Knowledge is power. That phrase has never been truer than in today’s business environment where executives at Enron, Global Crossing, Arthur Andersen and other big-name companies are embroiled in controversy stemming from the alleged failure to disseminate critical information to employees, customers, business partners, advisors and shareholders. Until recently transparency was mainly an issue for shareholders, analysts and external board members seeking more financial information from company executives. But now, that focus has shifted to include the importance of transparency—open communication of business information—to employees, customers and business partners.

Most companies have nothing to hide, but executives don’t understand that deliberate secrecy or unintentional lack of transparency may lead to a communication crisis. Gaps in communication, deliberate or not, are frequently a root cause of stagnant or poor performance. Three main challenges exist for companies seeking to resolve a communication crisis and boost performance:

• Communicate effectively about strategy below the top executive level
• Demonstrate the link between employee action and company performance
• Disseminate critical information consistently to all employee groups
• To face the communication crisis and win, top executives must be willing to rise to these challenges

Challenge #1: Communicate effectively about strategy below the top executive level.
No matter the industry, most employees consistently feel uninformed (or under-informed) about their organization’s strategy, let alone about changes in strategic direction. In fact, more often than not, employees feel that they don’t learn about planned changes in strategy until changes are made, and then they are left to make assumptions about why things have changed. This often results in employee resistance, confusion and limited acceptance of change; slower implementation of new strategies; higher cost to get desired results; and, in the end, lower than expected return to shareholders.

In the case of companies that grow via acquisition, effective communication about strategy below the top executive level is critical to successful integration. After two years of aggressive growth through acquisitions, a $100 billion subsidiary of a global financial services company struggled to realize the value of its acquisitions. The leadership team was challenged to integrate the acquired firms and encourage cross-selling of products and services. Ineffective communication about the new strategy turned out to be a root cause of the trouble.

Baseline research revealed that the lack of a centralized approach to disseminating the company strategy and business-critical information to all employees was causing a communication crisis resulting in internal competition among employees clinging to legacy business practices and a decline in customer service. To resolve the crisis, this company chartered an internal communications function to partner with top management and provide oversight and coordination of all strategic employee communications. This new team developed a meeting kit and a consistent process to communicate the company’s business strategy to employees at all levels. Then executives engaged managers to present and facilitate discussions about the company and business unit strategy with their direct reports and so on until entry-level employees were informed.

A follow-up assessment showed that improved strategic communications, and particularly the manager-led strategy meetings, resulted in increased understanding of the overall strategy. Employees reporting a “clear understanding of the overall strategy” jumped 50% for those who attended the manager-led meetings. Management involvement helped win the hearts and minds of employees who were questioning the value of making a change. Communicating about business strategy was the first step to help reduce internal competition, improve customer service and drive performance.

Challenge #2: Demonstrate the link between employee action and company performance.
Most employees have some idea about how their work relates to specific department, group or work team results, but few employees clearly understand how their individual actions add value to the company and impact performance. Even in the sales function, where the correlation between goods sold and revenues earned is obvious, the profitability of different products and services may be poorly defined. To add to the confusion, leaders often communicate using MBA-speak (acronyms such as ROI, EVA, ROCE, TRS, IRR) that is rarely motivational for anyone outside the executive suite.

To effectively address this challenge, leaders must communicate in a way that is simple, inspires action and uses actual examples of what to do in the workplace. Companies that communicate clear links between employee action and company performance use what Jim Collins called “economic drivers” (From Good to Great, 2001, HarperCollins). These drivers are simple targets that all employees can relate to and understand without taking a finance course.

When a top five producer of baked goods was faced with the mandate to turn around the business in one year, the leadership team decided to change the goals and targets to increase operating efficiencies and make better use of existing assets. They decided to apply the concept of economic value to their own management incentive plan, but they also wanted the rest of the company to shift their focus to increase ROCE (return on capital employed). But how do you teach people who mix dough and bake bread how to impact ROCE?

Executives launched a series of employee presentations that began with humor—a manager pointing to a spreadsheet too small to read projected on a screen, then abruptly interrupted by the delivery of fresh bread to each table in the meeting room. Participants were provided with their own familiar product—a loaf of bread pre-sliced into the “components” of economic value. Leaders reassured everyone that they were still in the business of baking bread and satisfying customers. Then they facilitated open dialogues at each table about how workers in the bakery could contribute to growth, reduce cost, increase profit (and profit sharing to employees) and have direct impact on ROCE. Employees gained a new level of business literacy—understanding the fundamentals of their business, the goals and targets, and how they could impact company performance each day at work.

The results were phenomenal. Employees shared a common goal and began meeting or exceeding their performance targets. Profits increased 250% over a one-year period and the stock price more than tripled. The company became the most profitable in its peer group in the baking industry. Learning how to operate more efficiently by saving a little flour added up to a lot of dough.

Challenge #3: Disseminate critical information consistently to all employee groups.
Given all the technology available today to aid in the communication process, one might assume that consistent communication could be as simple as sending a weekly e-mail to everyone in the company. But this does not account for lack of access to technology, language barriers, different educational levels, cultural differences and the importance of human interaction when addressing sensitive topics. As many companies have learned, e-mail is not a substitute for face-to-face communication. So how do executives ensure that business-critical messages reach every business unit, job level, and employee group and are interpreted as intended? Executives must consider critical differences when communicating with their own diverse employee populations in much the same way that they factor key differences into decisions on how to market their products and services to geographically diverse customer segments.

Two professional services firms were faced with this exact challenge during their global merger. The CIO of the soon-to-be-merged firm realized that 3,500 IT professionals (working for two separate firms) dispersed in more than 150 countries had to collaborate pre-merger to ensure that 140,000 employees would receive consistent information and access to technology post-merger. Failure to deliver 250,000 internal Lotus Notes messages per hour and 300,000 external Internet messages per day could have resulted in millions lost due to the inability to conduct business. The potential challenges of supporting thousands of computer users each week could have led to reduced customer satisfaction and employee turnover among the IT staff. Leadership understood the huge risks of a communication crisis and took a proactive approach to bridging the gaps.

Establishing consistent communication required a strategy, formal structure and process; a targeted mix of communication vehicles and channels (in person, print, electronic, multi-media, etc.); and a heightened sensitivity to language clarity and cultural differences:

• The merger communication strategy focused on global consistency of messages, multi-channel reinforcement of the strategic goals of the newly merged firm and encouragement of behaviors required to build a new corporate culture.
• A formal global network of communication professionals was established to ensure timely dissemination of hundreds of messages each month, a process for collecting news and feedback, and a means for translating and reviewing messages for local sensitivities.
• Training was provided to leaders to help them understand the behavioral impact of their words and actions
• Tools were created to aid communication professionals in developing strategic, culturally sensitive communications.
• Technology was deployed to provide: news and announcements replicated on global databases; space for IT professionals to find resources and solve problems real-time; quick surveys to gauge concerns; video and voice conferencing to bridge communication between geographically dispersed colleagues; and reinforcement for messages delivered in person by leaders.

The success of this complex, integrated effort was demonstrated in tangible ways. Technology was connected on Day One of the merger that enabled business to be conducted as usual without interruption around the world. Internal customer service levels for IT support were maintained or improved as a result of learning from feedback. And turnover among IT professionals remained below 10% at a time when industry average turnover was double that figure. Consistent communication was a driver of high performance pre- and post-merger.

Lessons Learned
Even if you’ve been unsuccessful at overcoming these challenges in the past, there is good news: It is not too late to start effectively communicating with your employees.

1. To communicate effectively about company strategy below the top executive level, senior executives must create a centralized, manager-led communication plan for sharing that strategy and other critical business information with all employees.
   
   
2. To demonstrate the link between employee action and company performance, senior executives should follow the old adage: keep it simple. Executives must verbalize the link in simple, relatable terms and help employees visualize the behavior necessary to drive performance.
   
   
3. To disseminate critical information consistently to all employee groups, executives must create a formal communication strategy, structure and process that: a) recognizes key differences among their employees, b) uses those differences to segment the employee population into distinct groups based on their unique communication needs, and c) delivers customized messages to each of these groups.

Implementing these fundamental communication strategies will help executives to mobilize their employees to achieve greater company performance.