Relational Capital Services
What is Relational Capital?
Relational Capital is an emergent 21st century business concept, with roots in the UK where much of the background research and development work has been conducted. It represents the total value of an organisation’s internal and external stakeholder relationships – the store of value upon which organisations build and grow their businesses. High relational capital is evidenced by the presence of trust, accountability and empathy.
Measuring and building relational capital represents a ground-breaking approach to transforming organisational performance. Relational Proximity® measures the amount of ‘relational access’ people have to one another – access determined by formal and informal rules of engagement established either by the stakeholders’ own behavioural habits or by enterprise practice and policy. By learning how to measure and build relational capital, leaders can address organisation-wide relationship problems, and simultaneously strengthen the relational infrastructure on which productivity depends.
Relational analytics provides a concrete tried and tested suite of techniques and tools for measuring the quality of business relationships. Once the results of the analytics have been shared, high quality strategy facilitation can help the relevant parties convert the insights into relational action plans, and ultimately into increased relational capital and reduced relational risk.
In a 21st century business environment characterised by escalating levels of volatility, uncertainty, complexity and ambiguity (the so-called VUCA syndrome), business leaders have come to recognise the crucial importance of carefully managing the quality of relationships among and between their key stakeholders, both internal and external. With increasing calls for the implementation of new corporate governance protocols, whereby social and relational capital will need to be reported on with the same rigour as financial measures, this imperative comes into even sharper focus for both directors and executives.
The importance of relationships, and effective relationship development, to business success
Our UK partners, Renuma, have identified the following business imperatives underpinning relational work:
- Good corporate governance requires an understanding of the impact of a company’s operations on the wellbeing of all stakeholders – for example, as set out in the new South African corporate governance code, King III.
- Sales levels and sustainability depend on the quality and strength of relationships with customers.
- Supply chain relationships are a key factor in long-term corporate profitability. ‘Industrial Relations’ between management and staff impacts employee motivation, rates of shop-floor innovation and labour productivity.
- Relations with shareholders determine whether they stay with the company through the good times and the bad.
- Relationships with regulators often determine the speed with which it is possible to introduce new products, what price they can be sold for and, ultimately, the breadth of profit margins.
- It is now widely recognised that ‘goodwill’ is a proxy for a company’s relational capital, i.e. a measure of the strength and quality of the relationships a company has with its stakeholders.
- Measures of a company’s stakeholder relationships become important in the context of merger and acquisition discussions or negotiations.
Relational Proximity®—an overview
In working with Renuma, we are able to use the Relational Proximity® Framework to underpin our relational analytics work. Relational Proximity® identifies, and rigorously measures, five key domains of relational capital: COMMUNICATION; STORY; KNOWLEDGE; POWER; and PURPOSE. The model provides a way of looking at how, in each of these five domains, such things as skills, values, working practices, organisational structures, policy and other factors influence the way in which relationships are formed and conducted, and the value of the outcomes that result.
Many struggle to measure relationship quality, or do so using various lagging indicators measuring how a party feels after a recent engagement. Using Relational Analytics, Cause Way can provide our clients with reportable results that can be tracked over time, with a rigorous quantitative basis for management and governance. Relational Proximity® provides a leading indicator (as opposed to lagging measures of engagement) of the quality of future relational outcomes, as well as actionable behavioural levers to improve the relationship. The metrics can apply to every kind of organisation and every kind of relationship.
- Communication deals with the ways in which the type of contact in a relationship may be mediated by time, technology, or other people, so influencing the quality of communication and the quality of connection.
- Story is concerned with how interactions are sequenced over time, enabling growth and momentum, and building the story of the relationship that can convey belonging and loyalty.
- Knowledge looks at the way in which information is gained, enabling the appropriate breadth of knowledge that allows effective interpretation and management of the relationship, as well as the sense of being authentically known and appreciated.
- Power addresses how the distribution and use of power can influence participation, fairness, and the experience of mutual trust, confidence and respect.
- Purpose considers how the depth, breadth and clarity of mutual alignment of purpose influences unity and synergy in a relationship.
Why should 21st century enterprises measure their mission-critical relationships?
Because our metrics are understandable, actionable and certifiable, you can reduce risk and increase value creation for stakeholders in a way that is recognised by others.
We provide hard data on relationships – both internal dynamics and crucial connections with external stakeholders. What an enterprise can measure, it can improve.
Our metrics satisfy emerging social and relational reporting requirements – for example, Integrated Reporting: http://integratedreporting.org/. They also allow an organisation to develop a nuanced understanding of strengths and weaknesses arising from its own relational capital, and how those strengths and weaknesses may impact on third party relationships.
Typical improvements you can expect to see from relational measurement and improvement projects are:
- actionable knowledge about corporate relationships
- clearer identification and management of risk in relationships with customers, suppliers, regulators and investors
- stronger internal co-operation and improved staff retention
- faster innovation
- greater operational agility
- better relationships with other organisations
- stronger leverage of relational and intellectual capital
- greater sustainability of operational performance, and where relevant, profitable outcomes