Conventional wisdom holds that communication within an organisation works best when there is greater specificity, because more information allows employees to better understand the overall objective and improve firm performance.
But that’s not always the case, according to research by Dr Jeremy Hutchison-Krupat, University Senior Lecturer in Innovation & Operations Management at Cambridge Judge Business School.
Naturally, the study published in the journal Management Science supports the notion that more information is better, but there’s a catch: not all communication provides information. No doubt, information sharing within an organisation is beneficial when interests are aligned, yet, more often than not, interests and preferences differ.
“Not all communication translates into useful information, and not all useful information induces direct reports to take actions preferred by senior leadership,” the study says. Such communication will not be deemed credible if the direct report believes the message would be the same regardless of the leader’s knowledge, because such a message risks coming across as mere corporate rhetoric.
Dr Jeremy Hutchison-Krupat, who is also Co-Director of the Entrepreneurship Centre and Director of the Master of Studies in Entrepreneurship programme at Cambridge Judge, discusses some of the key findings of the study, entitled “Communication, incentives, and the execution of a strategic initiative”.
Not all information is useful. When senior management communicates information that points to actions that would already be expected, adding detail to this comes across as mere window dressing. For example, “work 20 per cent harder” adds little information to “work harder”.
More specific communication may have unintended consequences. The value and risk associated with a company’s new initiatives are often highly uncertain. Still, senior leaders usually have a better understanding of the value such initiatives represent to their company than do their direct reports. Here, senior leaders should focus on specific communication coupled with appropriate (generally higher) incentives. Not only will more specific communication be informative, but it also helps prompt a more appropriate allocation of effort from direct reports. The same cannot be said for less risky initiatives in the portfolio. Greater specificity here may be ineffective and also further discourage direct reports from investing valuable effort in new initiatives.
Organisations too often consider incentives and communication independently. This reflects the classic problem of looking for a lost item where the light is instead of where it was lost. What this research points out is how, in many cases, senior management simply cannot solve the problem of information exchange through better messaging – that’s where the light is – but instead need to properly choose the underlying incentives in place for both senior management and those who receive the information.
It is not chicken and egg; incentives come first. There is a reason organisations that could benefit from more specific communication choose not to. When looked at through the lens of their current operation the benefits simply do not seem to realise. Indeed, trying more specific communication prior to altering incentives will not yield the intended output. The message is clear: incentives must be established to make communication credible. Only once this has been done should more specificity be pursued.