Business Communication | 10 mins read

Business Communication - What It Is and Why It Matters

business communication what it is and why it matters
Hanh Truong

By Hanh Truong

Introduction to Business Communication

A company will typically encompass multiple teams, as well as supply chain partners, stakeholders, and diverse consumer bases. Managing a modern and efficient business communication system will ensure that these different levels of personnel are thoroughly informed of organizational plans and goals.

What is Business Communication?

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Business communication is the practice of sharing key information with employees and people outside of the company. When management teams interact with their staff, organizations can acknowledge their core objectives and promote teamwork.

Typically, business communications will entail presenting new organizational ideas, developing proposals, holding meetings, and sending customer orders to the right teams to complete sales. A robust communication system can help with reducing operational errors and ensure effective business plan execution.

In fact, organizations that are engaged and connected with their employees were able to increase their productivity by up to 25%, according to studies. Companies with higher employee engagement also experienced a 19.2% growth in income within a 12-month time frame.

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Types of Business Communication

There are 4 fundamental methods for business communications that an organization will often utilize.

1. Internal Upward Communication

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This refers to when subordinates report to managers and executives about the company. The upward flow of information allows senior employees to understand how well their operation is performing.

Internal upward communications typically entail sending surveys, giving feedback, and sharing reports to team leaders and managers.

2. Internal Downward Communication

Internal downward communication is when higher-level managers provide information to their subordinates. This typically comes in the form of a memo, meetings, emails, or letters.

It is recommended that managers communicate professionally and clearly to ensure that employees can understand the information that is being relayed.

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3. Internal Lateral Communication

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This form of communication is between staff members, in which employees will talk with their colleagues in the workplace through online chat systems, text, and email.

Compared to other methods, internal lateral communication occurs more regularly and is a critical component to productivity and overall engagement.

4. External Communication

This is when businesses communicate with external entities, like suppliers, customers, and financial partners. External communications usually occur less regularly, in contrast to internal forms of communication.

Common Forms of Business Communication

Business communications can be carried out using these 3 key forms.


1. Verbal Communication - This is when information is relayed to another person verbally. The best way to do this is with the use of video conferencing or phone calls.

2. Written Communication - Writing information onto a physical letter, email, messaging app, or shared online document is a form of written communication.

3. In-Person - In-person communication is when people meet face-to-face to share information.

Common Methods of Business Communication

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Organizations will often use a combination of the 3 different forms of communication and will employ different platforms to do so. The most common ways business teams communicate with employees include the following.

  • Online Portals - Web-based platforms, such as online chats, enable employees to communicate to the entire organization remotely from any location.
  • Video Conferencing - Holding video conferences allow participants from around the world to engage with the company, face-to-face, online.
  • Presentations and Reports - Typically in the form of physical documents or PowerPoints, reports, and presentations allow information is shared in a visual manner.
  • Phone Calls - Questions can be answered and information can be provided verbally over the phone.
  • Personal Meetings - This refers to when two people from a business team meet to talk. This often occurs during interviews and between employees and their supervisors.
  • Feedback or Suggestion Box - Feedback can either be received physically by forms or through online forums. Management teams may request their employees to send comments and requests or will ask customers to share their personal suggestions for the company.
  • Email - Sending emails is a popular digital communication method among many organizations. Emails can be accessed on office desktops, mobile phones, and tablets, allowing team members to stay connected with the business at any time.
  • Instant Messaging Sites - Business teams have been using instant messaging apps, such as Skype and Slack, to quickly communicate with personnel. These sites allow for multiple parties to be added into one chat; therefore, streamlining and syncing communication and promoting collaboration.

Modern forms of digital communication have risen in popularity because it ensures information is shared and received quickly. Additionally, it promotes accessibility since employees can access messages and information from any location, rather than having to wait for a meeting or for a letter to be faxed.

Importance of Business Communication

A well-structured business communication system is at the forefront of creating goal-oriented plans and ensuring employees are working efficiently. In order for a business to be successful and for projects to progress seamlessly, all personnel in and outside of the organization must be on the same page.

When developing communication methods, it is important that businesses consider the 4 key parties.

1. Shareholders

Shareholders are people or companies that own a share of the organization's stock. Since shareholders are the ones investing in the company, they have the ability to control its future.

Therefore, these entities must have transparent and accurate information regarding the business and its performance in a timely manner. Generally, reports are relayed during board meetings to allow for discussion and collaboration.

2. Personnel

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To effectively operate a business, management teams must thoroughly convey to their employees what tasks need to be completed and how these activities must be performed.

Personnel should also provide feedback to let executives know whether the business plan is working as intended and if extra work needs to be completed. Employees may also have questions about processes that need to be answered by managers.

Communicating with employees will allow higher-level leaders to ensure that all organizational goals are acknowledged and to determine if their staff is conducting tasks correctly.

3. Customers and Clientele

Organizations should establish an effective communication system with customers. This will give executives insight into what their clients want, how they prefer their products and services, and the different ways they can fulfill their needs.

Customers are the driving force to a business's financial success, so by speaking directly to them and collecting feedback, owners will be able to optimize their operations.

4. Vendors and Contractors

Vendors and contractors equip organizations with critical supplies and infrastructures that help ensure business goals are met. For example, a vendor will provide finished goods to companies, which are then sold to consumers for a profit.

Management should have comprehensive communication with these partners to make sure expectations are relayed, such as product quality and delivery times.

7 Reasons Why Effective Business Communication is Powerful

Some reasons why effective business communication can enhance an organization's success include the following.

1. Boost Employee Engagement

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Case studies have shown that employee engagement is correlated to how effective an organization's leadership communication is.

By proactively supporting, training, and speaking to employees, they will be more likely to interact and work towards company goals.

2. Remove Communication Silos

A communication silo refers to when employees only contact those within their teams. This can result in uncoordinated order fulfillments, ineffective customer support, and misinformed decisions. Additionally, silos can cause critical information to easily get lost between teams.

A proper system for internal business communications can eliminate silos and guarantee all employees from every department and level are informed. When all employees in an organization are on the same page, they can easily collaborate and work together to complete common goals.

3. Maximize Employee Productivity

According to reports, an average employee will typically spend 2.5 hours each workday searching for information in order to complete their tasks. To minimize the time necessary to find the right content and to maximize productivity, good communication needs to be employed.

In fact, 4 in 5 employees have indicated that internal business communications are helpful in boosting their job performance. With productive employees, businesses can reduce their labor costs and manage their time more effectively in the long term.

4. Improve Communications Between Remote Employees

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Remote work is becoming increasingly popular, especially during the COVID-19 pandemic, in which businesses are allowing their employees to work from home to prevent the spread of the virus.

Working remotely allows for more employee flexibility and improves inclusivity. The Global Mobile Workforce Forecast Update reports that over 40% of the global working population will be remote by 2022.

However, this new work environment can result in silos and miscommunication if not managed properly.

An internal business communication system that takes into account the different time zones, language barriers, and Internet connectivity will ensure that remote workers will be engaged with the team.

5. Decrease Employee Turnover

Management teams that engage and frequently interact with their staff members will experience a reduction in employee turnover rates. This is because employees will be more satisfied with the company they are working with when they are fully informed about their job.

However, executives should make sure they are sharing critical information that is relevant to the employee's responsibilities. Overloading non-essential details can increase stress and disengagement, as well as decreased employee retention.

6. Foster a Collaborative Company Culture

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An efficient business communications strategy will improve the overall company culture and the environment of the workplace.

By promoting transparent and open communication, employees will be able to work in a healthy atmosphere at work. This will effectively amplify staff's motivation, enhance engagement, and boost satisfaction.

In turn, happier employees will also provide better customer service; therefore, creating positive experiences for all people that interact with the brand.

7. Increase Brand Advocacy

Employees that are informed and fully connected to the business plan are more likely to be the company's brand ambassadors.

For example, business communications systems help improve employee satisfaction, therefore, they will be inclined to speak positively about the company. This will increase brand awareness and help the organization reach more consumers in their marketing campaigns.

Not only will sales increase, but the company can also enhance its reputation as an employer and attract experienced and high-quality candidates in the job market.

Business Communication - Key Takeaways

  • Business communication is the process of sharing relevant information with all employees, third-party partners, shareholders, and customers.
  • A robust internal and external communication system will help businesses maximize their profit margins and increase their employee's productivity.
  • The 4 key types of business communication include external communication, internal downward, internal upward, and internal lateral.
  • Businesses will commonly relay information using verbal, written, or in-person methods. These practices can be carried out in a variety of ways, such as email, face-to-face meetings, video conferencing, and instant chat messaging.
  • When creating a business communications strategy, management teams must consider methods that focus on shareholders, employees, customers, and vendors.
  • From boosting internal engagement to reducing employee turnover, developing an effective business communications strategy is crucial to an organization's success.

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