Relationships Part 1: Relationships Create Profitability

Soft skills don’t always get the respect they deserve. But, picture this. You have invested huge sums of money in computer hardware. Without software, the machines just sit there, mocking you. With software, the machines spring to life. Likewise, soft skills are required to bring your company to life.

Relationship skills are a major component of soft skills. The quality of relationships your company has with its employees, customers, vendors, and neighbors has a surprisingly big impact on your profitability. In this column, we will describe three ways in which relationships can make the difference between mediocre and truly exciting earnings. Next month, we will identify the key skills that create successful relationships.

1) Managers and their direct reports: The Gallup Organization did a 25 year study on what makes a quality work place. After looking at 80,000 managers and the 1 million people they supervised, what they discovered was this: Companies will invest a lot of money in recruitment. They work hard to convince top talent that they offer great opportunity, excellent salary, and wonderful fringe benefits. Such efforts may be successful in landing some desirable people. Yet, whether talented people stay or not is entirely in the hands of the company’s managers and the skill with which they handle their relationships with them. Employees experience the company through the behavior of their superior. As Gallup summarizes their findings: “People join companies but leave managers.” How much have you invested in training your managers to do their most important job of managing the crucial relationships with their direct reports?

2) The Partnering Process: The construction industry developed a process called Partnering when it discovered the huge costs of poorly managed relationships. Partnering creates a framework for successful relationships among the many stakeholders involved in major construction projects. Participants include the customer, architects, the contractor, engineers, electricians, carpenters, plumbers, painters, lawyers, and suppliers. Government officials are involved in issues such as zoning and permits. As the Explore Park (ambitious natural history park project in Southwest Virginia) learned in its early planning days, citizens sometimes get deeply involved as well.

In unpartnered projects, ignored and poor relationships are common. Some participants dismiss others as unimportant, or worse, see them as adversaries. The delays based on poor joint planning, mistakes based on poor communication, and legal costs that grow out of poor trust are well known to almost anyone who has ever been involved in a major building project. One study found that 50% of on-site work time is wasted, 24% just by people waiting around for someone else to do their part.

Partnering organizes all of the stakeholders into a team by focusing on essential relationship issues. Everyone is deemed important. All stakeholders’ issues are considered from the outset, so that there are few nasty surprises later on. Mechanisms for handling inevitable conflicts are agreed to ahead of time. Taking these steps prior to turning the first shovel of dirt builds trust and communication. When problems arise, as they will, participants call each other instead of their attorneys, and they do it early rather than things getting out of hand.

Over and over again, partnering participants report reduced project costs. Completion time is shortened, litigation is rare, and safety is improved. Participants also report that projects have higher quality outcomes. Contractors and others enjoy repeat business even when they are not the low bidder because good relationships provide value that people will pay for.

3) Alliances: In other industries, companies are discovering profitable reasons to work as allies with different firms. Alliances are happening more often in our increasingly global, specialized and competitive business climate. Suppose a major customer turns to you to fill a need that requires your core competencies but also requires competencies that fall outside of what you do. Rather than go to the time and expense of creating new institutional skills, you may look for other firms to help you. You form an alliance with them.

It happens in businesses of all sizes. Remember the last time you were at the movies. As the feature came on, the names of several production companies were screened. Those separate companies had formed an alliance to jointly produce that particular film. Some large companies have launched 50 or more alliances. Even in my small consulting firm, I have alliances with two other firms and am negotiating a third. Imagine the leverage that alliances provide to meet the needs of your customers with minimal investment on your part.

Just one small problem. Research shows that 70% of business alliances fail. Why? The most common cause is not poor business strategy nor is it bad legal or financial terms. Participants typically prove to be good at such traditional business skills. The number one cause of failed alliances is poor or damaged relationships between the partner companies. Perhaps participants fail to recognize the essential role that relationship skills play in alliance success and therefore fail to do the development work which good relationships require. Alternatively, they may recognize the importance of relationships but not know what to do to make them happen. As a result, poor relationships pull the plug on the business advantages the alliance offered.

Now What? If a baseball coach tells a player that having a good swing is the secret to good batting, he has only done part of his job. The coach needs to help the batter know what a good swing is and how to get it. As your coach, my job next month is to identify the specific skills of successful business relationships and provide some concrete steps for building them.

Dana C. Ackley, Ph.D., is founder and CEO of EQ Leader, Inc., which helps companies perform at their peak through emotional intelligence. He can be reached at (540) 774-1927, or by e-mail at dana.ackley@eqleader.net.