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Communication in organizations encompasses all the means, both formal and informal, by which information is passed up, down, and across the network of managers and employees in a business. These various modes of communication may be used to disseminate official information between employees and management, to exchange hearsay and rumors, or anything in between.

The challenge for businesses is to channel these myriad communications so they serve to improve customer’s relations, bolster employee satisfaction, build knowledge -sharing throughout the organizations, and most importantly, enhance the firm’s competitiveness. Perhaps the importance is best understood by considering what things would be like in its absence. For instance, if a company has a mechanism for recording and transmitting special order request from its customer, and the employees in the sales and fulfillment areas only interact minimally, there is a good chance that when it receives a special request, the company will have difficulty in delivering what the customer wants.

It may even lose the sales as employees grapple with an unusual request the management has not prepared for, now considering a company going through merger, the top executives at the merged entity proclaim that there will be thousands of layoff to boost efficiency, but the management is slow to say who will be affected.

Furthermore, they must think about the criteria that can be used for who is to be laid off, and what the separation terms will be. To make matter worse, an authorized list of persons facing the ax is rumored to be circulating and specific names are brandied about as being on or off the list. This situation continue for weeks before management comes forward with the full details.

This would be hard to see how such a scenario could be anything but detrimental to employee morale, and it might well lead to valuable employees who were not slated to be let go jumping ship because of the chaos and management thoughtless tactics.

As a final example of poor communication, there might be an imagination of a business with a large, young workforce that is highly trained. However the company is very hierarchical and a premium is placed on seniority over originality and other employee’s traits. A few younger employees have approached management with a new business idea, but their immediate supervisors have not taken the proposal seriously and upper management is largely inaccessible to these employees. As a result, the small group decides to leave the company and start their own firm, which grows quickly and proves to be incredibly profitable.

If these scenarios seem rather predictable some are based loosely on real events, they serve to illustrate obvious communication gaps and missteps businesses must surmount. In each case, not only were employees or customers left unsatisfied, but each incident also could have led to monetary losses for the companies’.In short, communications both internally and externally must be open, timely, complete and accurate to keep a business running smoothly and to maximize its return on its human capital.