Chapter 30

Communication in Business

Effective Communication

Any means where there is a transfer of information between individuals that leads to understanding is communication.

• Effectivenessmeans getting something done as intended or achieving the purpose of something successfully.
• Effective communicationcan therefore be defined as getting the required information to the person or persons who need it in the most appropriate way and promptly for its intended use.
• The right message

Communicating the right messages, which consist of good quality information.

• To the right person

For communication to be effective, it must get through to the right person or people who need it to make their decisions.

The person receiving the information should be able to understand what it means.

• Speed

An essential requirement is that communication be timely so that it reaches the person in time to make use of it.

• Support effective decision making

Providing high-quality information to the right people at the right time and through the right channel or method will support better-quality decision-making within the organisation.

• Cost-effective

The communication system, as well as the information communicated through it, should be cost-effective.

Informal communication does not have an obvious cost, but formal communication systems may be expensive – for example, when they are large IT networks.

• Employee training

Employees should be trained to communicate effectively– choosing the suitable communication methods, crafting the right message, and enhancing transmission speed and reception accuracy.

Ineffective Communication

Ineffective communication has adverse consequences for the organisation:

• Poor decision-making

If the information communicated is ‘wrong’ – for example, inaccurate or incomplete, wrong decisions may be taken.

Wrong decisions inevitably result in inefficiency or over-spending – and an ineffective organisation that fails to achieve its objectives.

Information does not reach subordinates

In a hierarchical organisation, information may fail to be passed on from senior management to the employees, who are expected to carry out the instructions and wishes of management.

If individuals are uncertain about what they are supposed to be doing, they will not do it.

Information does not reach managers

In a hierarchical organisation, information may not be passed on from subordinates to their managers.

Subordinates may be unwilling to give information to their manager for fear of how the manager may react. Or managers may not listen to what their subordinates are telling them.

Unless managers are kept informed, they will fail to identify problems or opportunities in good time and react too late.

• Lack of trust

Individuals within the organisation will not trust what they are told.

They may not believe what they are told or think they are not being told everything they ought to know.

• Poor morale

The morale of employees within the organisation may be low, especially when communication is not flowing effectively between managers and subordinates.

Junior employees may think of their relationship with management as ‘them and us’, people with different interests and concerns.

• No sense of purpose

Employees may lack a sense of purpose and not understand what to do.

They may perform their job and carry out routines to do their work but may not understand why they are doing it.

• Lack of coordination

There may also be a lack of coordination between employees and departments and an inability to coordinate efforts.

There may be mistrust or conflict between departments because people within each department do not understand what the other department is trying to achieve.

The main consequences of ineffective communication are that information is not communicated, poor-quality information is transmitted, and as a result, poor-quality decisions are made, or action is not taken when something needs to be done.

Formal and Informal Communication

Formal communication is information transmitted through official channels, which individuals send as part of their job and work.

Formal communication includes meetings, management reports, official emails, and telephone conversations about work matters.

Formal information is communicated at all organisational levels and through various IT systems.

Informal communication (the “grapevine”) is the communication of information outside official channels. It may be described as ‘unofficial’ or ‘gossip’ even concerning work matters.

Information communicated informally can be accurate and reliable, but it can also be unreliable and incorrect – for example, it may be a ‘rumour’ rather than a communication of known facts.

Direction of Communication

• ‘Horizontal’,‘vertical’ and ‘diagonal’ describe the direction of the transfer of formal information.
• In a business organisation with a hierarchical structure, horizontal communicationinvolves transferring information between individuals at the same level in the hierarchy. It could be communication between colleagues or co-workers in the same team or work group, or it could be communication between individuals at a similar level in different departments in the organisation.
• Vertical communicationis information that goes up and down the scalar chain. Upward vertical communication is from subordinates up to their managers. Downward vertical communication is from a manager down to a subordinate.
• Diagonal communicationis between individuals at different levels and departments within the organisation. For example, diagonal communication may pass from a senior manager in one department to a middle-ranking manager in another.

Verbal And Non-Verbal Communication

• Verbal communicationis what people say to each other when they speak to another person directly, either face-to-face or by phone.
• Non-verbal communicationtypically describes how people communicate through their body language and tone of voice, which may give a different meaning from what they are saying.

For example, a person in a meeting may say they are happy about a business decision. Still, their body language may indicate that they are, in fact, not happy about it (by frowning or refusing to make eye contact).

This example demonstrates how body language can indicate that what a person says may not be the entire truth.

Communication Methods

Activity 1

Match the best method for the communication.

Activity 2

Select the most appropriate communication method for the task.

Face-to-face meeting

Phone call

Email

Text message

Formal memo

Instant messaging

Communication Patterns

A pattern of communication is how information is communicated within an organisation.

There are at least five basic communication patterns originated by Harold Leavitt.

Activity 3

Identify the communication pattern in the scenario.

Chain

Wheel

Y

Circle

All-channel

Effectiveness of Communication Patterns

Each communication pattern has specific characteristics that may be relevant to its effectiveness.

In practice, individuals within an organisation may be a part of several different groups, each with its communication pattern.

Management’s concern is understanding how information is communicated between individuals and whether it is communicated effectively. The communication pattern may be relevant to the effectiveness of the communication system.

When considering communication patterns and which to use in different business situations, managers should consider all the factors in the above activity, including motivation – some patterns, such as the Y and the wheel, have been less motivating. 

Types of Information

Information is used at all levels within an organisation. Just as levels of management can be classified into strategic, tactical and operational, information can be organised in the same way.

Activity 4

Classify the information relevant to the strategic, tactical, or operational level.

Information Systems

Systems for processing and providing different types of information can be divided into several categories.

The various information systems are described below.

Information that junior and middle managers use comes mainly from transaction processing and automated office processing systems within the organisation.

Each information processing system within a business has a different purpose and uses data or information from various sources.

The word ‘system’ typically refers to a computer system. With advances in digital and communications technology, some of these systems obtain and analyse data from sources outside the business organisation and internal information.

• Executive Support Systems (ESS)

Executive information systems and business intelligence systems gather and display information for executives at a senior level in the organisation.

• Decision Support Systems (DSS)

Decision support systems support management in their decision-making function by analysing data and enabling them to make sound judgements.

These systems are designed for managers at the middle-to-senior level within the organisation. They would, for example, include spreadsheets devised to forecast costs and sales for new product proposals.

• Management Information Systems (MIS)

Systems that produce information to support management decision-making are called management information systems.

For example, management information systems can produce reports comparing monthly sales to plan or variances of the costs of producing items in a factory compared to budget.

These management information systems obtain the data for producing their information mainly from transaction processing systems.

• Office Automation Systems (OAS)

Office automation systems perform tasks without human intervention or minimal human intervention. Some may provide transaction data for possible use later as management information.

For example, office automation systems may archive all the emails and phone calls made in the business. They can also generate letters and emails automatically, for instance, to customers placing orders.

• Knowledge Work Systems (KWS)

A knowledge work system (KWS; also referred to as a knowledge management system – KMS) facilitates the creation, integration and dissemination of (new) business knowledge within and throughout an organisation.

• Transaction Processing Systems (TPS)

Transaction processing systems process routine transactions, such as sales and purchases. Bookkeeping systems in an accounts office are an example of transaction processing systems.

Transaction processing systems also update master files that contain a historical record of transaction data, for example, about customers, suppliers, employees and inventory. This transaction data can be analysed to produce information for management.

It involves using specialised tools to enable knowledge creation and integration into the business environment, such as event modelling and computer-aided design.

• Expert Systems

Expert systems are IT systems that attempt to replace human expertise by replicating knowledge in a database.

For example, applications include doing a credit check in a mobile phone shop or assessing potential tax savings from a personal finance perspective in a bank branch.

Lauden and Lauden have diagrammatically shown the relationship of information systems to each as:

Activity 5

Match the information with the appropriate information processing system.

*Please use the notes feature in the toolbar to help formulate your answer.

Attributes of Good Quality Information

Information may be provided as a matter of routine, as part of a regular procedure. For example, managers may receive monthly performance reports for their part of the business. Alternatively, information may be obtained on request as a non-routine item.

Whether it is routine information or information provided on demand, information must have a purpose.

In business, the primary purpose of having information is to help management and other employees to make informed decisions.

Decisions should be better when they use good-quality information than when they are based on inadequate information.

ACCURATE Mnemonic

The attributes of good information can be remembered with the ACCURATE mnemonic:

The cost of providing information can be calculated reasonably, but the benefits obtained from information are much more difficult to quantify. These may be the benefits that arise from making better-quality decisions than if the information had not been available.

Applying the Attributes of Good Information

The effectiveness of business communication depends on a combination of the information itself, whether it is good quality, and the communication process.

Some scenarios where the quality of information is poor are:

• Excessive use of jargon

Jargon is the technical terms used by members of a professional fraternity. Excessive use of jargon would exclude non-members and make communication difficult. This fails the “User-targeted” and “Easy-to-use” attributes.

For example, a manager has received a report from the accounting department commenting on the department’s financial performance in the past year. The manager may not understand many accounting terms used in it.

In this situation, the accountant who prepared the report has used technical vocabulary (or ‘jargon’), which is understandable to accountants, perhaps but not to non-accountants.

• Excessive accuracy

Excessive accuracy can make it more challenging to understand the figures, and users may question the reliability of its source, especially for future-oriented information (forecasts, etc.)

For example, the accounting department in a vegetable processing factory has prepared a sales forecast for the next three years. They estimate that sales will be $125,935.89 in the first year, rising to $131,751.56 in the second and $136,001.28 in the third year.

This information is too accurate for its purpose. Forecasts do not need such a level of accuracy. So, the figures could be rounded to $126,000, $132,000 and $136,000, which makes them easier to understand and provides an adequate level of ‘Accuracy’.

• Irrelevance

Only necessary information should be provided to the recipient to improve focus and understanding. Anything more would be irrelevant and may lead to confusion.

The production manager is given a performance report, comparing the production department’s actual performance with the expected performance. The report shows an overspending of $60,000 on beans because the purchase prices for beans were over budget.

In this situation, the production manager has been given information about the price of beans. This information should be given to the purchasing manager, who is responsible for buying beans cost-effectively, not the production manager. The information is not ’relevant’.

• Late information

Information received too late is not actionable and does not help decision-making.

For example, the production manager of a vegetable processing factory decides that the factory should spend the next week producing only tinned beans.

At the end of the week, the sales manager says they should have made carrots because the demand is weak for beans and strong for carrots.

The production manager obtained information about which product to make too late.

Either the production manager should have asked for sales information earlier, or the sales manager should have given it earlier. The news was not ‘timely’.

Why Communication Barriers Occur

Communication barriers result in ineffective communication, and understanding is not successfully transferred.

There are two main types of barriers to effective communication:

Interpersonal or personal communication barriers arise from the sender’s failure to provide relevant information or the receiver’s inability to understand the information.

The communication may also be affected, lost, or distorted because of interpersonal differences between the sender and receiver.

Technical barriers to effective communication mean messages do not get through as intended because of problems with the communication system.

For example, there may be problems with the speed or reliability of the communication channel, such as email servers breaking down.

Also, the choice of the communication channel may not be the most suitable – for example, telling someone they are being made redundant by email rather than face to face.

Noise in Communication

Noise prevents effective communication. There are various reasons why noise occurs.

Other Communication Barriers

• Distortion Of Message

A message is distorted when its meaning is changed or lost in communication.

This can happen, for example, when information is communicated verbally and not properly understood when written communication might be much more suitable.

• Information Overload

This happens when individuals are given so much information that they cannot take in everything they are told. Often, they will fail to see the most important information items.

• Selective Listening

Individuals may have a firm opinion about something and so may hear only what they want to hear – information that is consistent with their set opinion – and not listen to anything that raises doubts about their point of view.

• Selective Reporting

Individuals may inform their managers or colleagues only what they want them to hear – the good news and not the bad news, to create a favourable perception of their performance.

• Different Views About What Is Important

Individuals may have different views about what is important and treat information differently. For example, an individual may fail to respond to an urgent communication by failing to recognise its importance.

• Distance and Familiarity

Individuals may attach less importance to information from a distance away or from people they do not know well.

• Differences Between People

Communication may be ineffective because of the differences between the sender and receiver of information. The use of technical language, jargon, or language differences may cause barriers.

Overcoming Communication Barriers

• Overcoming Interpersonal Barriers

Good communication is a vitally important function of management, and effective managers should be able to communicate well with other people.

There are various ways of overcoming interpersonal or personal barriers to communication.

Communication skills can be improved through training. Training may also help individuals to overcome barriers to communication caused by the use of jargon or limited fluency in a foreign language.

Problems with interpersonal communication can also be improved by making it easier for people to talk to each other.

For example, members of a work team might be located in the same office so they can communicate continually.

Departments that work closely together might also be located close to each other.

Where individuals are geographically distant, they can be encouraged to talk regularly – for example, through regular phone calls.

Managers may hold regular ‘team meetings’ for their work group – for example, at the start of each week – to discuss issues.

• Overcoming Technical Barriers

Employees should have access to the equipment and systems they need to communicate appropriately.

For example, a firm of management consultants may provide all their employees with a laptop computer that can link to the firm’s cloud-based systems and a smartphone so that they can make calls and receive and send emails and text messages to colleagues and clients at any time.

Managers should be given access to the information they need and the tools they need to use it effectively.

Senior executives in larger companies may have to use a management information system (MIS) or a business intelligence system to help them remain well-informed.

Making sure that the message is clear.

For example, performance reporting systems may benefit from reporting by exception – reporting only aspects of performance that seem unusual or exceptional and should therefore be investigated.

Similarly, IT systems may produce automatic reports for management when a tolerance limit or boundary limit is exceeded.

Choice of appropriate communication channels or using more than one channel to communicate a message.

A typical example is to confirm, in writing or by email, anything that has been discussed or agreed upon verbally in a meeting or a phone call.

Activity 6

Match the appropriate communication problem with the most appropriate solution.