkers, suppliers and customers.

Here's a recent case in point. 

Beginning last year, following a move, I asked our suppliers to change our billing address. Despite numerous requests by phone, email, and old-tech posted letters, one supplier did not change our address and as a result, I did not receive any invoices. However, I did get very regular and efficient phone calls from their collections department threatening to remove the leased equipment. I called again and explained the issue. They promised to resolve the situation. Three additional months have passed with no response or resolution.  

As this was taking place, I attended a conference where I met several HR representatives from this very organization. I asked what problems they faced in performing their jobs. The first thing they shared was that they had very little money for employee communications.  And, although they got better results when they outsourced some of the responsibilities, they couldn't do it very often "due to budget constraints."

To close the loop on this story, I decided to look this company up on Glass Door. The most common complaint was lack of communications. No surprise to me!  My experience was clear -- the employees of this company, at multiple levels, don't know how to resolve issues or treat customers as valued assets. And worst of all, their management can't connect the dots and see the negative effect this behavior is having on their financial goals.

XL will end its relationship with this organization. We may be small potatoes, but I wonder how many other customers this company has lost due to poor communication, training, and service protocols. And suppose their management actually compared such losses of income to their "savings" in employee communications. How smart would they consider their frugal budgeting then?

David J. Cohen
CFO
XL Communications Inc.

Want to learn more? Contact us at 203.761.8841 or email Jeff at jsaverine@xlcommunications.com.