2009/2010 Communication ROI Study™

2009/2010 Communication ROI Study™ Originally published by Watson Wyatt Worldwide Capitalizing on Effective Communication How Courage, Innovation and Discipline Drive Business Results in Challenging Times

A presentation to IABC San Diego by Christine Infante, Kathleen Drummond

September 15, 2010

How companies with highly effective communication:

z Have the courage to talk about what employees want to hear in challenging times.

z Focus on innovation and use new tools to keep employees engaged in the business.

z Have the discipline to plan and measure success.

But first, some background on our study

z Links effective communication and financial performance

z Fielded April through June, 2009

z 328 companies participated, representing 5 million employees

2009/2010 Participation Australia, 20 Canada, 40 United States, 141 Middle East, 62 Europe, 65

Companies get a communication effectiveness score based on survey responses

Companies are ranked Communication and grouped Effectiveness Score

Look at 5-year financial High, 25% performance

Regression shows firms 50% with high scores are also best financial performers Low, 25% towerswatson.com 4 © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. Key Findings: Highly Effective Communicating Firms

Better financial performance • A 47% higher total return to shareholders (2004-2009)

Invest in employee communication • Spend 28% more per employee ($257 high vs. $200 low)

Effective Communication is a Leading Indicator of Financial Performance Return on Investment by Communication Effectiveness $140 $120 $130 $100 Low communication $80 $100 effectiveness $83 $60 High communication effectiveness $40 $20 $0 2004 2009

Effective communicating firms are more likely to…

5 5x 4 3 3x 2 2.5x 1 2x 0 Times more likely more Times Use social media Have a clearly Train managers to Use branded defined EVP lead through approach to talk change about compensation and benefits

towerswatson.com 7 © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. Highly Effective Communicators have the COURAGE to talk about what employees want to hear in tough times

When the Communicate the “new” employment deal (EVP) going gets Help employees tough – highly understand what they effective have now communicating Train managers to help companies: employees manage change

The Employee Value Proposition

z Also known as the “employment deal”

z What the employee can expect from the company and what the company expects from employees

z Includes pay, benefits, development opportunities and work environment

Do you have a formal EVP?

Employees 74%

Employers 28%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Drop in employee engagement on engagement index

All 2008* 100 employees 2009 91 -9%

Top 2008* 119 performing employees 2009 92 -23% *2008 score set as baseline

Source: Original Watson Wyatt 2009/2010 Strategic Rewards Report towerswatson.com 11 © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. The Employee Value Proposition Has Changed

PAY & BENEFIT PENSION CONCESSIONS FREEZE SALARY FREEZE

REORGANIZATION/ RESTRUCTURING CUTBACK IN TRAINING

BENEFIT CHANGES MANDATORY FURLOUGHS

ADDITIONAL JOB RESPONSIBILITIES DOWNSIZING

HIRING FREEZE COST SHIFTING LOSS OF PERKS 401(K) MATCH SUSPENDED

The best have a clear EVP and align it to their brand

Made the EVP part of our 36% communication strategy 18% 27% The best are 2.5 times more 50% likely to have a Have aligned the EVP with our 16% clearly defined external, customer-facing brand 33% EVP

62% Have a clearly defined EVP 23% 47%

0% 20% 40% 60%

HIGH COMMUNICATION EFFECTIVENESS LOW COMMUNICATION EFFECTIVENESS ALL PARTICIPANTS

Organizations with a coordinated and branded approach to communicate the total value of health- and wealth-related benefits 60% 50% 52% The best are 40% 5 times more likely to have 30% a branded 28% 20% approach 10% 10% 0%

ALL PARTICIPANTS LOW COMMUNICATION EFFECTIVENESS HIGH COMMUNICATION EFFECTIVENESS

Employees at my organization understand …

40% How pay levels are set 13% 20% The best help employees The value of their 41% understand their pension program 16% current programs 27%

How our bonus 56% program works 20% 36%

The value of their 63% health care benefits 28% 43%

0% 20% 40% 60% 80%

HIGH COMMUNICATION EFFECTIVENESS LOW COMMUNICATION EFFECTIVENESS ALL PARTICIPANTS towerswatson.com 15 © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. Regional Differences are Significant When Communicating the “True Value” of Total Rewards

Canada 61% Europe Percent of companies United States 48% 33% reporting high Middle East effectiveness 50% Australia 33%

All 45%

Change 50% management 35% Treat training 43% managers as a unique and 47% Communication important training 34% 42% audience

0% 20% 40% 60%

HIGH COMMUNICATION EFFECTIVENESS LOW COMMUNICATION EFFECTIVENESS ALL PARTICIPANTS

towerswatson.com 17 © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. During Times of Change, Managers Play an Important Role

61% Dealing openly with 18% resistance to change 33% Managers 64% Addressing the needs take the and concerns of 22% initiative to remaining employees 42% keep employees Supporting the executive 73% management vision 29% engaged in through their actions 47% tough times

Increasing 73% communication with 27% employees 52%

0% 20% 40% 60% 80% HIGH COMMUNICATION EFFECTIVENESS LOW COMMUNICATION EFFECTIVENESS ALL PARTICIPANTS towerswatson.com 18 © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. Highly Effective Communicators focus on INNOVATION and try new tools to keep employees engaged in the business

When the Align employees to the going gets needs of the business – and with customers tough – highly Increase face-to-face effective communication communicating Try new tools to reach companies: employees in real time

towerswatson.com 20 © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. Significant Regional Differences When it Comes to Talking About the Business

Middle United All Australia Canada Europe East States Helping employees understand the 60% 48% 53% 60% 56% 65% business

Providing information on organizational 56% 60% 63% 54% 44% 61% performance and financial objectives Increasing productivity 46% 36% 57% 49% 48% 42% Communicating to employees on how their actions affect 45% 36% 51% 40% 48% 46% the customer

Middle East 36% Europe 51% My company Canada 56% has increased the use of Australia 59% face-to-face United States 61% communication over the past 24 Overall 55% months? High effectiveness 65%

Low effectiveness 45%

Europe 27% Canada 38% Percentage United States 41% of participants Middle East 45% that have Australia 55% increased their use of All participants 40% social media High effectiveness 53% Low effectiveness 24%

towerswatson.com 23 © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. Highly Effective Firms are Using Social Media to Reach Various Audiences

41% Line management 29% Using more 29% channels in 43% challenging Sales staff 20% times 28%

52% Global employees 23% 36%

56% Local employees 19% 39%

0% 20% 40% 60%

HIGH COMMUNICATION EFFECTIVENESS LOW COMMUNICATION EFFECTIVENESS ALL PARTICIPANTS

Limited staff/resources to implement social media 45%

Limited knowledge of social media 40% If you have not implemented or Lack of IT support or technical capability 36% expanded the use of social media for Lack of CEO or senior management support 33% employee communication, Lack of employee access to online social media 32% please indicate tools the reasons. Lack of metrics to measure impact of social 32% media

Restrictions imposed by our legal department 19%

towerswatson.com 25 © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. Highly Effective Communicators have the DISCIPLINE to plan and measure success

Make sure they have a When the documented plan going gets Measure their success in tough – highly driving behavior change and achieving desired effective business outcomes communicating Get input from companies: employees Benchmark other companies

Does your organization have a documented communication strategy?

36% Social media 13% 24%

Global 64% 29% communication 46%

Electronic 72% 35% communication 52%

0% 10% 20% 30% 40% 50% 60% 70% 80%

HIGH COMMUNICATION EFFECTIVENESS LOW COMMUNICATION EFFECTIVENESS ALL PARTICIPANTS

Compared to last year, are you including more communication outcome metrics?

High communication 53% effectiveness

Low communication 34% effectiveness

All participants 40%

0% 10% 20% 30% 40% 50% 60%

towerswatson.com 29 © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. Highly Effective Firms Seek Input – From Inside and Out

Benchmarks the performance of 43% the communication functionr 18% Communicators against other companies 29% increasingly expected to Have a communication advisory 51% p show value group to pretest employee 19% communication 32%

Makes use of measurement to verify the 69% communication function’s contribution oto 21% meeting strategic business goals 39%

Uses measurement findings to plan 73% future communication initiativesr 36% and/or business decisions 51%

0% 20% 40% 60% 80%

HIGH COMMUNICATION EFFECTIVENESS LOW COMMUNICATION EFFECTIVENESS ALL PARTICIPANTS

towerswatson.com 30 © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. What The Study Tells Us… 1. When the going gets tough – successful companies say more not less • The best take the initiative to deliver the tough messages in real time • Use a variety of media – from face-to-face to Facebook! 2. The employment deal has changed – companies need to recalibrate the new deal to retain high performers and keep all employees engaged • Employees believe there is a deal – even if the company doesn’t • What are you saying about the deal going forward? What’s staying the same? 3. Treat managers as a special audience • Help them use communication to effectively manage change • Provide tools and training to communicate with a diverse/dispersed audience 4. The three secrets to success – measure, measure, measure • What gets measured gets done, acknowledged and rewarded 5. Investing in effective communications pays dividends to the business