Accounting Articles for Students

Understanding the importance of communication

by John Ball | Published on 5/6/2003


If there is one prerequisite that sets accountancy apart from other professions, it is the need to communicate clearly and concisely both internally and externally. Communication is the core activity of the accounting profession, transmitting information from one person to another, from one organisation to another – or a combination of both – and to the shareholders and other stakeholders of the organisation.

The function of communication is to ensure that every member of the organisation knows what is expected. Good communication is critical in ensuring coordination and control of individuals, groups and departments. Good communication ensures individuals know what is expected of them, that the appropriate person receives the correct information and that there is coordination within the organisation. It ensures control of the organisation’s plans and procedures and that instructions given to staff by management are understood. Group and team cohesiveness is encouraged and stress can be reduced.

Many problems such as bias, distortion and omission are often the result of poor communication. However, these can be reduced and removed, as can secrecy, rumour and innuendo. This can result in the added advantage of conflict reduction.

Clear and concise communication and the consequences of poor communication need to be understood by the accountancy profession. Poor communication leads to ineffective control, poor coordination and inevitably management failure. Very often, the simplest barrier to communication is not recognised as such. In many organisations directors, managers and staff use different phrases and expressions, a certain recipe for disaster but easily remedied. This problem stems from many different sources including the personal background of the individuals communicating (including language differences and jargon used by the different professions and individuals with different levels of education). The concept of organisational ‘noise’ is often an issue. In this context ‘noise’ refers to the message being confused by matters unrelated to the topic, or overload – where too much information is being communicated. Brevity can often be the surest way of ensuring successful communication.

The different perception of individuals can lead to conflict within the organisation and thus to a communication barrier, as can the distance between those individuals communicating with each other. This is often overlooked in the business environment and can lead to distortion of information and thus misunderstanding between departments and individuals.

Communication cannot take place if there are barriers to the communication process. These must be recognised and, as far as possible, removed. Barriers to communication can be overcome by consideration of the needs and understanding of the message receivers with careful and clear reporting, clear expression and the avoidance of jargon or abbreviations. The use of more than one communication system can assist, as does the encouragement of dialogue rather than monologue, and of course ensuring that there are as few links as possible in the communication chain.

Communication can often be improved by identifying the appropriate media. Written, verbal or electronic methods, while impersonal, are fast and can be effective. Meetings, interviews and video conferencing require personal, face to face communication and thus interpersonal skills. Telephone and public address systems should be used only where personal communication methods are difficult. Written communication is very often the most suitable and clearest means of communication and can take many forms: memoranda; occasional or annual reports (fundamental in communicating accounting information); forms; notices; house journals and other forms of standard documentation such as rules and procedures, manuals and job descriptions.

Visual communication is a powerful communication media and is often overlooked. Charts, slides, videos or films provide an immediate and clear message. Electronic means of communication are increasingly becoming more relevant. Document imaging, telex, fax, the Internet and e-mail are instantaneous and provide clear and fast communication possibilities.

The type of communication and the medium used will depend to a greater or lesser extent on organisational structure. This will in turn be a function of the product or service and its environment. There are many forms of communication within an organisation, formal and informal. Generally, in formal organisations information flows through quite clear channels and in defined directions. Traditionally, the direction of the three main information flows is downward, upward and lateral.

Downward communication is associated with giving orders or instructions from senior management. This form of communication is often the one most easily recognised. Its purpose is to give specific directives, provide information about procedures and practices or provide information about the task in hand. Control of employees and information about their performance is an important use of downward communication, as is the provision of information on organisational and departmental objectives.

Upward communication is usually communication initiated from the employees and tends to be non-directive in nature. It generally takes two forms, personal problems / suggestions or technical feedback, as part of the organisation’s control system.

Lateral or horizontal communication is increasingly important and necessary in modern organisations, especially as traditional communication theory assumes only vertical communication. It can take the form of task coordination, such as departmental managers or supervisors meeting regularly or problem solving through departmental members meeting to resolve an issue by sharing ideas with other departments. It can resolve conflict and interdepartmental friction.

Clear communication is not easy. The method, context, structure, language, knowledge and an understanding of the needs of the recipients to whom the information is being transmitted are vital in understanding the importance of communication in the organisation. Without proper and clear communication, no organisation can survive.

Article courtesy of ACCA Accountant


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