“Developing strong relationships offers a stream of benefits and opportunities. When we bond with others, we create trust, we are more effective in what we do, and we form ties that transcend boundaries such as geography, culture, and personal differences. These linkages forge loyalty, commitment, and high performance. They create value and protect us, which is especially helpful in times of crisis.”.
BEN BRYANT, LEADERSHIP PROFESSOR, IMD
WHY FOCUS ON RELATIONSHIPS?
“GUANXI DESCRIBES THE BASIC DYNAMIC IN PERSONALIZED NETWORKS OF INFLUENCE AND IS A CENTRAL IDEA IN CHINESE SOCIETY.”
Winter Nie, Professor, IMD; author, In the Shadow of the Dragon
Welcome to the new era of relationships in business. Perhaps you remember the hoopla created by the concept of ‘six degrees of separation’ in the 1990s, with its assertion that we are only six connections away from any person on the planet. Today, that probably seems very old-fashioned as we are used to the highly connected world of the early 21st century. The global business networking site LinkedIn calculates that a subscriber with 250 first line contacts is linked to over five million other professionals. Fascinating – but what is the point of this? Why are we so obsessed with connections and relating to people? The short answer is because people are essentially social creatures, but more specifically the great variety and number of points of contact with other people means that developing and managing relationships has never been so important – or so complicated. People can also understand each other’s views much more easily now than ever before and this is especially true in business. In essence: relationships rule.
Organizations have much to consider about relationships since they generate opportunities as well as challenges and they profoundly shape almost everything that organizations are trying to accomplish: from selling to teamworking, customer service to innovation, engagement and energy to customer loyalty and competitiveness.
This situation applies to internal relationships, including employees and other stakeholders, as well as to external relationships including those with customers, distributors, the media, opinion leaders and vendors. It is important to develop strong relationships with all stakeholders, as success depends on the quality of those relationships.
Understanding internal relationships
It is easy to see why internal relationships (meaning those between colleagues and suppliers) matter, since a company relies heavily upon its employees. It is less easy to know how to ensure that these happen. An organization poised to be the best at any and all points over time needs to attract and retain the best talent. An acknowledged expert on internal business relationships, Ben Bryant, leadership professor with the Swiss business school IMD, argues that many barriers exist that get in the way of good working relationships. These include competitiveness and rivalry, guarded behavior, an unwillingness to open up and the tendency to see others more in terms of their job title than as people. This way of working is symptomatic of a lack of any real connection between people and can lead to limited, potentially damaging relationships. Where there is a poor level of connection, it is likely that people’s motives and behaviors will not be understood and conflict may result. To avoid this, organizations should promote ways of working that help people feel connected.
This may sound like just another of those touchy-feely fads that does its rounds in business thinking. It may sound like it – but it absolutely isn’t. Feeling connected with our colleagues is the foundation upon which strong relationships grow. Everything springs from it: trust, certainty, confidence, comradeship, ability to make decisions. The benefits to the business are clear; as Ben Bryant says, “We are more effective in what we do and we form ties that transcend boundaries, such as geography, culture, and personal differences. These linkages forge loyalty, commitment, and high performance. They create value and protect us, which is especially helpful in times of crisis.”
Even when we have this facet of internal relationships under control, there is more to be done. Organizations must ensure that their relationship practices and policies are in step with the times. After all, the tectonic plates in the business world are always shifting, and we have to move with them. Globalization, technology, demographics, and other major trends have altered the dynamics of work. What’s more, the number, pace, and extent of these developments shows no sign of stopping; in fact, the opposite appears to be true – the rate of change is accelerating.
“THE LADDER IS SPLINTERING INTO THE CORPORATE LATTICE.”
Cathleen Benko and Molly Anderson, The Corporate Lattice: Achieving High Performance in the Changing World of Work
If the workforce has changed then the workplace has too. Accordingly, businesses need to revise their thinking in the realm of relationships. In particular, the previously accepted, linear mode and mindset toward employee advancement has been challenged. The one-size-fits-all approach that focused on offering a bigger office, bigger paycheck and greater power and prestige now needs reexamining. Today, if we were to look for the corporate ladder we’d be in for a surprise: it’s gone. It has been replaced by what Cathleen Benko and Molly Anderson refer to as the corporate lattice, which, they say, has developed because, “Globalization and technology are creating organizations with fewer rungs and more options for how, when, and where work gets done. And these are only two of many major shifts that have occurred.”
Using the corporate lattice
“FROM THIS OPENNESS AND COLLABORATION COME CAMARADERIE AMONG COLLEAGUES, MOTIVATED TEAMS, AND INNOVATIONS.”
Cathleen Benko and Molly Anderson, The Corporate Lattice: Achieving High Performance in the Changing World of Work
A major advantage of the corporate lattice is that it enables people to work more flexibly and productively. It is better able to tap into each individual’s motivation and offer the working conditions and opportunities that they are looking for. With less hierarchy and better connections between people, organizations are realizing that lattices release large amounts of ‘potential,’ greatly improving productivity and employee retention.
This way of working has profound implications for relationships in the workplace. No longer constrained by the hierarchical structure of the past, every aspect of relationships improves – from better collaboration to the flow of internal communications. The advantages don’t stop there, as the authors observe, “From this openness and collaboration come camaraderie among colleagues, motivated teams, and innovations.”
They suggest that organizations should look at several important issues, notably how to:
• Engage the workforce – for example, use an intranet to facilitate communications, including blogs and remember to include past employees and those retired from the company.
• Help our people grow and develop – use mentoring, coaching, a company ‘university’ and a training allowance.
• Provide flexibility – consider using virtual working to ensure that employees are better able to maintain a healthy and productive work/life balance.
• Recognize and reward – these can include ‘spot’ rewards, performance-related pay, contests and recognition in a company-wide newsletter.
• Build trust – surveys and town-hall style meetings can be useful here, as they make people know that they are valued and that they are being listened to and can contribute.
Organizations should encourage and facilitate relationship-building activities with their internal stakeholders. But this is only half the story: building relationships with external stakeholders is the other half.
Developing external relationships
Too often, business thinking and analysis assesses an issue from the organization’s perspective using internally generated metrics, measures and conclusions. Yet some of these conclusions miss one obvious source of information: the clients themselves. This oversight leaves an important gap in a company’s knowledge – one we will seek to overcome here. If a company wants to be successful in the marketplace, it must improve its relationships with external stakeholders. To do this, it must directly and regularly engage with customers – and its communications must be meaningful.
MOMENTS THAT MATTER
Deloitte
Proving the central significance of external relationships is Ralph Classon, one of Deloitte’s long-time clients, who believes that, “Business success is all about people. It’s about continuity, regular meetings, in between communication, following a client’s business, and caring. I define outstanding service … as a variation on a familiar acronym, CPA = Client-centric, Proactive, Accountable.” Recognizing the importance of relationship building, Deloitte has initiated a program to put this principle into play – they call it the Moments That Matter lab.
Bill Freda of Deloitte says that the aim to generate breakaway growth basically relies on the tried and trusted method of “drawing attention to the client experience. The emphasis is on relationships.” Of course, Deloitte has always focused on developing and maintaining strong client relationships; what this new approach has done is to intensify the focus, deal with complexity, clarify the situation and reveal solutions in a directly relevant way that strengthens relationships with customers. Crucially, the Moments That Matters lab provides a means for people to immerse themselves in what’s important, away from the bustle of everyday activities, and zoom in on the best ways to invest in relationships.
BUILDING SUSTAINABLE RELATIONSHIPS
Relationship capital is the gold standard for building relationships with external stakeholders. Quite simply, it is what drives a business. By investing in relationships, capital and goodwill accumulate over time, providing companies with a valuable cushion against future difficulties. In this way, the Relationship R is closely related to the Resilience R. Although it’s an intangible asset, those who create it (service providers, in this case) and those who receive it (clients) come to rely on it.
BUILDING BRAND RELATIONSHIPS – BRICK BY BRICK
Lego
Founded in 1932, Lego is one of the most iconic children’s toys in the world. In 2004, the company hit financial difficulties and, for the first time in the company’s history, someone from outside the family was appointed CEO. Jørgen Vig Knudstorp took charge and set about rebuilding the company and revitalizing the brand. To do this, he devised a seven-year strategy known as the Shared Vision. Central to his plans was the need to build strong relationships with customers and employees.
His relationship with employees grew out of this shared vision and his leadership style. In the early years, the focus was on ensuring the company’s survival and turning the situation around. This demanded a top-down style of management – which is often frowned upon in business literature. However, the financial situation left little room for maneuver and the fact that it succeeded was due to Knudstorp building the right conditions for good relationships to develop. He gave people a shared vision so that everyone was on the same page, working together toward the same goals. In short, the certainty and purpose of this shared vision was the glue for good working relationships. After all, any relationship requires knowing why there is a relationship there in the first place: it must have a purpose.
The mission statement was a call to arms: ‘we are here to make money’. This was about more than simply communicating the company’s aims: it was about building the right relationship with employees. When there are clear goals and a sense of purpose, relationships are more collegial. By creating a bond between everyone, people work better with each other. Everything leaders do and say has an impact on relationships in the workplace.
Also, he made sure he was visible and approachable – as puts it, “managing at eye level.” It seems an obvious thing to say but it is often overlooked: it is easier to have a relationship with someone that is there, someone you can approach and have a conversation with. Being visible and approachable and promoting a sense of shared challenges built camaraderie, trust and commitment. Once the financial tide was turned, Lego could move toward a looser, ground-up corporate structure that empowered managers and unlocked creativity and ideas.
Forming strong relationships hinges on what the people at Lego think of Knudstorp. Quite simply, employees will make a judgment on whether a leader is worth following. At Lego, people trust Knudstorp because he takes responsibility and makes things happen. Interestingly, Knudstorp’s own belief that leadership should have “less talk and more action” also sets the tone for other relationships in the company. The emphasis is on each person taking responsibility and delivering results, and because everyone knows this, it creates an environment where people work well together to get things done.
One of the key issues that led Lego to its crisis was its lack of attention to customer relationships. In the main, it ignored its customers. Instead of learning directly from them, discovering what they really wanted, Lego relied on information provided by retailers. And that was not enough. With sales falling dramatically, Lego needed to learn more about its customers if it was to turn the situation around – and relationship marketing and community marketing were to help them do just that.
As part of the turnaround, Lego developed the notion of a ‘creative platform’ that engages in two-way conversations with customers. The company now has direct contact with consumers through its own sales channels, clubs and collaboration programs. The backbone of the customer communications exercise is the Lego Club, which has almost three million members. The Lego community is certainly one of the company’s core assets. It actively encourages fans to interact with the company, including sharing their ideas for new products. While they have only 120 staff designers, they can potentially access 120,000 volunteer designers outside the company to help them develop new products. This creates an added advantage – Lego knows what its customers are looking for and that removes the uncertainty of ‘will customers buy it’? that surrounds all product development. Moreover, this twoway communication really does get customers to psychologically invest in the company. When people feel part of something and feel that they are contributing to it, they want to stay with the group. By listening to customers, acting on their suggestions and encouraging them to share their ideas and thoughts with each other, Lego has built a loyal customer base. Building such a two-way relationship not only gave Lego the information it wanted, customers felt valued and they felt part of a community. Lego was turning ‘customers’ into ‘loyal customers.’ The result was swift, sales increased and customer preservation grew. The company went from making a $327 million net loss in 2004 to a $232 million net profit just four years later. That is the difference that developing strong customer relationships makes – Lego had learned to put all the pieces together.
The benefits of sustainable relationships also follow a two-way directional path. For example, through deep reserves of relationship capital, service providers gain greater credibility and access to customers. Clients receive more service than expected, such as personal advice and strategic insight.
Figure 8.1: Building sustainable relationships
Relationships with clients – especially high-paying ones, with equally high expectations – are not always easy to get right. A common challenge faced across industries is how to deal with those high-stakes exchanges and opportunities. How you deal with these situations ranges from ‘great’ to ‘oh-no’ – and this is where relationship capital comes in. When teams create outstanding value for clients, the organization’s reserves of relationship capital surge. Conversely, a company that does not deliver what the client is expecting very quickly draws down on their reserves, and the account runs the risk of being permanently depleted. The question, of course, is: What can a business do to gain and maintain traction?
The solution? This is where the Moments that Matter lab approach comes in very useful: it helps to get the right solution and suggest a productive way forward. Here, you should leave all theoretical notions, PowerPoint slides and lectures behind, and simply discuss what’s working and what is not. This involves exploring real-life situations and issues from the point of view of strengthening and sustaining client relationships. This information should be brainstormed and the resulting ideas should be put through the prism of two types of moments: those you respond to and those you create. From this, a plan will emerge that will capitalize on these Moments That Matter that will create profound value for the organization.
“RELATIONSHIPS AND TRUST. THIS IS THE BEDROCK OF LIFE.”
Mukesh Ambani, Chairman & Managing Director, Reliance Industries
If there is one aspect that will always emerge from any discussion on relationship capital and Moments that Matter, and one that underscores another element of the R for Relationship factor, it is trust.
A question of trust
Why is trust such an interesting concept? Perhaps the answer lies with the fact that it spans both the logical and emotional aspects of human thinking and behavior. Trust flows from experience and knowledge, as well as from consistency. Nevertheless, trust is also a sense of confidence, a feeling about someone or something’s ability to deliver on a promise. Any way you look at it, while we may use information and data, trust requires judgment and a leap of faith.
For success in business and other relationships, trust is imperative. With this in mind, how do we generate trust? If there is one overriding rule, it is this: trust has to be earned.
Earning trust
Andrew Sobel studies how to manage trusted client relationships. In his book, ‘Clients for Life,’ written with Jagdish Sheth, he offers a model built upon seven attributes. These principles are applicable to all professionals who serve clients in all fields and industries. To be trusted, effective leaders must have:
• Empathy – specifically, ask great questions and listen
• Selfless independence – balance dedication with detachment and objectivity
• Depth as well as breadth of knowledge
• Synthesis – combining ideas as well as analysing them
• Judgment that incorporates their own and their clients’ values and beliefs with their clients’ organizational capabilities
• Conviction to communicate recommendations with belief and energy
• Integrity and competence – built through mutual familiarity with the client
A common trait of trusted advisor relationships is that the advisor places a higher value on maintaining and preserving the relationship itself than on the outcome of the current transaction. The advisor makes a substantial investment in the client, without guarantee of return, before the relationship generates any income, let alone any profit.
David H. Maister, Charles H. Green and Robert M. Galford address the subject of trust in their book, The Trusted Advisor (Free Press, 2001). Their research has highlighted the following key points:
• It is essential to focus on the client’s needs rather than on your own. In this regard, it is also important to relate to the client as an individual rather than as a job title.
• A focus on problem definition and resolution is more important than technical or content mastery.
• A strong competitive drive should not be aimed at competitors; instead, it should be aimed at constantly finding new ways to be of greater service to the client.
• The focus should be on doing the right thing rather than on achieving specific outcomes. In other words, the means are as important as the end result.
• You should do the right thing for the client rather than be led by your own organization’s rewards and dynamics.
• View methodologies, models, techniques and business processes as a means to an end – if they prove effective for a client, keep them, but discard them if they don’t.
• Always value the quality of contact with clients – successful client relationships depend on the accumulation of high-quality contacts.
• Dedication to helping clients with their issues lies at the core of a good relationship – the client will know if this is genuine and they will value it when it is.
DEVELOPING RELATIONSHIPS WITH CURRENT AND POTENTIAL CUSTOMERS
Starbucks
Starbucks began life with one, small outlet in Seattle. It was hugely popular and it soon became an internationally successful coffeehouse chain. When revenues fell during an economic downturn, the founder, Howard Schultz, admitted that past success had made them complacent. Customers had drifted away in part, because they no longer felt that connection with Starbucks; the close relationship with customers that the company had always valued and worked at had disappeared – and, along with it, customers were disappearing too. Starbucks set about reversing this situation, aiming to win customers back. Getting customers through the door was the priority, and that would only happen by successfully rebuilding all relationships both with customers and employees.
Everything rests on building relationships. This simple truth is summed up by Howard Schultz’s belief, “The best way to deliver the greatest customer experience is to deliver the best employee experience.” In light of this, before we look at how Starbucks builds excellent customer relationships, we will look at the employee experience.
The inclusive, connected approach is evident from the outset – employees are known as partners. They are not just called partners, they really are considered partners. It is an attitude that promotes good relationships, where people feel equal and that their opinions matter. This atmosphere means that people are more confident, they will value what they do and will work well with colleagues, which ultimately results in an excellent customer experience. Also, a number of policies (from corporate healthcare to staff stock options) make the clear statement that partners are valued. The small-company atmosphere is highly conducive to partners being able to connect with each other and work well together – promoting trust, responsibility and dependability. Staff training is very high on the company’s agenda; not only training them in basic skills and product knowledge but also encouraging genuine enthusiasm for coffee and customers. Relationship building doesn’t stop there. Starbucks further builds trust through its responsible, we-all-share-the-planet approach to doing business and with community-minded and environmentally responsible policies. This attitude of a shared planet is reflected in its sense of shared community in the workplace. This matters: for relationships to grow, there has to be a point of connection; people need shared experiences. Of course, this attitude also helps to build strong relationships with customers.
If one idea dominates Starbucks’ approach it is being totally customer-centric. Starbucks was conceived as a place for conversation that has a sense of community. It was designed to be a third place – not home, not work – where people could go to relax and enjoy a different, special experience during their day. From the outset, building great customer relationships was central to their approach. The space isn’t just a place to have a cup of coffee; it is a place where you share a portion of your day with Starbucks. Having an easy, relaxed space, establishing rapport and gaining trust means customers enjoy a connection to Starbucks. As soon as customers walk through the door, and most likely the reason they walked through that door, is that they will feel they belong and that they are sharing the space with like-minded people. Being able to develop such a close relationship with their customers is a key reason for Starbuck’s success. This connection helped the company rebuild its stock of relationship capital that it had previously depleted. As Starbucks found out: you should never let the coffee cup run dry.
Relationship marketing
Relationship marketing is a technique for building loyalty and business by enhancing customers’ levels of satisfaction, understanding and trust. It focuses on managing and cultivating a company’s clients and stakeholders. It relies on two-way communication to identify and meet current clients’ preferences and needs. In this way, relationship marketing approaches customers from the perspective of retaining them, rather than directly selling to them. The idea is that happy customers will stay longer with a particular product, service or brand. Sales, and in particular, continued sales, will then flow not just for the short term, but over the long haul.
Community marketing takes this concept further by engaging customers at the point where their interest already is, or has the potential to become, a community. Meaningful communication is critical in building relationships and building connections around a product or service to form a community infuses relationships with meaning. For example, businesses using LinkedIn to find specific contacts is still a valuable way of connecting with people and a great example of the value of networking – an issue we’ll discuss later.
Forrester Research advocates this customer-centric strategy, especially for the business-to-business (B2B) market. In fact, it considers community marketing mandatory, “marketers must abandon time-worn broadcasting and adopt community-focused marketing. Community marketing replaces traditional offer-response strategies with communications that foster dialogue; embrace community issues and values; and position brands, vendor experts, and products as valuable community resources.”
How do you form a community? There are various tools available. Web 2.0 offers a range of interactive means that promote community marketing, such as blogs, Internet forums, RSS feeds, social networks and wikis. Further, organizations have their own arsenal of items. These include podcasts and webcasts made for community members that provide value and elicit further dialogue with and among customers. Also, face-to-face approaches matter. Advisory boards fall into this category. An important aspect of building a community is forming partnerships with stakeholders.
A critical success factor when building a community – or building any relationship – that is often neglected is networking.
Networking
The question we all want to know the answer to is: are savvy networkers hard-wired or can these skills be grown? The answer is that they can be developed, according to N. Anand and Jay Conger in Capabilities of the Consummate Networker (Organizational Dynamics, 2007, Vol. 36, No. 1, pp.13-17). The secret lies in four capabilities:
• Understanding and being able to identify the most important factor that will assure a successful result.
• Knowing which people to connect, in order to facilitate any plans – that is, match-making.
• Managing and improving your network, constantly.
• Building – always working to build good relationships with others.
Enhancing networking skills is not easy; it requires sustained effort. As Anand and Conger note, “Without fail, the managers who are most effective at networking that we researched told us they worked hard at developing their networking skills. It required a serious investment of time and focus on their part…. It is not a birthright of the chosen few.”
MOVING BEYOND TRANSACTIONS
There’s a common thread that runs throughout this chapter. For a business to generate sustainable earnings and profit it needs to move relationships with stakeholders beyond transactions. They must move the needle from deals/sales/service to experiences. Relevance, interest and personalization are all significant – these elements expand Moments that Matter into Relationships that Matter.
In our global, decentralized sphere of business operation, we still thrive on the personal touch. This applies to all relationships. The potential loss of personalization received public attention with the publication of John Naisbitt’s book, Megatrends (Warner Books, 1982). “High tech/high touch” is how the author described the need for balance, “The more high technology around us, the more need for the human touch.” Interestingly, high tech has changed the nature of personal touch and has facilitated it to an unprecedented degree, through, for example, blogs, tweets and other social media.
Those businesses that convert interactions with stakeholders into experiences and value are on the road to success. Social media has and continues to help.
Social media, for business and other uses, has grown so rapidly and garnered so much influence that it has spawned “Twitaholic. com.” At the moment, those people with well over a million followers are: Britney Spears, Ashton Kutcher, Ellen DeGeneres, Lady Gaga, President Barack Obama and others. Is this the new form of high tech/high touch?
For businesses that use these tools to connect with people – keeping them informed, asking for their support, giving them special insights or things of value – the benefits in terms of relationships are very powerful. In fact, the more ways that a company can capitalize on this R, the better positioned it is to secure its place on the road to sustained growth and profit. If you are seeking to turbocharge your business, as AT&T and Bell System suggest, “Reach out and touch someone.” When building strong business relationships this advice certainly rings true.
Figure 8.2: From digital to social business
One final point to note about relationships is that even the most successful can hit a rough patch – after all, no one is perfect and all relationships, even the most successful, have their moments of tension or difficulty. What matters is how these challenges or concerns are addressed and, more generally, how readily companies learn about the best way to improve the relationship. This requires that companies evaluate their capabilities and address any weaknesses – the skill of Resilience, which is the focus for the next chapter.