Open communication - importance of effective communication systems in corporations; General Electric Co. and Cypress Semiconductor Corp. case studies

Business Horizons, Sept-Oct, 1993 by D. Keith Denton

A great deal of management's current concern for employee productivity and the need to empower people has revolved around the use of teams. No doubt teams have enhanced productivity and employee relations, but one should never assume that teams are the singular, correct path toward empowerment. Sometimes individual effort rather than group effort is needed. But more often what is required is the simplest need of all - communication.

When a group of industrial engineers were asked in a 1990 study how to improve productivity, communication concerns drew the strongest response to any question on the survey. More than 88 percent of the engineers strongly agreed that the lack of communication and cooperation among different components of a business leads to reduced productivity ("P and Q Survey" 1990).

CEOs have also recognized the importance of communication. In a study by A. Foster Higgins and Company, an employee-benefits consulting firm found that 97 percent of the CEOs surveyed believe that communicating with employees positively affects job satisfaction. Furthermore, the survey found that 79 percent think that communication benefits the bottom line; surprisingly, only 22 percent communicate with employees weekly or more (Farnham 1989).

Executives think communicating is extremely important to the success of their business, but they do not do it. Why is this? Perhaps many CEOs and other top officials prefer the company of their peers to those who do not share their perspectives. Perhaps, like generals on the battlefield, they are more fascinated with strategy than with tactics. Regardless of the reason, it is extremely rare to find CEOs or other top officials who actively seek out a down-in-the-trenches perspective.

An exception to the normal situation is the approach used by the CEO of Alabama Gas, Mike Warren. When Warren became CEO, he found that relations with the company's union were in poor repair. In a display of showmanship, he used a 20-foot papier-mache dinosaur with a stake plunged through its heart. He then wheeled the corpse around from department to department. The message was that the old ways of conducting business were over.

If all he had done was to go around the departments with a papier-mache dinosaur, everyone would have thought of the stunt as merely hype. Follow-through was critical. So Warren began eating dinner regularly with union leaders. When he was out driving and saw workers laboring in a ditch, he got out and visited with them. He surveyed employees and solicited their suggestions. Such actions may seem hokey, but Warren and others maintain it has had a dynamic effect on employee relations and productivity. The key to such an approach appears to lie in whether employees see it as manipulation or as an honest desire to communicate and understand their viewpoint.

TRANSFER OF MANAGEMENT PRACTICES

Communication is both the solution and the problem. Communication within companies continues to be an age-old challenge, but some radical new solutions can help. Most organizations consist of departments resembling a crude caste system, with each area insulating itself from other functional areas. These perceptual walls separate design engineering from production, production from marketing, and so forth.

Communication solutions today revolve around much greater data sharing and exchange of information among and within departments. As already noted, teams are used widely today. "Concurrent engineering" is one such team approach that involves bringing in a wider range of departments and people into the product and production design stage. There are also several ways in which open communication can be used to enhance employee relations and productivity.

One such example of a company using open communication as a competitive weapon is General Electric. GE is a diversified organization consisting of 14 divisions with business involved in medical systems, engineering, plastics, major appliances, financial services, aircraft engineers, and even an NBC television station. If ever there were a risk of communication problems, it would be in this $55 billion organization.

Recognizing the need for constant improvement, GE's executives have experimented with team management and programs for eliminating and simplifying work procedures with a program called "Work Out." One particularly effective system they use is called "Integrated Diversity." Jack Welch, the company's CEO, uses this term to describe how GE tries to coordinate its 14 separate businesses.

The idea behind integrated diversity is that each business division is supposed to help the others rather than operating separate fiefdoms. Welch notes that most diversified companies do a good job of transferring technical resources and dollars across their business, and some do a good job of transferring human resources. He believes that GE does the best job of transferring management practices across its businesses, including the best techniques, systems, and management principles to produce growth and profitability.