We’ve written before about the need for companies to understand how social media influences internal communication. But, it’s just as important for executives to realize how employees are using these tools to communicate externally — often without management being “in the know.”

Case in point: This week, the beleaguered Minnesota Timberwolves decided against re-signing coach Kevin McHale. Following employee communication best practices, the team’s front office communicated from the inside, out — breaking the news to staff and players first. A long-time member of the T-wolves organization, McHale was well-liked by his young team, and many of them were upset about this change in direction. Before the organization made the news public, forward Kevin Love broke the story on Twitter, writing:

Today is a sad day…Kevin McHale will NOT be back as head coach next season.

Team president David Hahn didn’t seem to mind that the team’s announcement got scooped by Twitter. As he said:”I don’t want Kevin [Love] to feel badly about that. We live in a very different world than all of us grew up in. I don’t think it’s a big deal.”

In this day and age, communication is instant and word spreads quickly. But, sometimes breaking news on Twitter is a big deal — and problematic. From a PR perspective, employee education is key to managing the message.

1. Employees must understand what’s acceptable to share online … and what’s not.
2. When companies make big announcements, they should explain when it’s appropriate for employees to share company updates on their personal networks.
3. Companies should understand how their employees are using social media and look for opportunities to work together to spread good news or clear up “mistruths.”

One thing’s for sure: As social media continues to infiltrate our lives, situations like this are more likely to arise. Businesses need to be prepared … or risk being caught off guard –  like the Timberwolves.

Thanks in large part to Watson Wyatt’s groundbreaking study “Effective Communication: A Leading Indicator of Financial Performance” (conducted in 2003 and again in 2005) we know that effective internal communication is a key component to overall business health, productivity and profitability. For example, some of the study’s findings included:

• Companies that communicate effectively have a 19.4 percent higher market premium than companies that do not.
• Companies that are highly effective communicators are 20 percent more likely to report lower turnover rates than their peers.
• A significant improvement in communication effectiveness is associated with a 29.5 percent increase in market value.

Today’s definition of PR tends to emphasize external communication; however, internal communication is just as critical to a company’s success. That may be why the PRSA Orlando chapter held a professional development luncheon last week focusing on this very topic — featuring guest speaker Ron Hess, who certainly understands the benefits of internal communication.

Here’s the thing: Not one of these tips — other than making sure the Intranet doesn’t contain too much information — included anything digital. Nothing about creating a dialogue. Hess didn’t talk abut Facebook, Yammer, Ning, wikis, kluster or any other two-way communication tool that can strengthen internal communication.

By now, companies are starting to understand the value of incorporating social media to communicate with consumers — not at them. But, why are we only using these tools to engage external audiences? From an internal communication perspective, social media can help make the CEO more accessible, foster idea sharing, engage employees and strengthen corporate culture. Instead of just distributing a static e-newsletter or posting information on a bulletin board, why not apply social media best practices to internal communication? As one HR expert put it:

It’s a shame that we have so many of these new, wonderful communication tools we can use internally yet they are so underused. People leave their jobs and join and participate in social communities while at home, where they learn and grow and share and better themselves and others. Then they return to the office and it’s 1993 all over again. Or 1973, depending on the location.

Research supports investing in internal PR. But, even if you already have a strong internal effort, don’t get complacent. Think outside the box. It’s worth noting that the government — an institution not normally known as an early adapter — is embracing Web 2.0 to foster better communication (as detailed by Dr. Mark Drapeau here and here). If the government can figure it out, you can, too. So, how are you using social media to modernize your employee communication efforts?