Keeping staff happy to boost shareholder returns

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By: Wise Marketer Staff |

Posted on November 11, 2003

Employers looking to increase shareholder returns and reduce employee turnover need to examine how effectively they are communicating with their workers, according to an employee communication study from human capital consulting firm, Watson Wyatt.

The study showed that companies with the most effective employee communication programmes provided a 26% total return to shareholders (TRS) from 1998 to 2002, compared to the -15% TRS experienced by firms that were viewed as communicating least effectively. A significant improvement in communication effectiveness was also associated with an increase in market value of up to 30%.

Some 267 companies in the US participated in the Communication ROI Study, which examined the relationship between an organisation's shareholder returns and its communication strategy and practices. According to the survey, companies that communicate most effectively are more likely (51.6%) to report staff turnover rates below those of their industry peers, compared to those that communicate less effectively (33.3%).

Best practices
The study identified nine communication practices that appear to be 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.

"The better a company has communicated with its workers, the better its shareholder returns have been," noted co-author Kathryn Yates, global practice director of communication consulting for Watson Wyatt. "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."

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