importance of internal communication

7 Reasons Why Internal Communication Is Crucial

It is all about customer experience. While customers are crucial to business’s success, no business should overlook the importance of internal communications.

Manoj Agarwal
Manoj Agarwal

Businesses have long been obsessed with getting communications right with their customers. However, it is the internal communications that take place within the organization that need more care and time. Only then can a business thrive and succeed under all circumstances. Finally, your employees are your first and foremost customers. If you communicate well with your employees, then you can communicate well with your customers, too.

‍ It is easy for businesses to completely ignore internal communications because you might be too busy doing external stakeholder communication only. While your customers are crucial to business success, no business should overlook the essential aspect of internal communications.

Why Internal Communication?

Firstly, businesses with a solid internal communications strategy in place are 3.5 times more likely to leave competitors behind and forge ahead. Secondly, it is quite expensive and a big loss if your employees are not aligned and on the same page due to a lack of internal communications strategy. In ‘The Cost of Poor Communications’ by David Grossman, he reported that businesses with over 100,000 employees lost more than $62 million per year due to information gaps. Debra Hamilton, in her report, said small companies lost $420,000 per year due to a lack of internal communications.

stats on internal communication

Sadly, the current scenario paints a miserable picture. According to a study by Arthur J. Gallagher & Co., 60% of businesses haven’t thought of building a long-term internal communications strategy. A Gallup study last year found that a dismal 13% of employees agree that their business leaders effectively communicate with them which means 87% of employees don’t think effective internal communications are taking place in their organization. While internal communications are vital, businesses are often putting them on the back burner or not realizing their potential.

Importance of Internal Communication in an Organization

What is the role of internal communication in an organization? Why is it given so much importance? Here are the reasons why internal communications need to be a priority and not an option for businesses of any size.

1. It helps boost employee engagement

Employee engagement is the holy grail for businesses because it is the lifeline of a business. If employees are not engaged, they are less productive and their stress can seep into their overall well-being. They will be more frustrated and they won’t be able to give their 100% at work which can dampen the spirit of the business. However, a boost in employee engagement can lead to productivity levels increasing by 25% according to a McKinsey report and this can impact the entire business. However, just 33% of employees feel like they are engaged at work.

stats on employee engagement

When businesses get their internal communications right, they are improving on employee engagement. This easily shows in a business’ success as organizations with higher employee engagement earn 22% more profits. While some employees are proactive in getting information and talking regularly, not all employees are like that and it is the duty of the managers and top-level management to put effort into regular communication. Internal communications can help employees feel valued and important.

2. It ensures organization-wide transparency

Internal communications ensure transparency in an organization. And transparency ensures trust. Employees don’t want to learn about a big announcement through a third person or any other external source. They want to learn through their company leaders or top-level management. According to a study by Slack, 80% of employees are interested to know how decisions are made in their organization. This means they want increased transparency so they understand how their organization works and how decisions are made by the management. Transparency enables employees to trust their leaders and this fosters accountability.

In the same Slack study, as many as 55% organizations felt they were being transparent, only 18% of employees thought the same. Internal communications can help bridge the gap in transparency and enable employees to trust and thereby work towards the common company values and mission. Internal communications enable swift delivery of information, whether it is from top-level managers or between employees. This flow of information enables transparency so every employee is on the same page as others. This can help build a strong workplace culture.

3. It keeps employees informed and updated

Internal communications aims to keep employees up-to-date about any information they need to know. A Bambu report said 80% of employees are interested to know what is currently taking place in their business. In the same report, 77% of these people explicitly specified it can help them work better while 66% said it can enhance their relationship with their colleagues. This shows how eager employees are to know news about their organization. An effective internal communications strategy can enable employees to be kept in the loop about company news. For instance, any policy changes, how the business is doing, and any changes to the work culture must be communicated with employees.

Importance of Internal Communication in an Organization
Employees don’t like to be kept in the dark about company news.

But it is just as easy to kill that eagerness if businesses don’t put effort into their internal communications strategy. This ties in closely to finding meaning in their work. When employees are eager to learn about the business and the projects they are involved in, they are more likely to be engaged. However, if effective communication is missing altogether then it can lead to high employee turnover which can prove to be costly for the business. According to Josh Bersin, world-known industry analyst, the cost of losing an employee can add up to 2 times his/her annual salary. This is easily avoidable with proper  internal communication planning and execution.

4. It helps in the time Of crisis

Internal communications can help in crisis management. In an ideal world, organizations don’t experience any problems. But the reality is far from it. Mergers and acquisitions, any macro-economic crisis, pandemics, political situations etc keep taking place. An organization might need to lay off a few or many employees or take any unpleasant decisions in times of crisis. In some cases, teams have to restructure and so on. Crisis can affect a business of any size and the people in it require clear information about what is happening in the company. Internal communications can help manage and ensure there is no misinformation during that time.

Rumors can spread easily and this can cause toxicity in the workplace. Additionally, people might lose trust and become less engaged as a result of bad internal communications. However, organizations with a proper internal communications strategy in place can flourish even in tough times. Internal communication can make it easier for difficult conversations to take place so employees can understand the full picture and why something unpleasant such as layoffs are taking place. This can help employees respect the organization they work in and it can create an open environment for discussions.

5. It helps with external communication

Internal communication and external communication might be seen as separate but they are not as separate as businesses seem to think. According to a Bambu report, 63% of employees said proper internal communication can help them become brand advocates and they will spread the word about their company. Think about it.

Employees are acting as company insiders as they work in it. When employees say anything about the company, whether good or bad, it is going to hold more weight because they are part of the organization. This can have positive or negative effects depending on what the employee says about the company.

When internal communication is done right, employees know what is going on and they feel like a part of the team. When employees have these positive feelings, it drives employees to say good things about the organization. Whether on social media or to family and friends, these employees will have encouraging words with regards to the organization. In this way employees can be credible ambassadors when they are satisfied about how they are being treated. Note that employees who have direct contact with customers will also benefit from internal communications as how they feel about the company will be reflected in how they speak to customers.

6. It fosters company culture and values

A strong workplace culture can enable businesses to retain and attract the best talent which can undoubtedly have a positive effect on business outcomes. According to a Gallup study, work culture is quite vital for a business’ success and top employees are interested in working at a place that has an exceptional work culture. Internal communications can help foster a positive work culture and have a profound impact on the bottom line. Company culture and values weaved into internal communications can enable employees to feel good about working there and boost a healthy work environment.

A successful workplace culture helps align employees with organizational goals. According to a study, just 40% of employees understand how they are contributing to an organization. Internal communication enables employees to clearly understand how they are important in the bigger picture and it encourages employees to work together as a team. Internal communications can help people effectively and efficiently work together. Without internal communications in place, the workplace environment can turn toxic, pushing good employees to leave the organization. Internal communications have the power to foster work culture and can help in overall workflow.

7. It enables feedback and innovation

Effective collaboration is required for a business to run smoothly and reach the required business goals. Internal communications facilitate that to happen and help create a place of openness whereby employees can discuss and pitch their ideas. Employees can put their ideas forward so the top-level management can understand their employees better. This type of two-way communication can enhance relationships between all the stakeholders in the organization and ensure a culture of innovation.

Feedback enables employees to put forward what they think. Whether it is about a particular flow of things at work or the way they are expected to work. When employees feel like their opinions matter, they are more likely to be connected to the company. This can help increase engagement and boost productivity.  Employees appreciate feedback and a strong internal communications strategy ensures feedback and discussions are a routine part of the business.


Internal communications need as much attention, if not more, than external communication. It all starts from within the business. If employees are engaged, they perform better and the business grows. In the new normal and hybrid work world, businesses need to re-focus on internal communications and put effort into their strategies. As the economic climate has changed, employee expectations have evolved, and newer technologies are making their way into the organization, internal communication is the key connecting factor. It helps build a healthy and trustworthy relationship between employees and ensures even in the face of change, the company works together as a unit.

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Manoj Agarwal

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Manoj Agarwal is the Co-Founder and CPO at Xoxoday. He is an MBA from IIM Kozhikode comes with 14 years of experience in building companies, technology, product, marketing, & business excellence.