2. Organizational Communication – Business Communication, 2nd Edition


Organizational Communication

“The most important audience for a company’s communications is not the customer, as is commonly believed, but the employee.”


Pratt & Whitney


Apex Business Solutions had promised to deliver a report to one of its customers by a certain date, but was unable to meet this deadline. Since the customer was very important to the company, there was an internal meeting in the concerned department to resolve the issue.

During the discussion, Stephen, one of the youngest members of the department, came up with a suggestion to solve the problem. However, because Stephen was known for his non-serious, jokey comments and was relatively new in the department, nobody took him seriously. The meeting continued for two hours, and when no solution was found, it was dispersed.

Later, while reflecting on the proceedings, Mr Mahadevan, the head of the department, realized that what Stephen had suggested at the beginning was in fact the most sensible course of action, but because everyone was predisposed to take him lightly, they never considered his suggestion seriously. In fact, they had completely neglected his ideas during the discussion. Mr Mahadevan felt that if they had heard Stephen with an open mind, they would have reached a solution in the first fifteen minutes of the meeting.

Upon completion of this chapter, you should be able to:

  1. Understand the functional relationship between communication and management.

  2. Identify new trends in organizational communication due to technological changes and developments.

  3. Know why managers need strong communication skills.

  4. Understand the elements that form the structure of an organization’s communication network.

  5. Understand the formal and informal lines of organizational communication.

  6. Know what and how much should be communicated to employees at the workplace.


Communication skills constitute an important aspect of effective management. Management is a complex process. In simple terms, it can be described as the organization of capital, labour, and material to achieve production and distribution of particular goods or services.

First, the management determines its objectives—what it must do and how it must do it. Then, there has to be a system through which the production and distribution processes can be guided, coordinated, and controlled to ensure that the management objectives are achieved. Communication is the system by which production and distribution operations are controlled and coordinated and the results correlated to the objectives.

Some Important Functions of Management

Exhibit 2.1 shows some important functions of management. The function of communication is to define and support the action involved in each of these functions.


Exhibit 2.1 Functions of Management

Forecasting Determines organizational objectives and policies
Planning Prepares programmes, procedures, and budgets
Organizing Sets the organizational structure
Instructing Provides the bedrock of organizational performance
Coordinating Ensures all efforts are directed towards the organization’s goals
Controlling Checks the results and receives feedback
  • Forecasting and planning: Each function of management depends on effective communication for its success. For example, if the management fails to communicate its objectives, policies, programmes, procedures, and budgetary provisions to the concerned people at the proper time, an organization would fail to run in an organized and targeted manner.
  • Organizing: Organizing, as a management function, determines the formal and informal relationships within the organization and outside it. These relationships are developed and maintained through interpersonal communication.
  • Instructing: The function of instructing depends entirely upon effective exchange of information regarding products, processes, and targets.
  • Coordinating: Coordinating is perhaps the most demanding of all management functions. It requires excellent communication skills to ensure that all efforts are directed towards the achievement of a single organizational goal. To ensure that diverse activities are complementary, a manager should be able to relate with all the people involved, both formally and informally.
  • Controlling: Finally, in order to control processes, a manager should be able to receive and interpret information and respond quickly.

Understand the functional relationship between communication and management.

Communication is the system by which production and distribution operations are controlled and coordinated and the results correlated to the objectives.

How Communication Is Used by Managers

Management is a unified, organized, and cooperative system committed to the achievement of common goals. Unity of purpose and commitment to a single organizational goal can be developed only through the persuasive power of communication. To do this, a manager needs to have excellent communication skills, including the ability to structure information according to its negative/affirmative nature and use words and tones according to the purpose of the communication. A manager should be able to create the desired relationship with the audience or employees to produce the needed response. Thus, diverse strategies, verbal and nonverbal, of effective communication form an important part of management as a discipline.


Unity of purpose and commitment to a single organizational goal can be developed only through the persuasive power of communication.

From a small business to a multinational enterprise, every organization today needs an effective communication system to enable it to function and flourish. Communication is a means of:

  • Increasing employees’ job performance and effectiveness by updating their knowledge
  • Promoting employees’ sense of belonging and commitment
  • Effecting changes smoothly
  • Motivating employees and creating a sense of identification with the organization’s goals
  • Informing and convincing employees about decisions and the reasons behind them
  • Helping employees develop a clear understanding of their roles and growth opportunities within the organization
  • Empowering employees with information on development and activities

When decision-making is transparent, employees understand the reasons behind decisions and accept and implement them, even if those decisions affect them adversely.

Hence, an active communication system is vital for the good health of an organization. If there is continual sharing of ideas and interactive meetings between the management and employees, an overall atmosphere of understanding and goodwill would prevail in the workplace. When decision-making is transparent, employees understand the reasons behind decisions and accept and implement them, even if those decisions affect them adversely. Thus, communication can help in management in the following ways:

  • Creating a sense of belonging: An understanding of their roles and career paths in the organization makes employees feel a part of the whole setup.
  • Resolving disputes: All disputes in organizations, which lead to huge losses of time, money, and good human relations, are caused by communication failures.
  • Providing a holistic view of the situation: A great value of effective communication lies in making people not only know, but also perceive and understand the meaning of things happening around them. Through clear communication, employees not only “see” the realities of the business, but also develop a “feel” for it.

Identify new trends in organizational communication due to technological changes and developments.

In the changing business environment of multinational competition and globalization, communication has become an important component of an organization. Like the functional areas of production, marketing, and finance, communication too is evolving into a distinct discipline in the form of corporate communication.

Theoretically, corporate communication brings under a single umbrella all communication activities undertaken by different areas such as marketing and public relations, which are directed at image-building and developing human capital. In this integrated form, communication speaks to the world outside the organization and within it in a single voice that builds the corporate image.

Several changes in the modern technological age of information have made people pay more attention to communication as an important tool in successful management. These changes are:


The large size of organizations today poses problems in communication.

  • Bigger organizations: Organizations are getting bigger and bigger, either due to increased levels of production or through multinational collaborations. The large size of organizations today poses problems in communication.
  • New developments in information technology: The modern age, the age of information, is not just an era of new media—telephone, radio, television, communication satellites, computers, and so on; it is also an era of a new attitude towards knowledge and the value of sharing it with others. In fact, communication is now looked upon as a source of empowerment of people. But the success of these new media depends on the skills of those who use them. It involves a new attitude towards the value and use of good communication.
  • The concept of human capital: Employees and workers are now considered to be the human component of business and not just the source of labour. Their attitudes, interests, and welfare constitute an important aspect of management. Hence, there has to be a live channel of communication between the employees and the management.
  • Need to learn corporate etiquette: Top corporate executives are increasingly being sensitized to the importance of conducting meetings, seminars, presentations, and negotiations effectively. They realize that management executives should learn the rules of etiquette if they are not already familiar with them. This includes knowing how to greet others, shake hands, dress for success, exchange business cards, listen, and converse with a diverse variety of clients.

The success of new media depends on the skills of the people who use them.

Corporate etiquette training, which is a part of communication skills, focuses on the rules to be observed and practised for success in international and national business ventures. Good business manners speak of the culture of the organization, not just of the individual.

These contemporary changes suggest that organizations now need not only an effective communication system, but also executives and managers who are well equipped with effective communication skills.


In business, a manager spends most of his or her time either speaking or writing to colleagues, supervisors, subordinates, or clients. A manager’s success depends largely on his or her ability to communicate what has to be done and why to colleagues.

To be able to do this, the manager has to devote his or her time to:

  • Receiving and interpreting information from other managers and departments
  • Sending information to other department managers
  • Passing on information and suggestions on new plans or projects to senior/top management
  • Transmitting information to subordinates
  • Developing a positive attitude

The success of an organization requires an atmosphere in which there is a free flow of information—upward, downward, and horizontally.

To a large extent, the success of an organization requires an atmosphere in which there is a free flow of information—upward, downward, and horizontally. At the workplace, the primary goal is getting things done. For this, instructions, guidelines, supervision, monitoring, and periodic reporting are usually considered enough. But if the company wishes to achieve more than the set task, a real involvement of all employees, from the highest to the lowest levels, is required. This cooperation can only be secured by allowing every level of employee to suggest ideas, express their views, and share their experiences. Such a system of communication can only be established within the organization by the manager. In fact, the manager functions as the point of intersection for all communication channels. One of the most important concerns of the manager is to organize and ensure an effective information system across the organization.


One of the most important concerns of the manager is to organize and ensure an effective information system across the organization.

As analysed by Henry Mintzberg1 of the Massachusetts Institute of Technology, managers need effective communication skills to perform in the following interrelated situations:

  • Interpersonal
  • Informational
  • Decisional

Know why managers need strong communication skills.

These situations, with their descriptions and examples, are clearly described in Mintzberg’s book, The Nature of Managerial Work.

The interpersonal role refers to situations in which the manager acts as a figurehead, leader, and liaison officer. The informational role is when the manager is a monitor, disseminator, and spokesperson. In the decisional role, the manager functions as an entrepreneur, troubleshooter, resource allocator, and negotiator.


If interpersonal communication is effective, internal systems run smoothly.

  • Interpersonal role: It is necessary to ensure the effective operation of the organization’s systems and to maintain proper relationships within the organization and with clients, suppliers, and other functionaries. If interpersonal communication is effective, internal systems run smoothly. For example, personnel functions within the organization require managers to inspire confidence, win support, and guide workers. Managers are role models for others and must develop the skill of listening patiently and perceptively in order to understand the needs of their subordinates. This is essential for creating an atmosphere of mutual understanding and goodwill within the organization and transparent sharing of its objectives, mission, and problems.
  • Informational role: If the internal information-sharing system of a company is effective, other systems such as stock control, personnel functions, financial systems, and quality control operate smoothly. Shortcomings and problems can be quickly identified and remedial action taken immediately. Proper maintenance of product and service standards can be ensured through timely monitoring and instructing. Through effective, interactive communication and a strong feedback system, high morale and satisfaction of workers can be secured.
  • Decisional role: Decision-making is based upon receiving and interpreting all relevant and necessary information. Decisions that are based on guesswork and are made without access to all relevant information may turn out to be unrealistic and harmful. Managers need to possess the skill of receiving relevant and up-to-date information correctly and accurately to be able to take decisions and act rationally, fairly, and to the satisfaction of all concerned.

Decisions that are based on guesswork and are made without access to all relevant information may turn out to be unrealistic and harmful.

All these functions require the manager to handle people and situations with a good knowledge of human needs.

Human Needs

Maslow’s hierarchy of human needs2, shown in Exhibit 2.2, suggests a succession of needs through which people move as they fulfil their wants and desires.


Exhibit 2.2 Maslow’s Hierarchy of Human Needs

  1. Physiological needs: These are the most basic needs of food, shelter, and protection from the elements.
  2. Security and safety needs: Next come the need to be free from physical danger and the need of knowing that one’s physiological needs are being met.
  3. Social needs: This is the desire to be loved, to be accepted, and to belong.
  4. Ego needs: Moving to a higher level of the pyramid, people feel the need to be heard, appreciated, and wanted. These needs of the ego are related to the status of the individual. Generally, the fulfilment of economic needs comes before the social expression of one’s ego.
  5. Self-actualizing needs: This is the desire to reach one’s highest and complete potential through different forms of professional, social, intellectual, and cultural and artistic activities. It is the highest level of needs in the pyramid.

From the diagrammatic description of human needs shown in Exhibit 2.2, one should not conclude that any of these needs is absent from the human mind. The pyramid structure indicates that as the lower-level needs are satisfied, one feels the urge to satisfy other, higher needs. In such a situation the pressure of the lower-level needs is reduced, but they are always present.

Hence, a manager should be able to identify the needs of different individuals through close interaction with employees. By doing this, he or she can create a business environment in which individual needs are largely recognized and satisfied. It is common knowledge that a satisfied employee is more productive than a dissatisfied one.

Theory X and Theory Y

In highly developed countries like the United States, even those with an average income feel that their basic needs are satisfied. Hence, most people can pursue the satisfaction of their social and self-actualization needs: the need to be recognized and respected and, above all, to belong and be a part of a community.

In developing countries such as India, more people are primarily motivated to satisfy lower-level needs. Accordingly, this has been the focus of traditional management. The management usually assumed that employees were mainly working to collect their pay, to fulfil their primary needs of food, shelter, and security. Hence the management could simply tell people what to do, how to do it, and by when to do it. It was not considered necessary to explain why things had to be done a certain way. Workers were viewed as a source of labour that was not interested in the organization’s general welfare. This view is no longer acceptable in most organizations, though in practice it still prevails at many places.

Douglas McGregor, in The Human Side of Enterprise,3 discusses two styles of management: the traditional view of human capital and the emerging modern view that management increases productivity when it helps people satisfy their higher-level needs. McGregor calls these two styles of management Theory X (conventional) and Theory Y (modern). Theory X postulates that, traditionally, management functions through close control and concern for the job to be done and not concern for the doer of the job—workers’ motivation was assumed to be imposed from outside through supervision, promise of reward, or fear of punishment.

Theory Y is the emerging style of management. It promotes a balance between control and individual freedom to actualize the individual’s potential and help him or her evolve as a mature and responsible being. McGregor bases his concept on the maxim that freedom accompanies responsibility.

Hence, the new management style views people as humans and addresses the fulfilment of their higher-level needs. Managers should consider their audience/receivers as adults capable of change and of controlling their own destinies. The communication focus in this context shifts from the language of control and information to that of motivation and persuasion.


The new management style views people as humans and addresses the fulfilment of their higher-level needs.


In an organization, communication counts. It provides the network of sustenance essential for the growth and smooth functioning of the organization. But how should it be implemented? What are the strategies of communicating effectively? How can one learn them? Can communication be taught?


In an organization, communication counts. It provides the network of sustenance essential for the growth and smooth functioning of the organization.

Today, communication has become a buzzword. Accordingly, a great deal of emphasis is being given to training aimed at developing the skills of writing letters, memos, and reports, participating in seminars and group discussions, interviewing, making presentations, and so on. In the world of business, managerial success depends largely on the ability to present one’s ideas before others. In fact, verbal (written/oral) and non-verbal (body language) communicative competence is an important aspect of one’s personality. In fact, many advanced institutions have incorporated communication in specialized personality development programmes as an additional input for management graduates at all levels of undergraduate and postgraduate education. There are formal courses in business communication, human communication, or organizational communication almost in all universities. In addition, there are training courses and workshops specially designed for executives and bureaucrats at all levels.

These communication courses and training programmes are offered because it is possible to learn and develop interpersonal skills. Of course, there are individuals who are “born communicators”, able to think clearly and express themselves effectively with little training. However, others can become successful communicators by learning and practising the strategies of effective communication. All communications courses and programmes are based on simulating real situations in the workplace as well as social situations. Their basic objectives include written and oral/verbal competence and understanding of non-verbal communication/body language. At the end of these courses, students can effectively write letters, memos, reports, proposals, and so on, deliver oral presentations and seminars, and participate in meetings, group discussions, and negotiations.

In business, it is crucial to create and maintain relationships. Effective communicators weigh relationships and develop desirable, long-term ones. One’s communication skills help nurture cherished relationships within the organization and outside it.


In business organizations, the effectiveness of a communication system depends upon the extent to which the necessary information (required for decision-making) reaches the concerned person (the person who needs that information) at the right time (when the information is needed). The network of information should support the overall functioning of management by integrating and coordinating the workforce for achieving organizational objectives.


Understand the elements that form the structure of an organization’s communication network.

Hence, every organization creates a network (channel) for information to pass through different levels of authority and functional heads and units. The flow of communication follows the structure of the organization. In actual practice, the information passes through the organizational pyramid such as the one shown in Exhibit 2.3.


Exhibit 2.3 Organizational Pyramid

Vertical Communication

In organizations, there are well-defined lines or routes for passing on communication. Policy decisions are taken at the boardroom level. From there, information is sent downwards to senior managers or a group of senior managers. They ensure that the policy decisions are easily understood, implemented, sustained, monitored, reviewed, and reported. Feedback (performance data or employee experiences or suggestions) is, in turn, sent upwards.

In this system of communication, the key links are the managers and supervisors. They transmit information both upwards and downwards. They are also responsible for following up on ideas and instructions. In all large organizations, the human resource or personnel department manages the circulation of information among employees. Personnel managers are in constant touch with all employees. They are able to identify needs, provide guidance on policy matters, and supervise infrastructural rearrangements.

However, when an organization has too many levels of hierarchy, managers may find it difficult to reach ground-level and shop-floor employees. In such situations, communication tends to be slow in reaching and delayed in being absorbed and acted upon. The cost of this delay, caused by the sheer size of the organization, may sometimes be too high.


When an organization has too many levels of hierarchy, managers may find it difficult to reach ground-level and shop-floor employees.

Hence, as Peter Drucker4 holds, large organizations have more recently moved towards a “flatter structure” of information-based management and executives “walk down” the jobs. This is obviously to facilitate information flow downwards and to prevent employees from getting frustrated by their sense of isolation.

Horizontal Communication

Also known as peer communication, horizontal communication is usually needed within the organization due to:

  • The geographical location of divisions
  • The functional basis of division

Geographical Organization

In a large setup, divisions may be based on geographical areas. Such divisions may be known just by numbers or single letters. For example, at Tata Steel (Jamshedpur), the “G” blast furnace has its own division with a full-fledged hierarchy of employees and executives. There are other furnaces known by numbers, with their own divisions. They are all located on the vast Tata Steel site. There are also other divisions such as research and development, total quality control, and so on. Each of these divisions maintains close contact with the others through seminars, presentations, and executive meetings. These divisions communicate among themselves to share information and help each other as equal members of the same organization. Thus, communication helps sustain a sense of unity among the various divisions in the organization.

Functional Organization

Normally, business and industrial organizations are divided on the basis of different functions such as production, marketing, finance, personnel, and training and development. All divisions function independently and yet remain linked with each other through peer-group communication and workflow information. With the growth of technology and the increasing size of organizations, the widespread production of goods and services needs to be coordinated through the channel of horizontal communication. From the stage of selection of raw material to the finished product, numerous processes are involved in completing the given task of production. At each stage of the production process, the job of a workgroup depends upon the timing and form of work received from the preceding workgroup. Any interruption in the workflow adversely affects performance at successive stages of production. The workflow in a company can be steadily managed only through horizontal communication between the sections that are directly linked.


Line and staff management (LSM) is a system of management in large organizations consisting of line managers and staff managers. Line managers are responsible for the main activities of the company, such as manufacturing and sales, while staff managers control the support and service areas, such as accounting, distribution, and personnel. A network of relationships between those in line (functional) management and staff (support) management is created by means of an effective internal communications system. Without this, an organization can neither function properly nor thrive in the business world. As shown in Exhibit 2.4, the internal communication system can be divided into two categories—formal lines of communication and informal lines of communication.


Exhibit 2.4 Internal Communication System in Organizations


A network of relationships between those in line (functional) management and staff (support) management is created by means of an effective internal communications system.

Formal Communication

Formal lines of organizational communication include:

  1. Line relationships
  2. Functional relationships
  3. Staff relationships

Understand the formal and informal lines of organizational communication.

Line Relationships

Line relationships refer to the line of authority that sets down the path of communication from supervisors to subordinates and vice versa. All official communications, orders, and instructions move from seniors to subordinates. Similarly, all follow-up actions and compliance and execution information and reports move upwards, from subordinates to supervisors and executives. Usually, all organizations insist on following the normal chain of authority from one position to the next. If the communication is in the form of a letter, this respect for the chain of authority is indicated by writing the phrase “through the proper channels” in the beginning of the letter.


Usually, all organizations insist on following the normal chain of authority from one position to the next.

If the communication is oral, the message is conveyed to one’s immediate supervisor.

Functional Relationships

Functional relationships are those between departments within an organization. Communication that occurs when departments share information regarding work and related organizational matters with each other is a formal line of organizational communication.

Staff Relationships

Staff relationships include the communication that supports line management, marketing, and production. They do not carry the executive authority of line relationships. Communications relating to personnel, public relations, administration, or finance are part of staff relationships.

Informal Communication

Informal communication in an organization usually flows through chat and the grapevine.


Horizontal or lateral communication is between managers from different departments or within the same peer group. Managers of the same level enjoy the same level of authority. Often, informal communication, which is usually in the form of a “chat”, has to be confirmed in writing before it goes through the official channel.

The Grapevine

Theoretically, the network of formal communication may be adequate to meet the needs of exchanging information within an organization. But, in real life, this is seldom true. Often, employees feel inadequately informed in a formal system. They may suspect that the management uses formal channels to conceal rather than reveal the true message. They may thus accuse the system of lacking transparency. As a result, employees modify the formal methods of communication by bringing in an informal communication system, the grapevine.

Information obtained via the grapevine is always attributed to “a reliable source”. “Learnt through a reliable source”, is a common phrase used by the communicator to make the news sound authentic.

However, the grapevine may create complications for the information system of organizations.


The grapevine may create complications for the information system of organizations.

  • The unofficial version of news, irrespective of its basis, is more easily believed by people.
  • News through the grapevine spreads like wildfire, quickly and uncontrollably.
  • Usually this version of information is somewhat distorted and exaggerated—a result of the vast chain of “filters” used in the process.

The grapevine exists in all workplaces. It is an informal adjunct or extension of the formal system of organizational communication. In a way, it is a corrective to the management’s system of information as it is timely and has a wide reach. It poses a challenge to management’s MIS (Management Information System).


The grapevine exists in all workplaces. It is an informal adjunct or extension of the formal system of organizational communication.

The presence of the grapevine shows that the management has missed an opportunity to share information of interest with their employees. The gap in formal communication is filled by informal gossip circulated among employees, who form relationships on the basis of their work or common social factors such as neighbourhood, language, culture, state, club memberships, and so on These relationships are formed on the basis of friendship and not official status.

Participants in the grapevine are non-official leaders who generally initiate and spread the gossip across the organization. As with formal communication, there is a sender and a receiver.

Normally, the management views the grapevine negatively as it undercuts confidentiality, secrecy, and guarded sharing of information with employees. However, sometimes the management itself may take advantage of the grapevine, for instance to learn in advance the reaction and response of employees to a proposed scheme or change. In such a situation, before officially announcing the change, the managers may deliberately feed the leaders of the grapevine with the concerned message and note employees’ feedback and responses.

This managerial practice is not always on the sly. Some management scholars approve of this practice of supplementing formal communication with informal communication. Koontz and O'donnell5 observe, “The most effective communication results when managers utilize the informal organization to supplement the communication channels of the formal organization”.

When using informal channels of communication, managers have to be very careful about the form of informal communication. For example, it could be very effective to “walk down the job”—move around the office, chat, and informally discuss formal matters. But, the effectiveness of this depends on the personal relationship between the executive and his or her subordinate and the image created by the executive by his or her official behaviour and personal attributes such as frankness, attitude, and sense of fairness. As Leland Brown says, “In using the grapevine, management must be able to pinpoint the leaders and work through them. It must feed in factual information, listen to the feedback response, and be discerning in not overloading the system and using it inappropriately. It is important that management be sure to follow up the grapevine message with official written messages and statements that will verify the accuracy of data obtained from the grapevine. This helps in building a mutual trust based on open communication followed throughout the organization or business.”6

Merits of Informal Communication

The chief advantages of informal communication lines are:

  • Uniting force: The grapevine brings together employees in matters of common interest.
  • Speed: Informal channels of communication pass on messages speedily.
  • Creation of ideas: Informal communication, through sharing of ideas and views or by spreading unofficial “grapevine”, generates ideas and expectations that often prove of value to decision-makers and planners.
  • Good personal relations: Public relations fail in organizations because of the lack of good personal relationships. Informal communication that promotes personal relations is, therefore, important for the success of public relations.

Public relations fail in organizations because of the lack of good personal relationships.

Emphasizing the value of informal communication in management, especially via the grapevine, Myers and Myers7 assert that field research and laboratory experiments indicate that “grapevine communication is fast; predictable in its course, directions, and membership; and also far more accurate than a casual observer might imagine. Grapevine communication is less heavily loaded with task information—how to do the job—than with information about people, attitudes, relationships, interpretation, prediction, values, norms, and needs”

Limitations of Informal Communication

The limitations of informal communication channels are:

  • Rumours: Sometimes informal communication, especially grapevine, can prove very provocative and disastrous for the relationship between employees and management. By its very nature, grapevine is information that lacks solid evidence. Moreover, there is little accountability in spreading it. By exciting hopes or fears in employees, rumour mongering may result in a negative or misleading situation in the workplace. As a consequence, the management may be confronted with a wave of prejudice, emotions, biases, half-truths, and ambiguity.
  • Inadequacy: Informal communication can only pertain to certain kinds of organizational information—that is, non-functional issues and matters. Secondary issues regarding staff and management relations are generally the subject of grapevine.
  • Changing interpretations: When information is allowed to be spread through the grapevine, it tends to result in distortion and dilution of the main issue. The key person, the individual who starts spreading the news, is sometimes surprised by the final form in which that news gets back to him or her. Just as in the game of Chinese Whispers, the distortions are unintentional. Changes in interpretations happen owing to the different perceptions of the persons involved in the chain. The unlimited circulation of a statement can make it lose its original meaning and character. Great caution is, therefore, needed in using informal communication channels as a supplement to formal communication.


By exciting hopes or fears in employees, rumour mongering may result in a negative or misleading situation in the workplace.

Changes in interpretations happen owing to the different perceptions of the persons involved in the whispering chain.

Finally, it is the responsibility of the formal communication system to ensure that opportunities for misinterpretation of information through the grapevine do not occur, by giving full and necessary information to employees in a timely manner. Therefore, besides interactions at the functional level, people should be able to talk to one another about formal matters informally on different occasions.


To reduce the chances of misinterpretation or disinformation being spread by the grapevine, an organization should keep all its employees informed about certain facts regarding it. The content of the information is generally a mixture of facts, opinion, attitudes and interpretation. The purpose is to instruct, persuade, and ensure a routine first one-way transmission of information.


Know what and how much should be communicated to employees at the workplace.

Broadly, all business communication can be divided into five types of information:

  1. Statutory information: Information regarding terms and conditions of service should be communicated to all employees as a statutory requirement.
  2. Regular work-related information: Information regarding normal work situations has to be regularly communicated through routine formal briefing sessions or through informal chat sessions between the manager and group members.
  3. Major policy or operational changes: Any major changes in the organization’s policies, which affect everyone or a large number of employees, have to be communicated to all by calling special meetings or by issuing notices.
  4. Information bulletin: To keep people informed about events and happenings in the organization, periodic information in the form of a newsletter is disseminated to all employees. This helps create a sense of involvement in the working of the organization.
  5. Communication by expectancy: Information regarding critical changes should be carefully and gradually communicated to those who are going to be directly affected by the decision. Before the decision is implemented, the people concerned must be prepared for it. This process aims at creating expectancy in the receivers, so that they are prepared for upcoming changes.
  • Effective communication plays a key role in enhancing the success of management functions in an organization.
  • Communication helps management in planning, directing, coordinating, and controlling employees, materials, and production.
  • Effective communication creates a healthy organizational environment in which all employees feel motivated towards the fulfilment of organizational goals.
  • Both formal and informal communication channels exist together in all organizations.
  • Informal communication and “the grapevine” should be taken advantage of by the management when there is a free and open system of communication in the organization.
  • The motivation and involvement of employees increases when they are given the maximum possible information regarding the organization. Essential information includes statutory information, work-related information, information on operational and major policy changes, periodic bulletins regarding organizational events, and information that sets expectations regarding future changes.

City Hospital was losing money, and the hospital’s executive director knew action had to be taken to reduce expenditure. Since a major portion of the costs were labour-related, the choice was clear—reduce staff.

A natural target for staff reduction was the fifth floor. This unit generally served “observation” patients but had been less than half-full for some time. Fifth-floor patients could be easily reassigned to other units, and closing that floor would save a significant amount of money.

Approximately forty employees worked on the fifth floor, all of them reporting to Lily Joe, the nurse manager. Hospital management decided that since her floor was being closed entirely, Lily’s services would no longer be needed.

There were, however, some complicating factors. First, the hospital had a policy of “reassignment” rather than “layoff” and thus had a commitment to place the fifth-floor staff in other open positions for which they were qualified within the hospital. While it was unclear how many of the 40 displaced staff could be moved to other areas, management knew that many could be accommodated.

Second, most of the employees on the fifth floor were long-term staff who had become somewhat “set in their ways”, compared to the employees in other departments. Indeed, the fifth floor had developed a reputation for being an uncooperative group that consistently resisted even the most minor changes, and most managers felt that the quality of care provided by the fifth-floor nurses was marginal at best. Similarly, Lily was generally regarded as the least effective of the hospital’s nursing managers. As a result of all of these factors, managers in other units were extremely reluctant to accept displaced fifth-floor workers.

A series of management meetings took place to plan the closing of the fifth floor. The meetings were conducted by the assistant head of nursing and attended by the hospital’s nurse managers, as well as the director of personnel, director of public relations, and a communications/labour relations consultant. Initially, management had considered keeping Lily out of these meetings, but later decided that it would “look better” if she were included in the planning process. During every meeting, Lily cried openly, much to the discomfort of the others present.

Everyone who participated in the meetings was sworn to secrecy; no one was to mention the closing of the fifth floor until the plan was completely developed and announced. Nevertheless, rumours quickly began to circulate that something was “in the works” and that the fifth floor specifically had been targeted by the management.

Eventually, a plan was developed. On the following Wednesday morning, the deputy head of nursing and the director in charge of personnel would meet with the fifth-floor staff to tell them the news and provide them with details either about their move to other units (for those for whom other positions had been found) or (for those who would be laid off) about the strikingly generous severance package the hospital was providing. Immediately afterward, this same information would be announced at a general meeting of all management; simultaneously, the hospital’s chief medical officer (CMO) would conduct a meeting of the medical staff. Individual letters, signed by the director general, would be couriered to all employees on Monday (so that most would reach by Wednesday), and departmental meetings for employees would be conducted on Wednesday afternoon to discuss the situation in detail with all the staff. Finally, the news media would be contacted late Wednesday afternoon and provided with statements, which would appear on Thursday.

On Monday, two days before the layoffs were to occur, the group met with the CMO of the hospital, Dr Manoj Mehta, and the chief administrative officer (CAO), General Khurana, to review their plan. Much to their dismay, Dr Mehta and General Khurana both reacted extremely negatively to the plan. Both wanted to know exactly how many people would be laid off. The group was unable to produce exact numbers, since the number of vacant positions fluctuated almost daily due to resignations and new hires. “Nursing never gets its numbers right!” Dr Mehta roared in frustration. In addition, General Khurana strenuously objected to having the letter to employees come from the director general. “We’ve got to stop passing the buck and shoving the blame upward”, he argued. Both demanded specific numbers and significant changes in the announcement letter drafted by the group before they would allow the plan to move forward.

At the same time, however, the organization’s grapevine was functioning at full throttle. The fifth floor was going to be closed, probably this week, the rumour mill held. Indeed, the fifth-floor employees themselves had apparently gotten wind of the plan. On the hospital’s computer system, one fifth-floor employee typed an announcement that was communicated throughout the hospital—“We’re long-service, formerly loyal employees who are about to be kicked out onto the street by the hospital. If you would like to help, we are starting a fund to help support those who will be hurt by this. Please send your contribution to (name, address of fifth-floor employee).”

On Wednesday, fifth-floor employees came to work dressed in black and wearing black armbands. They covered the curtains in patient rooms with black sheets, much to the dismay and confusion of the patients in those rooms. When no one came to tell them their floor was being closed, they became all the more upset.

On Thursday, tension mounted. While senior management continued to debate the numbers involved in the layoff and the appropriateness of the communication plan, the fifth-floor employees waited for someone to tell them to go home. Eventually, the situation became unbearable. One nurse began to cry, and soon all were sobbing and hugging each other. The personnel director was called, and when she went to the fifth floor and saw what was happening, she told all of the employees to just go home. With the help of the deputy head of nursing, she oversaw the hurried transfer of fifth-floor patients to other floors.

On Friday, the hospital announced that the fifth floor had been closed.


Questions to Answer

  1. Analyse the reasons for the spreading of rumours regarding the layoffs of the observation ward staff.
  2. Was it correct to include Lily Joe in the initial discussion meeting?
  3. Ideally, how should this situation have been handled?

Source: Based on Andrews and Herschel, Organizational Communication, “Case 2: Employee Layoffs,” pp. 125–127, ©1996. Reproduced with permission of Pearson Education, Inc.

  1. Discuss how communication is the lifeline of an organization’s health.
  2. Indicate the new trends in organizational communication due to technological changes and developments.
  3. What are the main concerns of a manager? How should he or she fulfil them through effective communication? Discuss.
  4. Analyse the corresponding relationship between channels of communication and the structure of an organization.
  5. Discuss the formal and informal lines of organizational communication.
  6. What is the grapevine? What gives rise to this communication phenomenon in organizations? How can the management prevent it from spreading?
  7. Discuss the advantages of informal lines of communication in the workplace.
  8. What kinds of information need to be communicated to an employee by the organization?
  9. Discuss how staff relationships affect communication in the case of City Hospital.
  10. Discuss the responsibility of senior management for establishing and promoting a sound communication system.
  1. What are the ways in which organizations encourage or discourage “upward” communication?
  2. “A flat organization is a myth”. To what extent can an organization function without a structure with levels of authority?
  3. How does training promote effective interpersonal behaviour?
  4. In an organization, one learns new attitudes towards working with others. How does communication help an individual’s learning behaviour?
  5. Identify the advantages and disadvantages of having a clearly defined communication policy from a manager’s point of view, especially in relation to employees’ needs.

Choose an organization you are familiar with and prepare a diagrammatic presentation of its communications networks. Analyse and evaluate the strengths and limitations of the company’s Management Information System (MIS).


From among the given options, choose the most appropriate answer:*

  1. Managing as a process does not organize:
    1. labour
    2. capital
    3. goods
    4. material
  2. Forecasting determines organizational:
    1. budget
    2. performance
    3. feedback
    4. objectives and policies
  3. To create a cooperative, understanding, and pleasant work environment in an organization, decision-making should be:
    1. transparent
    2. strong
    3. flexible
    4. quick
  4. In an organization, the functional areas are:
    1. communications, production, and marketing
    2. marketing, communications, and finance
    3. production, marketing, and finance
    4. finance, production, and communications
  5. In business, a manager spends most of his or her time in:
    1. speaking
    2. writing
    3. meetings
    4. planning
  6. Managers need effective communication skills to perform the following roles:
    1. personal
    2. interpersonal
    3. impersonal
    4. decisional
  7. There are ____ levels in Maslow’s pyramid of needs.
    1. four
    2. three
    3. five
    4. six
  8. In organizations, the flow of communication sometimes slows down because there are too many:
    1. managers
    2. channels
    3. hierarchical levels
    4. departments
  9. Grapevine, as an information system, is:
    1. informal
    2. formal
    3. predictable
    4. personal
  10. A limitation of informal communication is that it is:
    1. inadequate
    2. personal
    3. unwarranted
    4. false