Why cutting the budget for internal communications is never the answer

Back

This content was not created using ChatGPT or any form of generative AI.

The above line was a P.S. at the end of a memo written by the MD of a company to all employees.
Some who read it were amused, but most were not.

The reason was very simple. This was a memo written by the MD after a meeting with his management committee.
The meeting had been convened to discuss the financial challenges being faced by the organization.

Budgets were slashed in support functions, but the most severe cut was in the amount being invested in internal communications.

The HR and Communications Heads had tried to defend the budget saying that an ongoing investment in Internal Communications was essential.

To no avail.

The budget cuts were announced to the entire organisation through the memo mentioned above. The P.S. on AI content was simply an indication to all to look to technology for solutions.

What the MD did not anticipate was the unintended and unforeseen impacts of that memo.

• With the budget reduction, many internal communication initiatives had been stopped or curtailed. As a result of not knowing what was happening, productivity dropped, and shoulders of employees had sagged. They did not feel engaged anymore. The management had also reduced the frequency of open town halls from once a month to once a quarter.

Employees across the company began to feel more than a little vulnerable and not inclined to do their best. This subject came up for discussion at a management meeting when the HR head brought it up to the MD.

‘Boss, if you take a walk around the different departments, particularly the customer service areas, you will see that morale has taken a beating. I feel that they view us suspiciously, whereas we had always a more transparent relationship earlier.’

• The fortnightly company update on mail had stopped and the employee newsletter had been changed to a once-in-6-months information bulletin. The openness and transparency which had previously existed because of consistent communication had disappeared.

Things went further south. The HR Head shared some startling news at the next management meeting.

‘Sir, we had made 66 job offers to people who had confirmed that they were joining. However, of these, 41 have written to us over the past 7 days to decline the offer. The people who declined had gotten in touch with some of our current employees and were told they were better off not joining. Quite obviously, our own people do not feel the same way they used to.’

• Regular communication with existing employees that helps them to say good things about their organisation is a key role played by internal communications. Now there was no content that highlighted the company’s good points or achievements.

At a third management meeting a few months later, the Head of Operations made a point: ‘Sir, there has been a definite drop in the overall quality processes we used to follow. As a result, we are getting more complaints from our customers, and competitors are fast catching up.’

The HR Head added, ‘in the past month, our attrition number has risen. I feel that many other employees too are looking for opportunities outside. We should be telling them more transparently about how we propose to improve the functioning of the company and bring it back to its market leadership position. We, as the management committee, need to do more informal walkabouts and do a townhall urgently to tell our teams how we are taking steps to improve the situation.’

Rising attrition, a falling off in the quality assurance processes and an overall drop in employee pride of belonging was beginning to take its toll. Employee dissatisfaction continued to rise.

The MD, however, was unmoved: ‘This is a transient phase. I really do not have the time to walk around the shop floor. I must constantly meet our key stakeholders, financial backers including banks, and key customers to ensure that we have sufficient funds and repeat customers to tide over the current situation. Let us drop the town hall scheduled for this quarter.’

That is when the Communications Head spoke up.

‘Sir, would you be free to do a couple of media interviews, or indeed a press conference next week? Many journalists have sensed that something is not right with us and would like to ask us a few questions. I am sure that those who have recently resigned would have mentioned our challenges to the media. It is why I strongly recommend that you take 2 hours to address the media, and not just send out a press release.’

Once again, the MD remained unconvinced.

• The potential impact of negative stories about the company and the brand were all too clear. This, in turn, was having a cascading effect on customers, future joiners and existing employees. Apart from that, the company did not have a clear crisis communication programme in place. The situation could potentially spiral out of control.

And so, it went on.

• Performance kept dropping
• Attrition kept increasing
• There was little communication about the changes taking place, and employee engagement took a beating
• The company received negative media coverage, but since there was no plan and no crisis communications plan, there were only some weak rejoinders sent, because of which the company brand took a beating
• Hiring reduced dramatically, because good talent did not want to join

This scenario about a struggling organisation is not just about the impact of a memo – it’s about the significant role played by internal communications in building employee trust and sustaining a positive culture.

A company is no more than the belief structure that holds its stakeholders together. Which is why it is as important to invest in employee communications, as it is to showcase brand narratives to external audiences.

While the adage of a ‘penny saved is a penny gained’ works in most cases, this does not hold true in the crucial area of internal communications! A good internal communication strategy helps improve employee engagement and encourages people to become brand ambassadors.

 

To get in touch for our services or any other communication requirement, please contact + 91 842 581 4016 / 17 or simply drop an email at solutions@ticworks.com.