Communications is the process in which a person responsible for making a decision receives the knowledge that they need to effectively make that decision.

More money is lost in businesses through ineffective communications than in any other area.We all know that communications are vital.A survey of employees in any business always generates frustration regarding communications.Sometimes that frustration is having a critical effect upon the company’s bottom line and sometimes it is merely an employee’s way of “pointing the finger” so that they are not responsible.How do we separate the “excuses” from the problems?Let’s start by examining the “communications” process in your business.

Your business is constantly deluged with “data.”Phone messages come in, letters are received, emails are read, customer payments are received, customer comments, feedback and complaints are made—all of this is data.How do your employees decide what to do with that data?If this decision is merely being left to the employee without direction you are immediately losing whatever data they decide not to record.This is an unacceptable event that occurs daily in almost every business.How often have you heard someone say, “I didn’t know about that?” or “Why didn’t someone tell me about that?”To your customers it can often appear that your company simply “doesn’t listen” to them—and we all know what follows that feeling.The “integrity” of the data is also critical.Sales people making up phony records of sales calls, people posting hours worked to job numbers a week later are examples of poor data.Remember, “Garbage in; garbage out.”

But of course most data is recorded.The next issue is the processing of that data.Since we are businesses and not computers, the processing of data is the conversion of the data into “information.”Information takes the form of reports and compilations delivered in writing or verbally to a recipient.How do your employees decide how to “process” the data?Most companies have written reports they want generated and request verbal reports at meetings, but has this structure ever been defined?Do employees ever create their own reports?What happens in your business when a report goes “uncreated?”Do you often hear someone say, “I’m waiting for the report?”Are poor (no decisions are decisions) decisions made because of a lack of information?

After data is processed into information, it must be delivered to someone who gains “knowledge” as a result.Data might come in to your company in the form of a client payment.It is then converted into information by accounting by entering it on your books and producing a month-end Profit and Loss Statement.This report is then delivered to you, the owner who now has the “knowledge” that the payment has been made.Or do you?You might know that money has come in but you might not know its’ source.Or you might not know that the payment has been made until a month later when the P&L is delivered.Therefore we have developed four criteria for the evaluation of information.For information to really create the type of knowledge that we need it must meet four criteria: It must be (1) timely; (2) accurate; (3) usable; and (4) delivered at a reasonable cost.Without meeting these criteria, your information does not produce the “knowledge” that is required for your business.

For information to be timely means that it must be produced, delivered and assimilated in a timely fashion—at a point where acting upon the information can still produce a meaningful change.Finding out in February that your company lost money last year is nice historical information but it lacks the timeliness element that is required to make it meaningful knowledge.How much of your information is truly timely?Are you operating like the football coach with no scoreboard?Or the pilot with no instruments?Accuracy is a commonly misunderstood element.Most financial reports are generated by accounting.Accounting is staffed with people who worry about everything balancing to the last nickel—and rightly so.Unfortunately this attitude often interferes with them delivering timely information for managerial purposes.Most managerial information does not require the same degree of accuracy as does your tax return.It is often more important to receive timely information with a greater margin of error which is counter to the accounting culture.Who decides how “accurate” various reports must be in your company?What matters is that it is as accurate as necessary for the purposes of the user.

For information to be converted into knowledge it must also be usable.Usable means that the person receiving the information must understand it.A technically perfect report that the recipient doesn’t understand does not produce knowledge.Do you see reports go unread?Do you see people lost during meetings?Is the issue training of the recipients or the format of the information?Lastly information must be produced at a minimum cost.Although this technically is not an element of the communication process, it is critical to the success of the business.It makes no sense to produce a report that saves $100 and costs $500.It makes no sense to hold a meeting that costs $1000 to produce a savings of $200.Who determines the cost-benefit of your forms of communication?What is the real cost of an hour meeting of six managers?

After knowledge is actually received, the recipient must apply “thought.”Thought is the responsibility for acting upon the knowledge.What is critical is that the actions taken be in alignment with the best interests of your company, which is not necessarily in the “best interests” of the person making the decision.“I see from this that a change order should be generated, but I don’t want to bother to do all the paperwork.”“I see that this customer is unhappy, but I don’t want to face him so just forget it.”Many owners do not try to control this part of the process and instead rely upon their employees
”experience” and “common sense” to make good decisions.These same owners get frustrated when these employees make “bad decisions” and yet they have no incentives for the employee to make the “right” decision.The fact is, they are making the right decision—the right one for them but not the right one for you.

The pinnacle of the communications process is “wisdom.”Wisdom results from a repetition of and effective communications process.It results from the right people making the right decisions based upon the right information.Does this happen in your company?It is reflected in your bottom line and in the morale of your employees.Wisdom is the objective of your company.


How does your company accomplish “wisdom?”First you must understand that this is a “journey” and not a “destination.”Since your people and your company and the business environment are constantly changing, the systems, procedures and controls that are required are constantly changing.Albert Einstein said, “Tomorrow’s problems will not be solved with today’s solutions.”It doesn’t take Einstein for us to realize that your communications process can always be improved.So where do we start?One way is for management to complete a comprehensive analysis of the flow of all data, codify the system and then train the employees to use it.This will work but it is rarely cost effective and rarely sustains long-term implementation.It also tends to “etch in granite” systems that as we have already determined must constantly change.Comprehensive “fixes” that truly address the cause of the problem rather than the “symptom” of the problem as a rule are the better way to go, but in the case of communications, so much of your corporate culture must be addressed that a complete change becomes impossible.Rather, start by fixing the squeaky wheel.

First assume that almost every issue in your company is a “communications” issue.When a mistake is made, a frustration is expressed, or an excuse for non-performance is offered, start with the responsible person.

  1. Identify the problem in objective terms without placing blame.
  2. Cause the responsible person to “buy-in” by making them commit to what could have happened that would have allowed them to produce the correct result.
  3. Examine if this is the proper person to be responsible for the decision and if the employee in that position is the proper person.
  4. Work back down the communications hierarchy from the problem—what knowledge did the person have?What information was generated?Was the information produced in compliance with the four criteria for information?What data was the information based upon?How was it collected?
  5. The responsible person should then be “teamed” with the “lower level” persons required to feed the “higher level” person the knowledge that they have agreed is required.Together they produce the solution (facilitated and if necessary, mediated, by you).
  6. Once the solution is identified, it must be codified.The codification must be a writing that is distributed and maintained in the operations manual for each position.
  7. For the change to really become implemented it must not only be written, it must be reinforced by the leader within the first week, and reinforced by the leader again in the next two to four weeks.
  8. Depending upon the benefit the company derives from the change, incentives can be created to execute the reinforcement.

Does this seem like a bother?Weigh this course of action against the problem being repeated.Our office has a saying, “smart men make mistakes; dumb men repeat them.”Reprimanding a person for a “poor decision” doesn’t solve the problem—it generally creates another one.Fixing the root of the problem takes more effort in the short term, but it actually saves effort in the long term.Your job as the owner is leadership.Leadership is having a plan and then getting people to produce the results by performing their part of the plan.If we don’t have an effective communications system we are setting them up for failure and in so doing, limiting the ability of our company to succeed.Success is the accomplishment of your plan; failure is not accomplishing your plan.

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The Fremont Group