What is the cost of poor internal communication?

Long considered secondary, internal communication has regained its credentials, particularly during the health crisis. However, without measurement tools, and the implementation of improvements, poor internal communication can have serious consequences for a company.

For French companies, the loss is €9,100 per year per employee due to ineffective internal communication

Survey conducted by Mitel

These impacts can manifest themselves in different forms, more or less visible, which will affect the company at different levels. But also, these consequences are often preceded by clues, signals, which potentially indicate a developing internal communication crisis in your company. 

But do you know how mature your internal communication is ? Have you noticed any warning signs of its mismanagement ? What are the impacts of poor communication on your company ? In this article, we detail the impacts of poor internal communication on the company 🚀

#1 – The clues to look for

For many communication professionals, human resources professionals or even managers, it is sometimes difficult to detect the signals of poor internal communication, and the reasons can be varied.

For example, a company may have grown too fast, and not have a company-wide communication strategy. Or the communication tools used may be outdated and not relevant to current needs.

These signals can manifest themselves in different forms, sometimes visible, but also difficult to detect.

Weak signals

Crisis anticipation is an art in itself, and a real challenge. For this, it is important to set up a monitoring system in order to gather as much relevant information as possible. From this information, you can find the "weak signals". 

Weak signals are implicit information. They are not clearly evoked, but may be visible through behaviour, such as :

• Tensions within teams
• Rumours from the corridors
• Unsuccessful in-house events

The importance of the weak signal lies in its warning aspect. It is the starting point for an event (a crisis) that may potentially occur within your company. It is therefore a forward-looking element. 

But how do you pick up on these weak signals ? First of all, it is necessary to be vigilant and attentive to the life of the company. Then, these signals must be interpreted. For example, if you see that projects within a team have stalled, you need to ask the right questions : is it a problem with management? With the use of tools ? Or tensions within the team ?

By interpreting these weak signals, you will be able to prioritise areas for improvement, and thus potentially avoid a crisis. But the signs of poor internal communication may be more visible, and may be the result of actions on your part.

Direct feedback from your employees

As a communications professional, you may have already experimented with surveys or internal polls.  This feedback – which is qualitative and quantitative – allows you to collect feedback directly from your employees, and to have their feelings on the actions to be taken to improve your internal communication. 

This direct feedback is very relevant, and is the first step in improving internal communication: taking into account the needs and opinions of your employees.

When you set up actions to collect feedback from your employees, you should orient them around three criteria:

• The engagement of your employees
• The satisfaction of your teams
• The performance of your company

In your internal poll (or survey), you will be able to identify the shortcomings of your internal communication more easily. But before that, the challenge is to communicate about this audit, so that as many employees as possible take part.

In this first part, we discussed the clues to be taken into account, whether they are weak signals, or on the contrary direct feedback from your teams. The aim of the second part is to detail the direct costs of poor internal communication.

#2 – The visible costs of internal communication

The implementation of an internal communication strategy involves various direct costs. But what do these costs correspond to ? Direct costs are the expenses incurred directly by the company in providing a service or producing a product. As part of your internal communication, how are these costs calculated ?

The functioning of the communication department

In the context of internal communication, the salary is a direct cost, as it corresponds to the investment made in a service, in this case the development of internal communication.

So, if the latter is not effective, the salaries that are paid to your communication department are in a way « at a loss ». Even if these people are very competent, the impact of poor internal communication on these salaries will be significant, as there will be no return on investment. 

Within the framework of the communication service, it is necessary to understand the time spent by the various employees on their tasks, their salaries, the number of employees, and the various operating costs (service providers, equipment, etc.)

To assess the profitability of these investments, the following questions should be asked: 

• is the existing internal communication effective ?
• what is the ROI (Return On Investment) of the strategy ?
• does it involve all employees?

So if your communication strategy is not effective, the return on investment will be relatively low. In order to understand the areas for improvement, it is important to take into account the feedback from your employees.

A study by IDG (an American magazine publisher) showed that there is often a gap between employees and their managers regarding the perception of internal communication.

• 76% of HR and 63% of managers feel that communication is comprehensive, compared to 35% of employees
• 39% feel that the information is accessible

This study therefore shows that the perception of communication is not the same for all departments and employees. It is therefore essential to set up a survey to get feedback from your employees. Taking their feedback into account will optimise your investment in your internal communication strategy.

Other operating costs

Another direct cost of your internal communication is the raw materials, which represent a significant investment. For example, if you use an internal paper newspaper to communicate with your employees, but the information does not circulate well, or is not understood by your employees, the money that was invested to produce the newspaper will be lost.

For the use of paper, you have to count the printing, the inks, the printer, etc. All of these costs are lost if the information is not visible enough. But also, if you invest in a communication tool – for example a corporate social network – but your internal communication does not work, the investment – surely expensive – will also be at a loss.

There is no need to increase the number of tools if there is not a coherent internal communication strategy at the base.

Involvement of your staff

Poor or non-existent internal communication can have long-term effects on the engagement and loyalty of your employees. This will also have a negative impact on their productivity, as unhappiness will be increasingly present.

By changing your focus and orienting your internal communication towards the needs of your employees, they will feel listened to and valued. The quality of life at work will be improved, and your teams will be much more productive. 

In short, the involvement of your employees is a key aspect to consider. It has consequences at all levels of your company: productivity, absenteeism, turnover, quality of life at work or customer satisfaction.

To summarise, poor internal communication can therefore have three direct costs :

• salaries paid for the communication department
• investment in raw materials
• involvement of your employees in their tasks

But internal communication is not only about these direct costs, but also about the indirect ones.

#3 – The hidden costs of your internal communication

For internal communication, indirect costs can be calculated. These are feared because they are difficult to quantify, and they represent a risk to your company’s finances. To calculate them, different indicators are used:

• turnover
• absenteeism
• productivity

Turnover

First of all, what is turnover ? It corresponds to the ratio between departures and arrivals in your company. To calculate it, the average number of departures and arrivals in the company must be divided by the number of employees present at the beginning of the year.

In 2018, turnover was estimated at 15.1% in France

Preparing for take-off » Hay Group

If your turnover is rising sharply, there are several reasons for this. First of all, this rate may be normal in some situations, such as companies that hire a lot of temporary employees, where turnover is therefore high. However, it often corresponds to a bad social climate in the company.

If your communication is not effective, then the climate in your company can deteriorate. This can lead to tension, bad decisions, or a drop in morale among your staff. Resignations – due to poor communication – therefore lead to consequences that can be detrimental to the company.

36% of permanent contracts are terminated before the 1st anniversary date

DARES Analysis study

First of all, a person who leaves the company must therefore be replaced. The staff who will be responsible for training the new recruit will invest a significant amount of time and money. But the other risk is the « snowball effect ». The employee who resigns may make other employees want to do the same. 

On average, the cost of replacing an employee is 6 to 9 months’ salary

Karos

Your turnover will therefore have a strong impact on the engagement and loyalty of your employees, but also on your company’s finances, as the cost of replacing an employee can be high.

So how can internal communication address rising turnover? A good strategy will help to reduce turnover through different levers: 

• Better dialogue between management, managers and employees. The latter need to feel listened to and valued.
• A better corporate culture: the feeling of belonging is one of the factors that keeps an employee loyal
• An improvement in your employer brand, which will allow you to improve your brand image
• Uniting and creating links between employees
• Increased employee engagement

Productivity

Productivity is the ratio of output to the resources used to produce it. Thus, a drop in productivity may reflect various dysfunctions in the company:

• Poor project management
• Obsolete production tools
• A lack of motivation on the part of employees
• High turnover
• Recruitment problem
• Poor training of your staff

All these different aspects will weaken your teams, the organisation of the different projects, and therefore decrease your productivity.

A drop in productivity due to poor internal communication is estimated at $26,041 per employee per year

Vocoli

These different symptoms show one thing: poor internal communication can have consequences for the productivity of the company. Your employees may feel unmotivated and somewhat ignored by their superiors.

They will therefore be less productive, and this will have an impact on the productivity of your company.  It is also important to take into account the safety instructions.

For example, if you don’t communicate enough about good practices on production sites, employees can get hurt. Reduced productivity will also impact on customer satisfaction, as delivery times cannot be met.

A good internal communication strategy will solve these problems. By improving communication, your employees will feel valued and fulfilled in their work. This means that they will be much more productive and the work will be of better quality.

All in all, your company’s productivity will be improved and your customers will be satisfied. This will therefore be beneficial for the company’s image.

Absenteeism

Absenteeism is another indirect cost of the impact of poor internal communication. It is calculated based on the ratio of the number of hours of absence to the number of hours worked over a given period. Several factors are taken into account : 

• accidents at work, commuting accidents and occupational diseases
• sick leave for children
• unjustified absences

In 2019, the absenteeism rate in France was 5.11%, with 18.7 days of absence per year per employee on average

Ayming-Kantar TNS survey

Poor internal communication therefore has a strong impact on absenteeism. According to a study by Alma Consulting Group, absenteeism represents a cost of 60 billion to French companies. Various costs are included, such as salary maintenance, replacement costs, prevention, provident fund and contributions.

But above all, absenteeism has a strong impact on the organisation of your company. With a rising rate, the « snowball effect » can be felt. The tasks of the absent employee have to be taken over, which increases the workload on other team members. Their discomfort may increase, leading them to be increasingly absent. A vicious circle may therefore be established.

To remedy this, you need to ask the right questions. « Short » absences are normal in a company, for example due to illness. On the other hand, if long-term absences, as well as unjustified ones, are repeated, it is necessary to sound the alarm, as they may be synonymous with a malaise in your company.

Therefore, a diagnosis of your company is necessary. Are the workstations adapted? Is the workload too heavy? Is the equipment poorly designed? Is there a work-life balance?

It is therefore important to mobilise all employees in order to set up areas for improvement. With good internal communication, your absenteeism rate will be reduced, and the whole balance of your company will benefit.

In short, internal communication is therefore an essential part of corporate life. It impacts your organisation at all levels: turnover, absenteeism, productivity, direct costs, etc. By implementing an effective communication strategy adapted to each individual, the social climate will be positive, your employees will feel fulfilled and will therefore be more productive.