Forms of Communication at Fonterra - Case Study Example

Table of Contents 1. Executive Summary……………………………………………………………………2 2. Introduction: Communication in Organizations………………………………………. 2 3. Case Study: Forms of Communication at Fonterra…………………………………….4 3.1 Interpersonal Communication…………………………………………………4 3.2 Oral Communication………………………………………………………… 4 3.3 Written Communication……………………………………………………… 5 3.4 Organizational Communication……………………………………………… 5 3.5 Electronic Communication…………………………………………………… 6 4. The Role of Feedback……………………………………………………………………7 5. Informal Communication…………………………………………………………………9 6. Recommendations…………………………………………………………………………9 7. Conclusion………………………………………………………………………………..10 8. References ……………………………………………………………………………… 11 Executive Summary The organizational excellence that Fonterra Dairies New Zealand, or simply Fonterra, has experienced over the years can be attributed to establishing effective communication channels with its stakeholders-customers, suppliers and staff. A case study of Fonterra shows the various forms of communication used in the company. The forms of communication used by Fonterra are representative of their multidimensional relationship with its different stakeholders- farmers or shareholders, suppliers, staff and customers. Interpersonal communication is the most important part of Fonterra’s communication strategy including oral communication under the “Big in the World, Small at Home” programme which includes the Fonterra Farmer Community Networks, an initiative aimed at delivery of company information to shareholders or farmers face to face. Fonterra also employs written communication through letters from the chairman to individual shareholders and the annual Farmlink magazine which provides supplementary information and technical advice. Electronic communication in Fonterra is characterized by the adoption and use of technologies such as email and the internet to disseminate and receive information in an organization through websites dedicated to farmers. At Fonterra, feedback has played an important part in making communication more accurate and complete. A case study of Fonterra also demonstrates the role of informal communication in the company’s performance. Introduction: Communication in Organizations Communication is one of the most important tasks for the management of any organization. It is through communication with various stakeholders that the management of an organization is able to convey the organization’s goals or vision, gain a better understanding of the internal and external dynamics of the organization, respond to emerging issues or challenges and gain new insights or unique ideas and opinions on how to conduct the organizations’ business. Each organization must thus carefully select various forms of communication which resonate with the organizations’ specific interests, needs and challenges (Davidson & Griffin 2006). Fonterra Diaries, a farmer’s cooperative, is New Zealand’s biggest company and one of the largest dairy companies worldwide. The forms of communication used by Fonterra reflect the fact that they are modeled along the principles of a cooperative, not a corporate (Evans, Arthur & Bryce 1996).This implies that Fonterra has a complex or multidimensional relationship with her various stakeholders. For instance, farmers are not only the shareholders at Fonterra but are also the suppliers and sometimes customers or beneficiaries of the company’s services and support. Accordingly, the forms of communication by Fonterra are representative of this multidimensional relationship with its different stakeholders- farmers or shareholders, suppliers, staff and customers alike. As one of the world’s largest dairy companies, it is imperative for Fonterra to establish and maintain effective communication channels with the myriad of stakeholders including staff, shareholders, suppliers and customers (Goldberg & Porraz 2002). To address the communication needs at Fonterra, the Board of Directors devises a comprehensive annual communications programme. This essay will analyze the case study of Fonterra and identify these various forms of communication as used in the organization. Emphasis will be given to Fonterra’s two way communication systems. These will then be evaluated to determine if they are appropriate or if other forms are more suitable. The essay will then explore the role of feedback in making communication more accurate and complete and finally demonstrate the role of informal communication at Fonterra (Davidson & Griffin 2006). Case Study: Forms of Communication at Fonterra Fonterra uses various forms of communication including interpersonal communications, organizational communication and electronic communication. Interpersonal Communications Oral Communication Interpersonal communication is an integral part of Fonterra’s communication strategy. In an address to Auckland Business School, Ferrier revealed that most of the shareholders/farmers felt that the company information availed to them was not enough and that they preferred the information delivered in a more personal way. In response, Fonterra launched the “Big in the World, Small at Home” programme which was an initiative aimed at delivery of company information and support to farmers face to face. The Fonterra Farmer Community Networks were developed jointly by Fonterra and the Shareholders' Council. They are used by Fonterra to reach out to farmers, provide relevant and up to date information about the cooperatives’ business, to resolve shareholder or farmer’s issues and to encourage feedback between farmers as shareholders and management. Through this initiative, there is a network of volunteer farmer-members with one addressing the needs of every 20 farmers. These networks give Fonterra a local face and encourage two-way communication within the organization (Ferrier 2004). The networks have been successful in disseminating information and support services to Fonterra shareholders, providing timely feedback on farmer’s concerns and encouraging new farmers to actively participate in decision making processes. By ensuring that farmers are kept up to date with major issues affecting the cooperative and that their participation is encouraged and enhanced, the shareholders are more likely to be supportive towards new initiatives or decisions (Davidson & Griffin 2006). Written Communication One of the ways in which Fonterra uses written communication to communicate with shareholders is through letters from the chairman to individual shareholders. These letters usually address significant issues such as dividend forecasts or determination of the actual share values. In addition to letters, farmers and shareholders also receive 11 issues of Farmlink magazine annually which provide supplementary information, technical advice and records of Fonterra events such as the Annual General Meeting. However, while this form of communication is more standardized or uniform as compared to face to face meetings, it may not be sufficient to address emergent shareholder concerns and leaves little or no room for feedback (Ferrier 2004). Organizational Communication Organizational communication in organizations is structured in a way that enables information or messages to flow between organizational units or groups within the organization. This communication may be oral or written. Organizational communication includes vertical communication where information moves from subordinates to managers and their superiors both up and down within the hierarchy. This form of communication integrates different levels of the organization’s hierarchy and takes place within defined or formal reporting lines. Vertical communication is usually exemplified as upward or downward communication whereby upward communication consists mainly of suggestions, concerns or information deemed to be important to management and downward communication mainly consists of orders, instructions or directives from managers to subordinates. At Fonterra, this takes the form of district meetings with the shareholder’s executive where directives can be transmitted from the Board of Directors or feedback from shareholders communicated to top management. Fonterra’s Annual General Meeting is also another form of organizational communication structured around formal patterns and with clear procedures. The updated letters from the chairman of the board to individual shareholders or farmers are also a written form of organizational communication (Ferrier 2004). Electronic Communication Electronic communication in organizations is characterized by the adoption and use of technologies such as email and the internet to disseminate and receive information in an organization. At Fonterra, farmers have access to a website dedicated to their needs. By subscribing and logging in to www.fonterra.com, farmers can access their own on farm statistics and the latest financial and administrative information distributed by the shareholder’s council and the Board of Directors. the website offers a platform for Fonterra management to disseminate information to a large number of shareholders, suppliers and customers simultaneously while also giving farmers and shareholders an opportunity to contact Fonterra management and have some of their queries addressed. Fonterra also recently launched fencepost.com which aims to provide web based farm management tools and support services for farmers (Hayden 2003). Fonterra’s AGM (Annual General Meeting), televised live to nine different venues, and is also another form of electronic communication allowing shareholders or farmers who cannot or may not be physically present to keep informed on the latest financial reports and decisions of the shareholder council. The Role of Feedback in Communication One of the aspects in which Fonterra excels as an organization is in its emphasis and treatment of feedback from all stakeholders. Fonterra encourages two way communication between stakeholders and management in which feedback is the most critical component. In two way communication, the sender and the receiver interact through feedback. The receiver, upon receiving and decoding the message, seeks clarification or expresses opinions and concerns thus becoming a sender. In turn, the initial sender intermittently becomes the receiver. At Fonterra, two way communications enables management to receive new and unique ideas from stakeholders which have helped the organization maintain its innovative edge in the dairy sector. Feedback is thus important in ensuring the accuracy and completeness of communication in an organization (Ferrier 2004). At Fonterra, feedback has played an important part in making communication more effective. Fonterra’s “Big in the World, Small at Home” program and the Fonterra Farmer Community Networks, for instance, were borne out of feedback from shareholders who felt that the information they received was insufficient and a need for a more personalized delivery of information. As a result of the program and its initiatives, Fonterra has been able to harness more quality feedback from its shareholders and can respond more accurately to the farmer’s or shareholders’ opinions or concerns. However, while listening to feedback from stakeholders is critical in ensuring accuracy and completeness of communication, it is also important to give feedback to the same (Hayden 2003). In a two way communication system, feedback must travel in both directions and this enables both senders and receivers to send their messages more effectively. For instance, Fonterra uses discussion papers to receive feedback from shareholders on the cooperatives’ capital structure. Management, in turn, reports the findings back to farmers and shareholders and inform them through Farmers Community Networks, letters or other forms of communication on proposed changes to Fonterra’s capital structure. This presents shareholders with further opportunities to express outstanding concerns and the feedback cycle continues until consensus on a decision is arrived at. This demonstrates that for communication to be effective, accurate and complete an organization must not only listen to but also give feedback back to stakeholders (Davidson & Griffin 2006). Informal Communication Informal communication in organizations refers to the spreading or sending of messages in a manner that has not been expressly intended or even planned. Informal communication may take the form of the grapevine, management by wandering around or nonverbal communication. The messages transmitted in informal communication channels or networks may or may not have a direct bearing on the official business of the organization. From the case study of Fonterra, there is evidence of informal communication being used by the CEO Andrew Ferrier through management by wandering around (Hayden 2003). Management by wandering around is a form of informal communication that literally means what it implies. It is characterized by top management or leadership moving around and interacting with different people at different levels in the organization or with other organizations in relation to theirs. The manager, or CEO, may move within the workplace discussing pertinent work issues with their subordinates running right down the organizational hierarchy. A company CEO may, for instance, hold impromptu one-on-one conversations with a member of the Board of Directors, shareholders, employees within the workplace, suppliers and even auxiliary staff such as cleaners and security. Through informal communication, management is exposed to a wider variety of opinions and this may enable them to have a better “feel” of the organization (Shepherd 1993).This form of communication also allows managers to gain invaluable insight into the working of the organization and better ideas on how to conduct the organization’s business more effectively. At Fonterra, the CEO intimates that he spends a substantial amount of his time in direct communication with shareholders. This is evidence of management by wandering around since it may be practically impossible to maintain direct contact with an estimated 12,000 shareholders on a preplanned or formal basis. He further emphasizes the extent of this form of communication by referring to perceptions from fellow corporate leaders who apparently think that the amount of time devoted to shareholders at Fonterra is of excessive proportions or in an obsessive magnitude (Hayden 2003). Recommendations According to the case study of Fonterra Dairies, the organizations’ remarkable performance can be attributed to the effectiveness of its communication with all stakeholders- shareholders, staff and suppliers. More specifically, two-way communication, which encourages feedback and integrity, has been cited as one of the key drivers of innovativeness which has in turn contributed to organizational excellence. Therefore, Fonterra should place emphasis on the forms of communication which provide more opportunities for feedback with customers, staff and shareholders. Oral communication through the Farmer Community Networks and the use of electronic forms such as the website are more likely to entrench Fonterra’s organizational excellence which is built on constant communication with all stakeholders (Davidson & Griffin 2006). Conclusion The effectiveness of the communication channels used by an organization has a direct bearing on the organization’s performance. For large enterprises such as Fonterra Dairies New Zealand, the establishment and use of two way communication channels with staff, shareholders and customers has been one of the key factors to the company’s success. This has been achieved by encouraging personal awareness, giving and receiving feedback, open and honest communication and uncompromised delivery of results (Berger 1991). Fonterra employs various forms of communication within this system such as interpersonal communication orally- Fonterra Farmer Community Networks- or written such as the letters from the chairman. Fonterra also uses organizational communication through formal procedures such as in their Annual General Meeting (AGM) and has embraced modern technologies through electronic forms of communication such as farmer websites which provide online farm management support and information (Goldberg & Porraz 2002). Feedback has played an important role in ensuring more accurate and complete communication at Fonterra. Through listening to and giving feedback, the company has been able to remain innovative by opening up to unique ideas from all stakeholders. In addition, informal communication channels at Fonterra have also enhanced the efficiency of communication at Fonterra (Hayden 2003). Bibliography Berger, C., 1991, Communication theories and other curios, Communication Monographs, 58,101-1 13. Dance, E., 1970, The “concept” of communication. Journu1 of Communication, 20, 201-210. Davidson, P. & Griffin, R., 2006, Management: an Australasian perspective, Wiley, Milton. Evans, L., Arthur G. & Bryce W., 1996, Economic Reform in New Zealand 1984-95: The Pursuit of Efficiency. Journal of Economic Literature, 34(4): 1856-1902. Ferrier, A., 2004, Opportunities and challenges of the cooperative model, Retrieved on January 17, 2011, Goldberg, R. & Porraz, J., 2002, Fonterra: Taking on the Dairy World. Harvard Business School, N9-903-413. Hayden , H., 2003, Fonterra Annual Report 2003, Retrieved on January 17, 2011, Shepherd, J., 1993, Building a discipline of communication, Journal of Communication, 43(3), 83-91. Read More