Formal & Informal Business Communication

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Businesses share information with employees through formal and informal channels. Formal communication typically occurs through prescribed reporting channels established by a company's hierarchy structure. Informal communication is commonly known as the grapevine and includes conversations among employees that take place outside of regular work activities.


Formal communication typically moves vertically or horizontally through an organization. Vertical communication involves discussions between managers and their subordinates. A supervisor coaching or training an employee on how to complete a task is an example of downward vertical communication. When an employee shares feedback or a product idea with his supervisor or other managers, he engages in upward vertical communication. Leaner organizations with closer relationships between employees and management encourage more vertical communication.


Formal horizontal communication is interaction between colleagues or co-workers on the same level. This includes talks in work teams and the sharing of information between work groups or functional departments. A work team, for instance, may discuss alternatives to resolving a flaw in a new product launch. From an intra-group perspective, a salesperson might call the warehouse manager to ask if an order can be expedited to satisfy a new customer.

Informal Communication

Informal networks of communication have existed in companies for a long time, but they have largely been ignored before the 21st century. Break rooms are common meeting grounds for employees taking a breather from their jobs and engaging in informal conversations about families and hobbies and about the company, their jobs or co-workers.

Managing the Grapevine

Management of the grapevine is a concern for some companies. Some have tried to minimize its effects by limiting employee free time or monitoring break rooms. This can create distrust and a bitterness in employee ranks. Other companies have had better results when encouraging employees to share in informal activities to promote morale. Another strategy is to have front-line managers participate in informal conversations to minimize the division between management and employees and to positively influence grapevine discussions. Dispelling gossip and rumors is one benefit of this approach.

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