The Relationship Age Company: A New Equation For Success

While the early part of the 20th Century witnessed the dominance of Industrial Age companies, the latter half of the century saw the flowering of Information Age companies. We are now seeing the emergence of the Relationship Age company, which incorporates new variables into the equation for success even as it borrows from each of its forerunners.

We can readily distinguish the companies of each age:

Industrial Age companies extract natural resources for use as raw materials and turn them into products. These are the companies that drove the U.S. economy until just a few decades ago; for example, General Motors, U.S. Steel, Union Pacific Railroad, Esso (now Exxon-Mobil), DuPont and many others founded in the 19th and early to mid 20th Centuries.

Management's challenge in Industrial Age companies is to maximize productivity by optimizing the flow of materials from acquisition to processing to distribution. Companies need employees for their physical strength and manual dexterity, and view and account for them as expenses - and thus treat them as expendable. To succeed individually and as a company, the mantra is to work harder.

Information Age companies are built with - and sell - technology and information-based products and services. These companies range from the Intels, Microsofts, and Googles at one end of the spectrum to the law firm and financial advisor down the street at the other end. They have transformed the world of work and are a powerful economic force. They manage the flow of ideas and technologies from conception to development to testing to full commercialization. Competitive advantage lies in coupling superior technology and knowledge with fast time-to-market capabilities.

Employees in an Information Age company are viewed as knowledge workers who become primary sources of a company's intellectual capital and thus valuable assets. Management focuses on creating a culture of learning and intellectual exploration in order to get and keep the best minds and facilitate innovation and creativity. To succeed individually and as a company, the mantra is to work smarter.

Relationship Age companies recognize the power of human relationships, not only to attract customers or to perform teamwork but also to define the business model. Avon Products and all the other direct marketing firms, for example, show that business can be done through person-to-person relationships just as easily and even more profitably than through mass marketing and advertising.

These companies create and maintain a vibrant network of suppliers, distributors, sales representatives, customers, strategic partners, employees - whatever drives the business. They manage the flow of human energy and spirit to satisfy customers, to take prudent risks, to pull together to get it done. To succeed individually and as a company, the mantra is to work collaboratively as one.

Four management principles distinguish the Relationship Age company:

People centered, not product or process or technology centered
The Relationship Age company is all about people. The product, the process, and the technology are all aspects of the business, but the talent and spirit of people are its core resource. Management's primary focus is to provide opportunities for both to flourish.

The traditional business formula, stemming from the Industrial Age, puts serving shareholders (the company's owners) at the top as the primary objective. Getting customers to buy products or services is the means of doing that. Then, within that context employees are merely a resource for making it all happen. Relationship Age companies turn that business formula upside down. David Neeleman, for example, founder of three successful airlines including JetBlue, when questioned about how he would explain to Wall Street why he put people first in his (highly successful) business model, said simply, "We serve our peoplee, who serve our customers, who serve our shareholders."

A focus on purpose as well as process
In a Relationship Age company, success starts with the effort to create and communicate a clear and powerful purpose. All aspects of the company, from mission statement to policies to operations, are geared to elicit the passion and involvement of its people. When they understand and get excited about why their company exists - which involves serving others in some way - they feel greater motivation to come to work and to contribute far more than they would in a traditional company.

More traditional companies focus on process. They design business processes and practices, define each person's job, and then expect success to result when everyone does what they're supposed to. While process is important, it is not the stand-alone answer.

Chip Conley, founder and head of Joie de Vivre Hospitality, attributes in part the success of his company to recognizing that a job is more than the tasks that his employees perform. His company's purpose is not just to serve customers but also to make them feel at home while staying in their hotels. Room cleaners can relate to this and attend, along with the entire staff of their hotel and customers too, weekend retreats to discuss this purpose and how they put it into practice. This shift of focus from task or process to purpose has led to a motivated work force with a turnover rate far below the industry average.

Values lived, not only spoken
Relationship Age companies live their values, from the business strategies they shape to the reward systems they create. Values guide the choices a company makes in every context and at each step of the way.

For example, when N.R. Narayan Murthy launched Infosys Technologies Ltd in 1981 with six colleagues, he believed that their success would come from setting and holding to high values. He put it this way in a Wall Street Journal interview: "While we recognized the challenges [of building a global IT company], we were certain of our value system. We believed that great companies are built to last hundreds of years, which requires a foundation that goes beyond revenues, profits and market capitalization. We pledged to seek respect from our stakeholders, which would automatically lead us to do the right thing by each of them. We would satisfy customers, be fair to employees, follow the highest principles in dealing with investors, and make a positive difference to society. If we did that, we agreed, revenue and profit would follow."

Nobody can really prove the impact of these values, but it's worth noting that the company has grown to 58,000 employees, hundreds of customers, and a market capitalization of $20 billion.

Relationships as assets, not incidentals
What is a company's most important asset? In an Industrial Age Company, it is primarily its financial and physical assets. In an Information Age company, it is its Intellectual Property. In a Relationship Age company it is its relationships. These companies treat relationships as long-term assets that are not to be sacrificed in order to attain short-term goals. A fellow employee or a customer or a supplier is not just a party at the other end of a transaction but also part of a long-term relationship built on shared values and common goals and maintained through a continuing stream of collaborative interactions.

Managers in Relationship Age companies spend as much time nurturing group performance as individual performance. They find ways to develop and call forth the fruits of group energy by delegating responsibility for analysis, decision making, and implementation to project teams or standing committees. They also pay constant attention to relationships among people in the company and to the relationships employees form with people outside the company. The strength of these relationships is measured and assessed, and steps are taken as needed to strengthen them.

When Bill Catucci led the turnaround of a failing telecommunications company, he blocked out time for managing the company's relationships with its major customers, important community and government leaders, and its employees. He also created a management system that fostered collaborative decision-making - and implementation - among top managers. In three years, the company achieved an industry leadership position, quintupled shareholder value, and raised employee morale.

Relationship Age companies also recognize that there is no one magic fix-that they have to do many things to succeed. While collaboration and unity of purpose and values are seen as the key to success, these companies also draw from the lessons of Industrial and Information Age companies, thus valuing efficiency and cost control (the focus of Industrial Age management) and innovation and creativity (the focus of Information Age management. They also recognize the need to take a holistic approach to management.

Even though your company may have mastered the important dimensions of Industrial and Information Age companies, you may take your company to a whole new level by focusing on the key drivers of Relationship Age companies. Begin by assessing all of the key relationships of your organization. Then find ways to capitalize on the strong relationships and take action to energize the flagging ones. While this is just the start, the benefits will quickly become apparent.