Relationships and Business
Relationships used to mean a lot in business. However, following the 1981 recession (the first white-collar recession) and the rationalisation of business structures to save cost throughout that decade, people began to accept that to progress, they would need to change employer with some degree of regularity. This flattening of the work pyramid moved relationships to a shorter-term basis. Consequently, it reduced the trust relationship between customer and supplier as both sides increasingly found that clients instead used short-term measures to evaluate performance. The history of trust that might exist between customer and supplier increasingly became replaced by Service Level Agreements (SLAs), Key Performance Indicators (KPIs) and lots of other acronyms.
Today, a loyal customer is one who ‘honestly’ tells you when you are too expensive and gives you the chance to compete, instead of just coldly switching the business. It is a natural consequence of flattened hierarchies and larger-scale companies that we are all run by metrics. In turn, business relationships become increasingly transactional.
Your manager doesn’t care how much work the supplier may save you or the occasions when they have helped you out in a company. Management is interested in how suppliers’ performance contributes to their personal targets, and so on up the ladder.
When you are trying to break into a new business relationship, transparent, performance measured relationships are great. The relationship becomes a commodity, and you know what you have to do to compete effectively. However, when you are already the incumbent, metric dominated relationships take away a barrier to your competitors and the relationship is reduced to a commodity one.
This transactional style of business, in which history counts for little, is very American. On the positive, It makes for competitive dynamism, ensuring maximum economic efficiency. On the negative, it removes much of the fun and pleasure of business. When there were many more large owner-managed businesses, there was more continuity of employment, and decisions were often based on a wide variety of factors and a deeper understanding of relationship value.
Still, there is no use lamenting the past. Today, the message is to make sure you understand what the key factors are to your customer giving you business. Make sure you give them the best possible deal on those key measure. and do not worry too much about giving them anything on top.’ If they won’t pay for it, it’s not value. If you want a friend, get a dog!