Does ignoring internal communication failures sabotage an SME's external success?

XYZ Solutions*, a 45-person B2B software provider in the UK, prided itself on close client relationships and fast turnaround. But as the team grew, cracks in internal communication began to show.

The Communication Challenge: With no formalised internal communication protocols, project updates and client requirements were approved informally—often through Slack messages or quick verbal briefings. The sales team promised custom integrations, assuming the development team could deliver without checking timelines or capacity. Meanwhile, client services relied on outdated specs, unaware that the project scope had changed.

The External Impact: One mid-sized client experienced repeated delays and inconsistencies. They were told a feature was complete when it wasn’t, and received contradictory messages from different team members. Eventually, they escalated the issue, citing a lack of professionalism and clarity. XYZ lost the contract and received critical feedback on a public review platform, damaging its credibility with future leads.

What Went Wrong Internally:

• No structured project handover process

• Assumed shared knowledge rather than documented updates

• Teams working in parallel without alignment meetings

• Leadership underestimated the risk presented by informal handoffs

Key Takeaway: In SMEs, it’s easy to rely on informal communication—especially when teams are close-knit. But as a business scales, lack of structure leads to costly misunderstandings. Internal clarity is the foundation for external trust.

* Anonymised case study

For many small and medium-sized enterprises (SMEs), internal communication isn’t always seen as a strategic priority—it’s something that “just happens” as teams work together. But when internal communication isn’t working, it doesn't stay internal for long. Mixed messages, duplicated efforts, delayed responses and unspoken tensions often leak into how the business presents itself to clients, partners and the wider world.

This is more than a soft skills issue. Poor internal communication costs SMEs both time and money, and it can weaken the consistency and credibility of their external messaging. A 2023 study by Gallagher found that UK businesses that invest in internal communication are 3.5 times more likely to significantly outperform their peers. Yet smaller firms are often under-equipped to tackle it properly.

Why internal communication is business-critical for SMEs

In small businesses, team dynamics can change quickly, roles often overlap, and decisions can happen on the fly, without reference to other activities. While this agility can be a strength, it also means information can easily go undocumented or unshared while issues and/or conflicts remain unresolved. When employees give clients conflicting messages—or worse, work at cross purposes—it undermines trust and damages professional credibility. Unresolved internal conflict doesn’t stay behind closed doors; it often shows up in confused messaging and fractured client relationships.

At the other end of the SME spectrum, businesses with 100–250 staff may have grown quickly, added regional offices, or started serving international clients. Here, the problem isn’t speed—it’s fragmentation. Teams often work in silos, and recent hires may not benefit from ingrained institutional knowledge or the informal networks which long-standing team members have put together themselves. Without intentional internal communication structures, the “small company feel” starts to slip. Clear and cohesive external communication never actually takes place.

No matter the size, internal communication remains a shared challenge

Let’s break down how internal communication challenges show up differently depending on business size and structure: 

In both cases, the cost of getting it wrong shows up in the same places: inconsistent messaging, lower staff morale, client confusion, and missed opportunities.

What good internal communication enables

Effective internal communication does more than keep people informed—it shapes how an organisation thinks, behaves, and presents itself. When it’s done well:

·      Staff understand not just what to do, but why it matters.

·      Messages to clients reflect consistent priorities and tone.

·      New employees are onboarded faster and with greater clarity.

·      Teams collaborate more effectively across locations or roles.

Crucially, it forms the bedrock of your external brand. As the CIPD notes, “Internal communication supports culture, employee engagement, change and ultimately productivity.” (CIPD, 2023)

Practical steps SMEs can take

You don’t need a large HR team or expensive software to improve. Here are some grounded steps SMEs can take, regardless of size:

Audit how messages flow: Ask staff where they get their information from and what’s missing. Are decisions communicated clearly? Are roles and responsibilities clearly understood?

Use tools with purpose: Slack, Teams, Notion, email—too many tools can muddy the communication waters. Choose fewer channels and make it clear what each is used for. 

Create simple communication norms: For example, “Project updates go on the shared board by Friday” or “Client messages should be recapped in CRM notes”. 

Make leaders visible communicators: Whether weekly check-ins or monthly video updates, leaders who practise open communication set the communication environment for the whole team.

Link your internal efforts to your external presence: Help staff see how internal clarity strengthens external performance—better client service, faster delivery, stronger reputation.

Final thought

Internal communication isn’t just an operational concern—it’s a strategic asset. It shapes how your organisation is perceived, how effectively it delivers, and how sustainably it grows.

Investing time, finance, leadership—all three—in good communication strategies provides the foundation for future success, no matter the size of business.

Sources:

Gallagher (2023). State of the Sector: Global Internal Communication & Employee Experience Survey.

Chartered Institute of Personnel and Development (CIPD) (2023). Internal communication factsheet.