Effective relationships build success in the future

Effective Relationships

It is hardly a secret that effective relationships are any business’s greatest asset. Few would dispute this proposition, yet just as few act upon it. In too many cases, the business environment either fails to encourage the relationships that will help the company grow, or it is actively toxic towards them, destroying trust, increasing risk and ultimately eroding value.

Why is this? It seems that in business, relationships are consistently undervalued even though they are the backbone of any transaction. Partly this is due to narrow thinking, which operates on a hierarchical, one-way model, between business and consumer, management and staff and so on. What is needed then is a complete rethinking of the way businesses are conventionally structured. One way of doing this would be to take a more holistic approach that removes the blinkers of strict categorisation and sees the way that all relationships are interconnected, along with company goals and strategies.

For this restructuring of approach to work, it needs to stretch all the way from the boardroom to the furthest extent of the supply chain. We may feel awkward speaking about relationships in a business context, recognising rightly that there is an emotional content that we may be uncomfortable acknowledging. Nevertheless, it remains that the quality of these relationships is vital for business success, and also that that they need to be understood and navigated intuitively along an organic and changeable network of patterns.

In any field, the failure of a relationship is the biggest handicap to success. This applies more so in business, where trust and goodwill are primary assets. According to the Tomorrow’s Company guide, Tomorrow’s Relationships, intangibles such as these are currently thought to make up 80% of the worth of any business, a complete reversal of the situation 40 years ago, when only 20% of such worth was intangibles. Yet this dramatic shift has not been reflected in the way most companies behave.

Understanding how we move on from talk of stakeholder management and human capital to recognising that in an increasingly complex and connected world, relationships have their own value and should not be pursued merely as a means to an end is an important step to take. This short-term approach is limiting and destructive to any business relationship, where both parties have goals they wish to achieve. Both should gain value from the relationship, even if their goals are incompatible. Effective relationships can be built on competition as well as cooperation.

One major drawback in traditional “master-servant” relationships is that information only flows in one direction: downwards. Hence board members are often isolated and the last to know about crucial information or underlying weaknesses. The people at the bottom are afraid to communicate bad news, or effective channels to do so are not in place.

True communication can only take place between equals. What is required is a culture that fosters accountability rather than blame, and a willingness to share information based on mutual values and trust. It is important to remember too that the same people may shift between many different roles, including employee, customer, investor, entrepreneur and so on.

Effective relationships are built on trust, honesty and transparency. Mutual respect is essential, as is a culture where these qualities are nurtured and encouraged. Identifying key relationships, monitoring them and measuring their success can give you a true understanding of your business’s value and an insight into future possibilities.