Watson Wyatt Worldwide has released its 2005/2006 Communication ROI Study™ and it is packed with terrific information that proves in cold hard numbers that effective public relations is a leading indicator of an organization''s financial performance. The survey was conducted over a four-year span. It determined that companies with "the most effective communication programs" returned 57 percent more to their shareholders than companies with "the least effective communication programs." Among other things, effectiveness is defined as establishing a two-way communications channel that enables and encourages feedback.

The survey also concluded the companies with "the most effective communication programs" achieved a 91 percent total return to shareholders while those with "the least effective communication programs" earned just 58 percent.

The organization''s initial study, the 2003/2004 Watson Wyatt Communication ROI Study™, demonstrated the correlation between communication effectiveness, organizational turnover and financial performance. The 2005/2006 study was designed to test the findings and take them a step further.

Watson Wyatt says the findings of the 2005/2006 study confirms the earlier study findings, determining that effective communication serves as the lifeblood of a successful organization by reinforcing the organization’s vision, connecting employees to the business, fostering process improvement, facilitating change and driving business results by changing employee behavior. The latest data also found that effective communication is a leading indicator of an organization’s financial performance.

According to Watson Wyatt''s executive summary, key findings include:

  • Companies that communicate effectively have a 19.4 percent higher market premium than companies that do not.
  • Shareholder returns for organizations with the most effective communication were over 57 percent higher over the last five years (2000-2004) than were returns for firms with less effective communication.
  • The 2005/2006 study found evidence that communication effectiveness is a leading indicator of financial performance.
  • Firms that communicate effectively are 4.5 times more likely to report high levels of employee engagement versus firms that communicate less effectively.
  • Companies that are highly effective communicators are 20 percent more likely to report lower turnover rates than their peers.

Other survey findings cited in the executive summary iclude:

  • Two-thirds of the firms with high levels of communication effectiveness are asking their managers to take on a greater share of the communication responsibility, but few are giving them the tools and training to be successful.
  • Global firms are not customizing their messages to meet local needs or cultural sensitivities.
  • On average, firms within the financial and retail trade sectors rank among the most effective communicators. Health care, basic materials, telecommunications and other service companies rank among the least effective communicators.

The 2005/2006 study sought to confirm findings from the 2003/2004 study. Additional questions focused on employee engagement, global communication, the relationship between the communication function and senior management, and new communication tools and technology. Compared to the 2003/2004 study, the 2005/2006 study found the following:

  • An 8 percent increase in companies relying on a reactive approach to communication
  • A 10 percent increase in companies using formal communication measures
  • An 18 percent increase in companies in which communicators play a lead role in managing the content of the intranet 

The new study is available for download at a cost of $45.