6 Reasons Why Effective Communication is Important in Business

Last modified 21 February 2023
Estimated reading time: 5 minutes
6 Reasons Why Effective Communication is Important in Business

Communication plays a fundamental role in all facets of business, which is why effective communication is so important for any leader in business. 

And the need for good communication skills doesn’t stop with leadership. It is also important that both internal communication within your organisation as well as the communication skills of your employees are effective, especially in times where an increasingly large amount of the population are starting to work from home. 

What does effective communication look like?

At its most basic level, communication is the process of exchanging information between people. Effective communication occurs when the people imparting the information and the people receiving the information are confident they share the same understanding.

Effective communication is therefore clear, unambiguous, transparent, contextual and considerate of the communication needs of everyone involved. When information is communicated effectively, everyone can agree on what it means and what needs to be done by whom.

Why effective communication is important for leaders

Leading in any business requires using influence. Whether your goal is to create consensus to make decisions, motivate and direct teams to execute on decisions or resolve conflict; effective communication is always important.

Whether it be face-to-face communication or via digital means, the following six reasons will explain why effective communication should be a focus in your business.

Good communication builds and maintains relationships

Building professional relationships is about much more than making friends at work. The strength of your professional relationships have a strong correlation with your effectiveness. 

Relationships are built and can be maintained by positive encounters with others. Communication will be key to this process – without effective skills, it will be difficult to properly construct and foster productive relationships.

Communication facilitates innovation

When employees feel comfortable about openly communicating new ideas, cooperation and innovation will flourish. Conversely, if staff are unable to convey their ideas due to limited communication skills, it is likely that the idea will not be implemented to its full potential.

Strong communication fosters more strong communication. When everyone’s ability to communicate ideas effectively, the quality of ideas will likewise improve.

It builds effective teams

When open communication within a workplace is encouraged, more cohesive and effective teams will emerge. Good communication within a team also tends to boost employee morale. When employees feel that they are well informed of the company’s direction and vision, they will feel more secure within their role. 

The importance of teamwork in the workplace is clear and it is often directly influenced by effective communication practices. Regular internal communication can also lead to an improved work ethic if staff are reminded of achievements and feel that they are working towards a common goal.

Also read: Fostering Teamwork: How Four Leading Companies Get It Right

Managing employees is easier

When managers are effective communicators, they are more able to inform staff adequately of their responsibilities and what is expected from them. Good communication skills also help managers to provide constructive feedback to their staff, build better relationships, and understand personal goals that staff may wish to work towards. 

Managing employees often involves resolving conflict and delivering feedback or information that staff may not want to hear. Managers who have strong communication skills – and appreciate the value of clear, compassionate communication – are able to navigate these difficult conversations to achieve the best outcomes for everyone involved.

It supports growth of the organisation

A lack of communication can lead to the collapse of any organisation. Whilst that is a bold statement – without proper marketing collateral and communication internally and externally, most organisations will struggle to survive. 

When there is effective communication within an organisation, employees are aligned on how they contribute to the organisation’s growth, and why their role is important. Similarly, when organisations are able to communicate externally, customers can understand what the organisation does and why they do it well. 

Effective communication ensures transparency 

When regular communication takes place both internally and externally, organisations remain more transparent. This is important in building trust in your brand, in your services and also internally when it comes to the trust that employees have in higher management. Tony Deblauwe from Examiner adds that “when tough decisions need to be made, transparent leaders will have an easier time explaining why”.

Also read: The Importance of Face-To-Face Communication in the Digital Age

How to improve your communication skills

With the importance of communication to business success, it’s a vital skill for leaders and future leaders to invest in. Becoming a more effective communicator requires practice – with different people and groups, in different settings and with different goals. Whether you’re building consensus, resolving conflict, giving feedback or instruction; you will be drawing on different communication skills.

The Fast-Track MBA provides the perfect opportunities to hone a wide range of professional communication skills alongside developing a powerful base of knowledge required for leadership in a modern business environment.

If you are seeking to develop your top-level communication and business skills, check out AIB’s Online MBA. A world-class master of business administration degree, built for busy professionals who want to accelerate their career. 

This article was written by Laura Hutton on behalf of the Australian Institute of Business. All opinions are that of the writer and do not necessarily reflect the opinion of AIB. The following sources have been used to prepare this article: Examiner

*The Australian Institute of Business (AIB) is Australia’s largest provider of MBAs. Source Ready, B. (2023) Domestic Enrolments Surged During COVID After International Students Locked Out, MBA News. Available at: MBA News.


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