Communication can be defined as:

The process by which a message or information is exchanged from a sender to a receiver

Communication can be:

  • Internal: between people in the same business
  • External: with people outside the business

Internal communication is particularly important. It links together all the different activities involved in a business. It also aims to ensure that all employees are working towards the same goal and know exactly what they should be doing and by when.

External communication is where the business communicates with people & organisations outside of the business. This is closely linked with the idea of "stakeholders" – i.e. those who have an interest in the activities and results of the business

Examples of external communication include:

  • Press releases
  • Marketing materials (e.g. adverts, brochures, direct mailings)
  • Published financial information (e.g. accounts)
  • Letters, emails and telephone conversations with customers and suppliers
  • Reports to government and other agencies

There are many reasons why it is important for a business to achieve effective communication:

  • Motivates employees – helps them feel part of business
  • Easier to control and coordinate business activity – prevents different parts of business going in opposite directions
  • Makes successful decision making easier – decisions are based on more complete and accurate information
  • Better communication with customers will increase sales
  • Improve relationships with suppliers
  • Improves chances of obtaining finance – e.g. keeping bank up-to-date about how business is doing

The link between communication and motivation is particularly important. Good communication is an important part of motivating employees and the main motivational theorists recognised this:

  • Mayo emphasised importance of communication in meeting employees' social needs
  • Maslow and Herzberg stressed importance of recognising employee's achievements and self-esteem needs

Amongst the other reasons for using communication to boost motivation are:

  • Ensures that everyone is working towards same company goals
  • Enables employees to be involved in decision-making
  • Employees can offer feedback and give suggestions
  • People are motivated by having clear targets set for them
  • Recognise employee achievements

Aiming to achieve effective communication is one thing – actually doing it is another. There are several barriers to communication, including:

  • Too many intermediaries (e.g. too many layers in hierarchy through which message has to be passed)
  • Geographical distance between a firm's offices, production plants or outlets
Communication overload – too much information can cause problems e.g. slow down decision making
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