Organizational Communication - Principles of Management

So far we have discussed communication in general terms. Let us now look more closely at the nature of communication within an organization. Communication flows through two main channels in an organization: formal channels and informal channels. Formal channels are systems of officially sanctioned channels within an organization that are used regularly to communicate information.

Formal channels tend to follow the structure of an organization, with information transmitted up and down a management hierarchy and horizontally between subunits. Informal channels are unofficial channels that have not been formally established by managers. Informal channels typically do not follow the structure of an organization.

Informal channels include communication that flows through the personal networks of employees (that is, gossip networks).


Within the formal communication channels of an organization, information flows in three directions: downward, upward, and horizontally. Downward communication occurs when information flows from higher to lower levels within an organization hierarchy. Downward communication includes information about the organization’s mission, goals, values, strategies, processes, procedures, task responsibilities, and overall organizational performance, along with feedback regarding the performance of lower levels within a hierarchy.

When considering downward communication, managers have to decide what to communicate, what media to use, and how to minimize noise in the system so that the receivers get the intended message. We discuss these issues in more depth later when we look at barriers to communication. For now note that managers need to be careful not to communicate too much information downward. To minimize the chance of overloading subordinates with information, they should focus on communicating only what is important. They also need to match media to their messages.

Upward communication occurs when information flows from lower to higher levels within an organization. Upward communication includes routine performance reports; feedback to higher-level managers about success in implementing strategies, policies, and procedures; suggestions for improving operations or strategies; alerts about unanticipated events or problems; and grievances and complaints.

As with downward communication, senior executives have to decide what information they want communicated up to them regularly. They too do not want to be overloaded with information, so they normally install systems to ensure the regular upward communication of selected financial, accounting, operational, and market data. You will recall that many firms now use the balanced scorecards to help decide what information they want communicated upward.

In addition, managers must make sure that systems are in place so employees can make suggestions and alert senior managers to emerging problems, opportunities, and grievances or complaints. These systems can include employee suggestion boxes, regular scheduled face-to-face meetings between senior managers and lowerlevel employees, and other procedures for allowing employees to suggest new business ideas.

An interesting example of a formal upward communication channel can be found at Google, the fast-growing Web search company. Part of the management philosophy at Google is that employees should spend 10 percent of their work time on “far-out ideas” that might one day become a business opportunity for Google. Google founders Sergey Brin and Larry Page hold regular sessions with employees working on projects that come out of this innovation time.

Employees don’t get to present their ideas to Brin and Page, however, until they have first been vetted by Marissa Mayer, the company’s director of consumer Web products. Anyone can post a proposal. Mayer then meets with employee groups, helping them to develop their ideas, and decides when they are ready to present before Brin and Page—something they don’t get to do until the pitch has been well developed and there are hard data to back up the proposals.

Then employees get just 20 minutes before Brin and Page. Ideas that have come out of this process include gmail (Google’s e-mail program), Google Talk, an initiative to offer free wi-fi connections to the Internet in San Francisco, and Google Earth.

Horizontal communication occurs among employees and units that are at the same hierarchical level in an organization. Horizontal communication is essential to coordinate the activities of employees and units and to solve any problems that might arise without involving higher levels of management. For example, developing a new product often requires close coordination between R&D, marketing, and manufacturing to ensure that R&D designs products for which there is adequate demand and that can be manufactured efficiently.

Such coordination requires rich communication between R&D, manufacturing, and marketing. To achieve this, firms often establish cross-functional teams, which allow face-to-face communication between personnel from different departments. In other words, the teams become the communication channel. Other communication channels for achieving coordination between different units include regular direct contact between managers from different units, liaison roles, and full matrix structures.


As noted, informal channels do not follow the structure of an organization, and they are often based on personal networks (relationships between individuals). Personal communication networks can be a valuable source of information about what is going on in an organization and a conduit for the exchange of ideas. Smart managers often proactively build a personal network precisely for this reason—it helps them discover important information.

For example, we discussed how Jim Donald, CEO of Starbucks, drops into his local Starbucks store every morning on the way to work. The store employees know him well, and in effect Donald has added them to his personal network. As such they can be a useful source of information about the company that Donald might not get from formal channels. Howard Schultz, the current chairman and former CEO of Starbucks, does the same, and it was through one of these contacts that Schultz first heard the idea that Starbucks should sell music—something that is now a big push at the company.

Personal networks can also function as conduits for rumor and gossip about what is going on in an organization. The grapevine can spread unsanctioned information (rumor and gossip) rapidly through personal networks. Grapevines always exist in organizations, often becoming the dominant force for transmitting information about what is going on—particularly in highly uncertain situations when information has not been released through formal channels.

For example, if a firm is in financial trouble and managers have indicated that they will take “concrete steps” to cut costs but have not released any information through formal channels, the rumor mill often generates significant gossip about what managers intend. Gossip, in other words, arises to fill an information vacuum, and the flow of gossip through the grapevine will be particularly high in an ambiguous and uncertain situation.

The interesting thing about grapevines is how much communication goes through them and how accurate it often is. One study estimated that as much as 70 percent of all communication in an organization flows through the grapevine; another suggested that as much as 70–90 percent of all information passed through the grapevine is at least partly accurate.

Some managers might like to squash the grapevine because some of the information flowing through it can be inaccurate and because it is outside their control. However, such an approach is unrealistic. People love to gossip. A better tactic might involve listening to the grapevine for valuable feedback about what employees are thinking and correcting misperceptions by releasing information through formal channels.

All rights reserved © 2018 Wisdom IT Services India Pvt. Ltd Protection Status

Principles of Management Topics