Communication systems are the various processes, both formal and informal, by which information is passed between the managers and employees within a business, or between the business itself and outsiders. Communication—whether written, verbal, nonverbal, visual, or electronic—has a significant impact on the way business is conducted. The basic process of communication begins when a fact or idea is observed by one person. That person (the sender) may decide to translate the observation into a message, and then transmit the message through some communication medium to another person (the receiver). The receiver then must interpret the message and provide feedback to the sender indicating that the message has been understood and appropriate action taken.

The goal of any form of communication is to promote complete understanding of a message. But breakdowns in communication can occur at any step in the process. Business managers need to understand and eliminate the common obstacles that prevent effective communication. Some of the causes of communication problems in business settings include:

  • A lack of basic language skills
  • Differing expectations and perceptions on the part of senders and receivers
  • Selectivity or the tendency for individuals to pick and choose what they retain when they receive a message from another person
  • Distractions such as ringing telephones, scheduled meetings, and unfinished reports

According to Herta A. Murphy and Herbert W. Hildebrandt in their book Effective Business Communications, good communication should be complete, concise, clear, concrete, correct, considerate, and courteous. More specifically, this means that communication should: answer basic questions like who, what, when, where; be relevant and not overly wordy; focus on the receiver and his or her interests; use specific facts and figures and active verbs; use a conversational tone for readability; include examples and visual aids when needed; be tactful and good-natured; and be accurate and nondiscriminatory.

Unclear, inaccurate, or inconsiderate business communication can waste valuable time, alienate employees or customers, and destroy goodwill toward management or the overall business. In fact, according to a 2004 study by the National Commission on Writing, entitled Writing: A Ticket to Work '¦ Or a Ticket Out, "it appears that remedial deficiencies in writing may cost American firms as much as $3.1 billion annually." As we enter the information age, the importance of communicating clearly grows and the emphasis on written communication increases. Brent Staples explains how the change to an information age economy is increasing the need for good writing skills in his New York Times article, "The Fine Art of Getting it Down on Paper, Fast." "Companies once covered for poor writers by surrounding them with people who could translate their thoughts onto paper. But this strategy has proved less practical in the bottom-line-driven information age, which requires more high-quality writing from more categories of employees than ever before. Instead of covering for non-writers, companies are increasingly looking for ways to screen them out at the door."


In the early years of corporate America, business managers operated on a strict basis of top-down communications. Whatever the boss or owner of the company said was the law. In most cases, strategies for doing everything from selling product to dealing with employees would be discussed behind closed doors. Once those decisions were made by managers, lower-level employees were expected to put them into effect. Employees had little input; they did as they were told or found work elsewhere. Such management attitudes, particularly when they applied to worker safety issues in such places as coal and steel mines, led to the growth of labor unions. If nothing else, unions had the power in many cases to slow or shut down production until management listened to the demands of the workers.

In reaction to union demands, corporations eventually set up communication systems where rank-and-file members could speak their minds through union representatives. Although the unions provided the impetus for corporate managers to implement such systems, managers eventually realized that employees could have meaningful input into solving company problems. When presented with the opportunity to contribute, many employees jumped at the chance. This sort of feedback came to be called bottom-up communication.

In today's business environment, most corporations encourage employees to take an active role in the company. Employees who notice ways to improve production are encouraged, and usually rewarded, for passing those ideas on to managers. Employees who submit ideas that withstand intense study can be rewarded with a percentage of the savings to the company. Employees who are harassed on the job are strongly encouraged to report such harassment as far up the chain of management as necessary to stop it. Regular employee meetings are held where the lowest-level employee can stand up and ask the highest-level manager a direct question with the full expectation that a direct answer will be offered in return.

Business managers have also developed a method of monitoring how the company is running while meeting employees halfway. Sometimes called "management by walking around," this method of communication calls for top managers to get out of their offices and see what is happening at the level where the work is performed. Instead of simply reading reports from subordinates, business owners visit factories or service centers, observe employees on the job, and ask their opinions. Although the practice is both praised and denigrated regularly by business management experts, this form of communications does serve to keep the boss in touch.


Perhaps the most important part of business communication is taking the time to prepare an effective and understandable message. According to Murphy and Hildebrandt, the first step is to know the main purpose of the message. For example, a message to a supplier might have the purpose of obtaining a replacement for a defective part. The next step is to analyze the audience so that the message can be adapted to fit their views and needs. It may be helpful to picture the recipient and think about which areas of the message they might find positive or negative, interesting or boring, pleasing or displeasing. After that, the sender must choose the ideas to include and collect all the necessary facts. The next step involves organizing the message, since a poorly organized message will fail to elicit the required response. It may be helpful to prepare an outline beforehand, paying particular attention to the beginning and ending portions. Finally, before transmitting the message it is important to edit and proofread.


There are two main media used for communication: written and oral. Nonverbal communications are also an element of communication systems. Each of these types of communication is described below.

Written Communication

Written communication is the most common form of business communication and ever more so in the information age and spread of electronic communications tools. It is essential for small business owners and managers to develop effective written communication skills and to encourage the same in all of its employees. The information age has altered the ways in which we communicate and placed an increasing emphasis on written versus oral communications.

The ever-increasing use of computers and computer networks to organize and transmit information means the need for competent writing skills is rising. Dr. Craig Hogan, a former university professor who now heads an online school for business writing, receives hundreds of inquiries each month from managers and executives requesting help with improving their own and their employees' writing skills. Dr. Hogan explains, in an article entitled "What Corporate America Can't Build: A Sentence," that millions of people previously not required to do a lot of writing on the job are now expected to write frequently and rapidly. According to Dr. Hogan, many of them are not up to the task. "E-mail is a party to which English teachers have not been invited. It has companies tearing their hair out." Survey results from The National Commission on Writing study back up this assessment. They found that a third of employees in the nation's "blue chip" companies write poorly and are in need of remedial writing instruction.

The most basic principles of written communication are similar to those for overall communication. Experts within the growing industry of remedial writing agree that there are five minimal requirements for good writing. They are:

  1. Know your audience
  2. Keep sentences short and simple
  3. Avoid jargon and cliches
  4. Distinguish between facts and opinions
  5. Always double-check spelling, grammar, and punctuation

The key is, of course, to convey meaning in as accurate and concise a manner as possible. People do not read business memoranda for the pleasure of reading. They do so in order to receive instructions or information upon which to base decisions or take action. Therefore, highly literary prose is not desirable in business writing. Overly formal prose may also be counterproductive by seeming stand-offish or simply wordy. A style of writing that is too informal can also convey an unintended message, namely that the subject matter is not serious or not taken seriously by the sender. A straightforward, courteous tone is usually the best choice but one that may not come naturally without practice.

Business correspondence should start with an outright statement about the purpose of the message and should be followed with simple and clear details in support of the purpose. The recipients of correspondence need information in order to act appropriately. They also need reasons that convince them to act or think in the way the sender intends. If the message conveys its meaning with clear arguments that identify reasons and provide evidence it should achieve that goal.

Special concern should be taken in all external correspondence since it reflects on the business as a whole. For example, letters intended to persuade somebody to either invest in a project or purchase from a company have a special organization. According to Murphy and Hildebrandt, they should: 1) attract favorable attention from the reader; 2) arouse interest; 3) convince the reader and create desire; and 4) describe the action the reader should take. When the purpose of the letter is to make a sale, it is also important to include facts about the product and a clear central selling point. Above all, it is important that any type of written communication that originates from a business create or enhance goodwill.

Oral Communication

Small business owners and managers are frequently called upon to make presentations, conduct interviews, or lead meetings, so oral communication skills are another important area for development. Presentations might be made to employees for training purposes, or to potential customers for sales purposes. In either case, good presentation techniques can generate interest and create confidence. Interviewing skills might be needed for hiring new employees, conducting performance appraisals, or doing market research. Meetings or conferences can be important tools for relating to employees or to interested parties outside of the organization in order to solve problems or set goals.

The same principles that apply to other forms of oral communication also apply to telephone calling. It is important to plan business calls by determining the purpose, considering the audience (including the best time to call), and deciding the ideas to be included and the questions to be asked. When answering the telephone in a business setting, it is important to answer promptly and to state your name and department in a clear, pleasant voice. Communication over the telephone can create impressions that are vital to small business success.

An often overlooked element of oral communication is listening. Good listening skills can be vital in finding a solution to grievances or even in making sales calls. Listening involves showing an interest in the speaker, concentrating on the message, and asking questions to ensure understanding. It helps to be prepared for the discussion, to avoid arguing or interrupting, to take notes as needed, and to summarize the speaker's statements.

Nonverbal Communication

Nonverbal communication—such as facial expressions, gestures, posture, and tone of voice—can aid in the successful interpretation of a message. "Sometimes nonverbal messages contradict the verbal; often they express true feelings more accurately than the spoken or written language," Murphy and Hildebrandt noted. In fact, studies have shown that between 60 and 90 percent of a message's effect may come from nonverbal clues. Therefore, small business owners and managers should also be aware of the nonverbal clues in their own behavior and develop the skill of reading nonverbal forms of communication in the behavior of others.

There are three main elements of nonverbal communication: appearance, body language, and sound. The appearance of both the speaker and the surroundings are vital in oral communications, while the appearance of written communications can either convey importance or cause a letter to be thrown out as junk mail. Body language, and particularly facial expressions, can provide important information that may not be contained in the verbal portion of the communication. Finally, the tone, rate, and volume of a speaker's voice can convey different meanings, as can sounds like laughing, throat clearing, or humming.


Advances in technology over the last 20 years have dramatically changed the way in which business communications take place. In fact, in many ways communication technologies have changed the way in which business is done. The expanded use of electronic mail and of the Internet generally have enabled businesses to more easily move work from one location to another, establish remote and/or mobile offices, even to create virtual offices. New communication technology has also speeded up the turn-around time for decision making and blurred the line between work hours and personal hours. All of these developments challenge companies to adapt to a faster business environment. This is both an opportunity for companies to become more productive and efficient and a test of their adaptability.

Although changes in electronic communication technology are occurring at a phenomenal pace, they are not radical changes in the basic forms of communication. They are, rather, enhancements to traditional communication techniques. These technologies have made two basic enhancements in how we can communicate.

Mobility and Reach

Wireless and cellular technology have greatly expanded the places from which we can communicate and the distance over which we communicate easily. A manager on the way to work anywhere in the U.S. can easily call and chat with a colleague or supplier in Singapore as she makes her way home in the evening there.

Speed and Power

High-speed fiber optic phone lines and reasonably priced high-speed satellite transmissions have created a situation in which it is as easy to transfer large data files from one department to another in a single building as it is to transfer those files to a location anywhere in the world.

Both of these enhancements to communications have influenced how business is done. They each have upsides and downsides. The ease with which colleagues can stay in touch with one another is helpful in coordinating a company's activities. Staying in close contact with suppliers is also beneficial. For a particular employee, however, being available at any time may also be a burden.

Cell phones, lap top computers, and hand-held messaging devices of various kinds are all valuable tools for business communications. They enhance our ability to communicate and stay in touch but to benefit from their potential a company must use them wisely and efficiently and establish rules that prevent the devices from becoming burdensome to the user. With ease may also come complacency. For example, just because a sales representative can call Joan in production—easily, quickly, and from almost anywhere—to clarify and answer questions about a sloppily placed order does not mean that making and answering many calls about the order is efficient. An emphasis on clear and accurate communications is needed for efficiency, regardless of the ease or speed with which communication devices operate.

Internal Communications

Intranets, or internal organizational computer networks, have become the media of choice for most companies when it comes to keeping employees informed. The company intranet can be used like an electronic bulletin board and when paired with e-mail can serve to disseminate information quickly and efficiently.

Since an intranet may be used to easily connect people working in various locations, it can help to establish or maintain a sense of community in an organization that is geographically dispersed. In fact, intranets make it possible for groups of people to work together closely in what is known commonly as a virtual office. Many small service businesses are started as virtual offices in which each person within the group works at his or her own home or place of choosing. What unites the group are two things: a common goal, and a computer network of some sort through which information and software tools are shared.

External Communications

The growth of the Internet has made it almost essential for a business to have an online presence, simple though it may be. On a simple Internet Web site a company can provide potential customers, clients, employees, and/or investors with contact information and a picture of the company. For those wishing to use the Internet as a sales and marketing vehicle, a more sophisticated (and expensive) site can be developed. Often called e-Commerce Web sites, these sites are used for advertising, displaying merchandise, taking and processing orders, tracking orders, and/or performing many customer service tasks.

Small businesses may have a unique opportunity for benefiting from a Web presence. The outreach that is possible through a well-marketed Web site is much greater than would be possible through any other media at a similar cost. According to some analysts, for businesses one of the most powerful aspects of an interactive medium like the Internet is the ability to develop a true two-way conversation with clients and customers. The Internet is a powerful communications tool and one that businesses of all sizes now use regularly.


Informal methods of communication, such as rumors and "the company grapevine," can be outside of management's control. The grapevine is a bottom-up form of communication in which employees try to understand what is happening around them when there is no official word from management. When management is silent, employees fill the void with guesses about what is happening. Although there is no way the grapevine can be stopped, it can be influenced. When dealing with questions that cannot, or should not, be answered, managers should take the initiative before negative rumors get started. If it is obvious to employees that the company will soon undergo major changes, for example, management should confirm that it will. Employees should be informed that management recognizes they have legitimate concerns, which will be addressed when possible. If official talk would damage the company, that should be made clear to the employees.


All forms of communication, even the lack of it, can have a significant impact on business dealings. A stiffly-worded, official-sounding memo to employees telling them not to talk to the press about impending litigation could be interpreted as admitting that the company did something wrong. Management's repeated "no comments" to employees and the press on a rumored merger may launch dozens of informal discussions about company suitors, how much the company will sell for, and how many employees will be laid off.

In order to avoid the negative effects of such scenarios, small business owners should make it a practice to communicate as much and as openly as possible. They should think twice before eliminating the company newsletter as a cost-saving measure, keep electronic bulletin boards up-to-date, and hold meetings in which employees can ask questions of management. In addition, they should develop their skills so that all business communications are easily understandable. Management terms and jargon, stiff or flowery language may contribute to the impression among employees that management is talking down to them. It is also helpful to obtain and analyze feedback. Asking employees if they feel informed or not and what would make them feel more informed about the company can open valuable channels of communication.


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