Recognizing Relationship Capital Leadership With PE-ER
Traditional command and control leadership is not elevating employee engagement, performance, and business culture. Let me make a compelling case for what we call Relationship Capital Leadership.
Relationship Capital Leadership or (RC) is a standard of guiding principles and accounting of an individiual or workgroup’s credibility or quality of their trustworthiness with respect to these two types of social interactions:
Commitments and Feedback are captured and scored as Relationship Capital Points or RCPs. Each person has a Relationship Capital Account in which relationship capital points or RCPs are credited. Keep a commitment and your RC account is credited with an RCP.
Character and Competence
Stephen M.R. Covey, author of the Speed of Trust talked about trust being necessary in two main areas. He called it character and competence. Competence is the same as ability. You have to have both in anything significant. You can believe that this person has wonderful competence in that they know what they are doing, but if they don’t have character, the chances are you are not going to buy from them, you are not going to follow them, you are not going to join them. You are not going to do anything significant with this person. They have competence, but not character. On the other hand, you can see they have unquestioned character. Their character is beyond reproach, but if they don’t have competence in anything significant, you are not going to do any business with them. You are not going to buy from them; you are not going to follow them, etc. So both character and competence are important.
Now when it comes to competence and character and the importance of trust, I think that both are important. But one has more perceived value. I think actual value and that’s character. Why? I believe that today when I speak to audiences of 50 to 15,000, I ask how many of you believe by a show of hands that we have live in a “low-trust” society? Pretty much everyone raises their hand. I do not think that people are any more or any less trustworthy than they ever were. I think there have always been people who are pretty trustworthy or even amazingly trustworthy. It is a sliding scale. And then there are some that are not trustworthy and never will be. But I think that today there is a perception today of low trust. A lot of that is because of the way people think.
It does not sell papers or the news to say “CEO Acted Ethically”. People tend to believe what they see. Because we have more media now and more ways of distributing these kind of negative stories, it paints a picture of a lack of trustworthiness. The good news is a person who can quickly and effectively establishes their trustworthiness, is 9 steps ahead of a 10-step game.
The measurement of an entity’s Relationship Capital (RC) is a results-oriented process. Making and keeping commitments is fundamental to earning RC and high-performing leaders and businesses have always understood this. The difference today is the hyper-connected and transparent social world we are in, the speed by which other’s perceptions of you, your product/service, or business is not only very fast, but is amplified by brand advocates “word of mouth”.
Characteristics of Relationship Capital Leaders
Relationship Capital Leadership, in its simplest terms, is understanding and doing what is right. The difficulty is in defining “right.” Different individuals, different cultures, and different religions define it in different ways. The general treatment of women and mindsets toward slavery in different cultures during different times in history provides prime examples of how what’s “right” can vary.
Relationship Capital leaders distinguish themselves by doing that which may be difficult, disliked, and even unprofitable in the short-term for the creation of long-term vitality and value. They view the world as interconnected and develop end-to-end solutions to address complex problems that appear in the course of business operations. Rather than routinely extending payment terms to a supplier during economic downturns, ethical leaders study the financial strength of the supplier and/or partner, possible negative impacts to the supplier (as well as to the supplier’s employees and its suppliers — and to the company itself) if payment terms are lengthened.
Relationship Capital business leaders also consider other solutions (e.g., sharing best practices with suppliers and partners) that may require an investment but generate more value over the long term. “RC leaders” extend relationship capital trust to their employees, creating an empowering environment necessary to enable employees, suppliers, partners, and even customers to take the required risks to produce breakthrough innovations. For example, the Ritz-Carlton’s leadership team authorizes each employee to spend up to $2,000 to resolve customer issues at his or her own judgment.
What’s more, Relationship Capital leadership is a renewable human resource and, for this reason, represents one of the most efficient and practical assets an organization can put to use.
Business Benefits of Relationship Capital Leadership
Anything you want more of or less of in an organization improves when you build higher levels of relationship capital with your stakeholders. You get more risk-taking that generate more innovation that results in greater financial performance. And it all starts with TRUST and Relationship Capital (RC) is the metric that accounts for it. The image just is based on research data from LRN (Dov Seidman’s company) based on research conducted in 18 countries and millions of observations:
The emerging world of social business makes interactions and behavior transparent for all to see and judge. It will be these judgments or perceptions that will have a profound impact on your organization’s culture and level of trust. In fact, these perceptions have always been critical in offline business, but it is through the implementation of standards of Relationship Capital (RC) and the sharing of these perceptions across social media that will reveal your cultural behavior and guiding principles.
Coming this summer is PE-ER Performing Excellence-Engaging Recognition. The PE-ER platform will enable you to capture relationship capital. Whether you are a solopreneur, small business, or large corporate enterprise.
Relationship Capital (RC) is is earned by an individual, product/service, and/or organization’s account when the:
- Brand Promise/Values: What the organization or individual says it values.
- Reputation: What people think the organization or individual is.
- Behavior: How an organization or individual truly acts toward the customers and the stakeholders it serves.
Partly because of digital and social technologies, reputational risk and its effect on business sustainability has started the transformational shift of of traditional leadership signified by command & control power to that of influence, trust, and credibility. There will be growing demand for a global ecosystem of Relationship Capital (RC) education, training, and implementation services working with business leaders, employees, suppliers, and partners in implementing the standards and best practices. In for-profit business, Relationship Capital Leadership will be about integrating results and relationships not one over the other.
What do you think of leadership today and what do you think it will look like in the future? Will relationship capital become a more tangible asset for leaders, employees, and entrepreneurs? Share your thoughts.