Organizational communication – all about human dynamics and synergies

My thoughts about organisational communication and importance of corporate culture.

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Organizational and corporate communication – what’s the difference?

Van Riel and Fombrun (2007) define corporate communication as “managing all internal and external communications aimed at creating favourable starting points with stakeholders on which the company depends”. I accompany this by viewing corporate communication as set of actions with the aim to establish a strong, unique and favorable reputation in the eyes of stakeholders. Corporate communication is speaking as an organization; the voice is given and consistent, whereas organizational communication recognizes the multiple voices of individuals within an organization.

Cornelissen states that whereas corporate messages speak to many audiences at once with the aim stated above, organizational communication typically addresses specific audiences with discrete messages. How I see it, organizational communication has a well-defined target with well-considered message, whereas corporate focuses on the integration and coordination of an organization’s communications. In nutshell, corporate communication aims to be objective whereas organizational is subjective; interpretation and presenting views depends on the communicator depending on their experiences and feelings.

Communication as the shaping force of an organization

Interpretive discourse can be used as a way to view organizational communication as a dynamic process actually creating the organization, which come into being through the everyday communication practices of their members (Putnam & Pacanowsky, 1983). I agree, seeing communication as the shaper of the reality of an organization: its operations, policies and ways of doing things.

According to Mumby, one feature of an organization is control. I find ideological control especially intriguing and relevant in the business today. It refers to the development of a system of values and beliefs with which employees are expected to identify strongly: “If employees have been appropriately socialized into the organization’s system of beliefs and values, then they should have internalized a taken-for-granted understanding of what it means to work in the best interests of the organization.” Ideological control is strongly linked to corporate culture. Disney and Wholefoods are great examples of companies with strong corporate culture and recruitment process with high emphasis on employee profile. I personally believe that this is the direction to which most organizations are going towards, increasingly realizing that people are not motivated working under heavy bureaucratic control. When motivated in a right way, employees’ contribution to organizations will increase from what traditionally is expected.

How do values shape an organization’s reality?

Stakeholders are increasingly paying attention to organization’s values. In my opinion, the employee must be able to fully assimilate with the organizations values. I, for one, will choose the organization to work for based on their values, as I’d not able to work to my full potential if I cannot connect with them. I personally think that one should connect with the organization’s values to an equal level as if it was their own business. This is a win-win situation for all parties: the company has motivated, entrepreneurial minded employees whereas the employees get to develop themselves and feel fulfillment through their work. This applies to entire stakeholder network, including suppliers, customers, society and so on. I, for example, have so far found only one company that fulfills these criteria: Wholefoods. For illustration, I will share their values:

  1. We sell the highest quality natural and organic products available
  2. We satisfy, delight and nourish our customers
  3. We support team member excellence and happiness
  4. We create wealth through profits & growth
  5. We serve and support our local global communities
  6. We practice and advance environmental stewardship
  7. We create ongoing win-win partnerships with our suppliers
  8. We promote the health of our stakeholders through healthy eating education

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These values are very close in line with the ones I would choose if I founded a business today. To successfully carry out this, in my opinion, best recruitment method would be conducting personality tests upon recruitment process to make sure that employees will fit in with the corporate culture. This is naturally beneficial for the potential employees as well, in order to being employed to a organization whose interests and ways of operating are not in line with theirs. This is even more important during the time of corporate colonization (Mumby); the boundaries between work and other aspects of our lives are becoming increasingly blurry. Thus, it is increasingly important for employees find their work meaningful.

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Collectivist organization is a structure that emphasizes shared power and widely dispersed decision-making responsibilities. I personally see this kind of structure to often be optimal for an organization to maximize the potential that lies in its human talent. Often it is the grassroots level that has great insights for operations. A great example is postmen. They operate the same route for years and gain incredible amount of insights that would be highly useful in business development. However, as the communication gap between the top management and postmen is so wide, these insights never reach the business development function, and thus a lot of potential remains non-utilized.

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Conclusions

My view towards organizational communication is closely in line with the interpretive discourse; it is the shaping force on an organization’s reality. It is vital that companies make their corporate culture explicit for all stakeholders to make sure that mutual understanding is reached to fully maximize organization’s resource potential. Surely, some traditional organizations such as factories will continue being led by bureaucratic control. Luckily, however, often in these kinds of organizations it is how stakeholders, including employees, prefer it to be. Factory workers are often happy by being led from up and being able to clearly structure different hierarchy levels. However, emerging trend is a shift towards flexible organization in which decision-making is dispersed. Values and corporate culture are crucial in forming the identity and operations of an organization. Recruitment will not be a “grilling” interview from the HR towards the potential employee; rather, it will be a mutual conversation of shared interests, skills and goals for both the person and the organization (represented by the recruiter) to evaluate whether they would make an ideal match.

References

Mumby, Dennis (2013) Organizational Communication. London: Sage.

Christensen, L. T. & Cornelissen, J. ( 2011). Bridging Corporate and Organizational Communication: Review, Development and the Look to the Future. Management Communication Quarterly 25 (3), 383–414.

Communication and organizations, an interpretive approachLinda Putnam‪, Michael E. Pacanowsky (1983)

‪Essentials of Corporate Communication: Implementing Practices for Effective Reputation Management. ‪Cees B.M. Van Riel‪, Charles J. Fombrun (2007)

http://www.wholefoodsmarket.com/mission-values/core-values

Reaction II Corporate Communication Research

Sonja Hannus

Integrated stakeholder communication: role of Investor Relations today

Below are my reflective thoughts of the role of investor relations in business today.

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1.0. Introduction

This is a reaction paper to three articles: “A descriptive account of the investor relations profession: a national study” by Laskin (2009), “A review of IPO activity, pricing, and allocations” by Ritter & Welch, and to “Instrumental and/or deliberative? A typology of CSR communication tools” by Seele and Lock. I will introduce the main ideas of the articles supported with my personal views to the issues discussed.

Laskin reviews comprehensively the nature of investor relations; its role historically and why and how this role has been reshaped in the past years. He claims that investor relations today cannot be categorized into its own separate box; building interactive relationships and trust with stakeholders is the main function of IR today. Ritter & Welch contribute to research of IPOs; they seek to find patterns on why companies tend to underprice their stock in initial public offering. First, they argue that the long-run performance of IPOs is highly sensitive to the choice of sample period. Thus, time-variation in research deserves higher emphasis. Further, asymmetric information theories are unlikely to be the primary determinant of fluctuations in IPO activity and underpricing. In other words, there is no single dominant theoretical cause for underpricing. Seele & Lock argue that CSR today is strongly dependent on effective communication; main goal of CSR communication is to build moral legitimacy in the eyes of stakeholders. For this aim, authors present a toolbox for corporations to engage their stakeholders in two-way communication. They claim that meeting the expectations and satisfying needs and informational interests of stakeholders is the main function of CSR. I will discuss these issues in more detail below. I will then present some final conclusions of the nature of investor relations today, based on my personal view supported by the articles discussed.

2.0. Reaction I: “A descriptive account of the investor relations profession: a national study” Laskin (2009)

2.1. Introduction: IR historically

Laskin states that the corporate scandals that shook the U.S. investment market (e.g. Enron in 2001) have resulted investor relations receiving heavy attention from the public. These scandals made shareholders think more carefully their investments in companies as well as wanting to get involved in decision-making. Consequently, the function of communication has changed significantly to adapt the demands of share- and other stakeholders. Laxis argues: “In the post-Enron era, investor relations vaults to the top of the corporate agenda, as companies must begin to rebuild investor confidence”. How I see it, a company cannot exist without its stakeholders; having their trust, support and engagement is vital for its survival. Thus, investor relations is all about having a mutually beneficial relationship with the stakeholders.

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2.2. IR today: finding synergies in merged finance and communication

As said, communication and relationship building is now more important than ever. Laxis argues that a communications professional is likely to be able to communicate more effectively and understandably to the investor. Thus, cooperation between financial and communication department is crucial. Effective IR reduces uncertainty and lowers the risk premium that investor demand for their investment. IRO’s need to provide investors with reliable information about the company to let investors make an informed decision. I strongly agree with Laxis’ view; investor relations will highly benefit when finance and communication expertise is merged in a company to develop targeted and effective strategic communications programs.

2.3. Acknowledging all stakeholder groups

Laxis argues that it is increasingly important for a company to speak in a unified and coordinated voice to all of its publics. Though I agree that it is vital to communicate not only to shareholders but all stakeholder groups, I however, do not agree that this should be done in a unified voice to all. Rather, due to their different interests, investor relations’ task is to provide relevant information to each group considering their individual information needs.

I believe that companies are widely realizing that IR today is all about satisfying the informational needs of stakeholders, according their interests towards the company. Thus many companies are outsourcing IR to professional communication agencies. Growing trends are, to mention some, CSR as well as storytelling in annual reporting and marketing strategy.

2.4. Conclusion

Laxis claims that investor relations cannot be categorized into its own separate box anymore. Building relationships – trust – with stakeholders is the main function of IR. In order to succeed in this, effective cooperation between communication and finance departments is necessary. Optimally, communication is not a separate business unit but tied to each business function in the company. In my opinion, even the term department is outdated; companies should integrate its functions and avoid categorizing them in order to reach maximum synergies between different expertises among the company’s human capital.

3.0. Reaction 2: “A review of IPO activity, pricing, and allocations” Ritter & Welch (2002)

3.1. Introduction

 Ritter and Welch state that a strong trend has been noticed in research: at the end of the first day of trading, shares have traded almost 20% above the price at which the company sold them. IPOs have returned on average 23% percent for an investor buying shares at the first-day closing price and holding them for three years. However, over three years, the average IPO underperformed the market index by 23%. This is naturally is paradoxical. The article seeks to find explanations for patterns in issuing activity, underpricing, and long-run underperformance. For a non-finance professional, the research method used remains relatively complex and challenging to grasp. How I understand it, the authors conducted a literature review on the earlier research of the issues on hand.

3.2. IPO activity: Why do firms go public?

The main reason for a company to go public is to raise equity capital. Also, the risk of ownership is spread among a large group of shareholders. This is especially important when a company grows: original shareholders wanting to cash in some of their profits while still retaining their ownership. Ritter & Welch argue that the most important factor in the decision to go public is favorable market conditions, however, only if they are beyond a certain stage in their life cycle. By favorable market conditions, I understand to be the state of company’s surrounding environment – economical factors such as gas price, trends in the field the company is operating on and so on. I personally believe that another reason for a firm wanting to go public is its desire to get access to a new market. It is important for a company to consider on which stock exchange to list. Each stock exchange has their special knowledge; for example, Norwegian exchange is professional in oil-related matters. Further, by listing itself, the firm achieves higher credibility and recognition.

3.3. What influences investors’ behavior?

Research shows that first-day returns and underpricing has correlated highly for decades. Ritter & Welch further argue that IPOs of operating companies are underpriced, on average, in all countries. When decision of going public is made, the firm hires an investment bank to make the IPO happen. The bank spreads awareness of the listing for investors and based on investors’ estimated demand and desirability, a stock price is set. After the first day of free stock exchange, it can be seen whether the stock was over- or underpriced.

Welch & Ritter suggest winner’s curse as one explanation for underpricing; in this case, the investor holds more information than issuer. Thus, issuer faces a placement problem; not knowing the price the marker is willing to bear. Another kind of issue is an informational cascade, in which investors only request shares when they believe the offering is hot. Pricing too high leaves the issuer with a high chance of failure: investors withdraw because other investors withdraw. As already stated, as a non-finance professional, I find it challenging to form a view for the reasons behind the phenomenon of underpricing. Further, as presented in the conclusions, even the authors could not find a theoretical explanation, based on their comprehensive research work.

3.4. Conclusions

Underpricing is a persistent feature of the IPO market. While asymmetric information models have been popular among academics, the authors feel that these models have been overemphasized. Welch & Ritter favor the behavioral point of view, presented above, in the research of long-run performance in IPOs. However, they emphasize being cautious with generalization of these views. Long-run performance of IPOs is highly sensitive to the choice of sample period; thus, time-variation in research deserves higher emphasis. Further, they argue that asymmetric information theories are unlikely to be the primary determinant of fluctuations in IPO activity and underpricing. To conclude, the authors argue that there is no single dominant theoretical cause for underpricing.

4.0. Reaction III: “Instrumental and/or Deliberative? A Typology of CSR Communication Tools” by Seele & Lock (2014)

4.1. Introduction

Scherer & Palazzo state the firms are taking a new political role as global corporate citizens; helping to solve public issues in cooperation with stakeholders while conducting profitable business. According to Seele & Lock, political approach to CSR refers to not only the economic, social and environmental, but also political responsibilities that corporations bear in the globalized economy. They state that successful CSR is strongly dependent on communication. Its main goal is to build moral legitimacy with its stakeholders; satisfying whatever needs and informational interests they might have for the company. For this aim, the authors present a toolbox providing directions for corporations on how to engage their stakeholders to company’s activities. My view is very much in line with the authors’; CSR today is all about acknowledging and meeting the versatile needs that different stakeholders groups have.

4.2. Credibility gap & moral legitimacy

Credibility gap, how I see it, refers to information asymmetry that stakeholders believe to hold between themselves and the company. Stakeholders have different expectations and interest for the company. Naturally, a company cannot exist without stakeholders. Thus, it is crucial for the company to establish CSR communication that builds a base for a mutually beneficial relationship between these partners. For this aim, the authors claim that open discourse, participation, transparency, and accountability are needed to get the CSR messages across to stakeholders. Further, reaching consensus is seen as the core element; company should seek ways to enable stakeholders to engage in a dialogue. The moral legitimacy obtained in this discourse depends on credibility as suggested by the authors. If truth, sincerity, appropriateness, and understandability are present in CSR communication, consensus, understanding, and credibility will be reached.

4.3. Conclusions

Authors argue that two-way communication and reaching consensus with stakeholders is in the core of CSR communication. Further, open discourse, participation, transparency and accountability are key components in building credible CSR. The tools provided by authors can be used as part of the bigger picture on how companies may handle their responsibility to society. Authors emphasize importance of closing the gap of credibility; meeting the expectations and satisfying needs and informational interests of stakeholders.

5.0. Discussion

How I see it, a business today cannot be successful without full support of its stakeholders. Investor relations is not about satisfying the informational needs of purely investors, but rather all stakeholder groups. Figure 1 is a simple illustration of different stakeholder groups:

Its goal is to address needs of stakeholders, as well as to engage them to two-way value-adding communication. Thus, IR is all about having a mutually beneficial relationship with the stakeholders. In order to succeed in this, effective cooperation between different departments is needed; communication is not a separate business unit, but rather tied to each business function. In my opinion, companies should avoid categorizing its functions in order to reach maximum synergies among the company’s human capital.

6.0. References:

Laskin, Alexander V. 2009. A descriptive account of the investor relations profession: a national study. Journal of Business Communication 46: 2, 208–233.

Ritter, J.R. and Welch, I. 2002. A review of IPO activity, pricing, and allocations. Journal of Finance LVII: 4, 1795-1828.

Seele, P. ad Lock, I. 2014. Instrumental and/or deliberative? A typology of CSR communication tools. Journal of Business Ethics.

Figure 1: https://wikis.engrade.com/stakeholdersinbusiness

Sonja Hannus

Investor Relations: Pre-examination

Fashion in La Grande Bellezza

The Great Beauty is a 2013 Italian film co-written and directed by Paolo Sorrentino. The main character is an aging socialite, Jep Gambardella, who once wrote a famous novel in his twenties, only to retire into a comfortable life writing cultural columns and throwing parties in Rome. After his 65th birthday party, he walks through the ruins and city streets, encountering the various characters, reflecting on his life, his first love, and sense of unfulfillment. We watched the film observing its fashion. It was not an uncomfortable task:

“If there is one film we wish would guide the direction of men’s style it is La Grande Bellezza.”

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Researchers need to be aware of philosophical issues in research

I’m starting my thesis project soon.. Here’s some of my concluded thoughts on the link between academic theories and practise.

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Introduction: How I view research

This is a reaction to Beginning qualitative research: a philosophic and practical guide by Maykut & Morehouse, as well as to Business Research Methods by Bryman & Bell.

Bryman & Bell state that research is systematic investigation into, and study of materials and sources in order to establish facts and reach new conclusions. The more I’ve personally got involved to the business life towards the end of my studies in the business school, the more I’ve began to question academic research. I question whether academic research actually contributes profoundly to practice or not, especially in the field of business. In human science, for example, I understand perfectly that research enables fundamental findings that can save lives. These findings can only be made through profound research and testing the human body.

In business, however, how I see it, everything is context-dependent. How do you know whether findings are trustworthy? To what extent can they be generalized? Further, if the researchers are not actively involved in the business life, are they qualified to give recommendations of best practices and tools? And when they do, how do we know that these implications will enhance organizational performance? Does the new knowledge even reach relevant people?

Philosophic questions on nature of research

My thoughts are very much in line with philosophical analysis in literature. Nature of research raises questions that researchers need to be familiar with and further, have their view on it. Epistemological assumptions concern the origins of knowledge – the nature, sources and limitations of it and whether there can be factual knowledge in the first place. How trustworthy are research findings? If there is no such thing as factual knowledge, what is the point of research?

In my opinion, the academic language is too complex and theoretical; people in business simply don’t have time and interest to read highly academic articles, even if they wanted. Information today needs to be quickly and simply absorbable and adaptable. Thus I’m afraid that the valuable work of researchers is too rarely utilized – practical and academic languages might simply not find mutual communication ground.

Ontology, then, questions the nature of reality. What can be said to exist? What is a thing? Can we sort existing things into categories? If yes, on which basis? I agree with Bryman & Bell, who claim that researchers have to very carefully determine how they conceptualize a noun in their specific piece of research. According to a constructionist view, nouns cannot be pre-given and assumed to be something constant and specific. Social actors are continually shaping social phenomena and their meanings; they are constantly in a state of revision.

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Research methods

Quantitative research collects and analyses data, with the aim to test an existing theory. Social reality is seen as an external, objective reality (ontological). Qualitative, by contrast, usually emphasizes words and sees social reality as constantly evolving by individuals’ creation. As Maykut & Morehouse emphasizes, it is important to choose an appropriate research method based on what is being researched. If we are interested in the worldviews of members of a certain social group, a qualitative research method that is sensitive to how participants interpret their social world is likely to be better option than quantitative.

The question of influence of author’s values in conducting research is highly important. As Bryman & Bell points out, choice of values can intrude in the process of business research, in for example:

  • Choice of research area
  • Formulation of research question and choice of methods
  • Data collection techniques and implementation
  • Analysis and interpretation of data
  • Conclusions

Clearly, there are several phases, which may result in a bias research; values being intruded consciously or unconsciously. Academic research always comes with limitations that are elaborated in the article; how generalizable and trustworthy the findings are.

Maykut & Morehouse highlight the importance of logic. Logic deals with the principles of demonstration and verification. Are causal links between bits of information possible? Teleology is generally concerned with questions of purpose. What is research for? What is the possibility of generalization? What does research contribute to knowledge? What is the purpose of research?

Conclusion

In the field of business, as I see it, situations are context-dependent and hardly generalizable. Each organization faces their individual problems. Research findings should always be questioned and their feasibility into context thoroughly considered. Despite the criticism presented above and limitations that research will always have, the findings will be very useful in organizations, when their limitations are carefully considered and understood by practitioners.

Corporate Communication Research

Sonja Hannus