How Gossip Affects the Bottom Line in Business
Corporate culture and communication is an important part of the business world. Employees and managers typically engage in various forms of formal and informal communication every day in the workplace. Gossip is an informal communication that can have dangerous effects in the workplace. While most workers engage in water cooler conversation, spreading rumors and sharing unsubstantiated information is unnecessary employee behavior. Gossip can ruin employee morale and affect a company's bottom line.
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Facts
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All companies develop a communication method to deliver pertinent internal information to outside users. This method is followed to ensure that no false information is reported about the company. Larger or publicly held companies often use a chief information officer to deliver information or respond to questions. Employees are requested to direct any inquires made about the company to this individual so informal statements are not touted as official company information.
Effects
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Informal comments or other gossip spread by employees usually has a demoralizing effect on company employees. Demoralized employees may develop a fear regarding their job security. This fear may drive them to another job or to take extended leave time from the company. This forces companies to compensate for these absences by hiring replacement employees or spread more work onto other current employees. This increases payroll expenses and drives down productivity, as companies must spend time training new and existing employees.
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Significance
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High employee turnover usually sends a strong negative signal to external businesses and individuals. A company that cannot maintain a steady workforce is seen as a potentially unstable company with which to conduct business. Businesses or individuals may think since the company cannot pay employees, they may not be able to pay other bills. Internal employee gossip has now spread to external entities. Companies may begin to discuss the financial strength of other companies through informal channels, extending the effect of employee gossip.
Warning
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Publicly held companies may be severely impacted by internal employee gossip. Shareholders and potential investors are always looking for new investment information for companies; unofficial employee chatter is often seen as important pieces of company information. Information that represents a potential financial loss may cause investors to sell shares and drive down the company's share price. This share price drop lowers the company's wealth and may invoke an investigation by regulators to determine if a company purposefully released this unofficial information.
Considerations
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Companies can limit informal communication lines and employee gossip by fostering an open environment for employee questions and concerns. Releasing a company newsletter or holding friendly management-employee meetings to discuss company information and operations accomplishes this. This levels the playing field between formal and informal communication. Stopping employee gossip from starting is usually the best policy for avoiding losses on the company's bottom line.
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