The Relationship Factor

"It's all about relationships." How many times have you heard this saying in reference to doing business? Well, I have heard it all of my working career, and honestly, I haven't heard a lot of opposition to this interesting concept. But it does make me wonder: Is it really all about relationships? What does that even mean? And if so, how much of it? Is it the most important factor in business? Or is it just something nice to have, just in case?

In my past life, I worked for a large corporation for 14 years. My first ten years were as an engineer with no management roles, and the last four were as upper management with nothing but management roles. I've noticed that during my first ten years at the company, there was a lot of grumbling amongst the non-managers about all the money the company spends on extravagant 10-day, all-expense paid trips hosting the top 250 customers that earned the trip with their purchases. These trips weren't just to local hotel resorts with golf, food, and shopping; we are talking about international flights to a remote destination guided by a team of travel specialists, fine dining, cocktail hours, concerts, and dressed-up events. Our company saw this as a high value and always set aside a budget to make this happen every other year. But why??

I was about to find out.

When I got promoted to management in year 11, I got to go on this very trip I used to grumble about. The first day at my new position was held at this glamorous, rooftop, outdoor restaurant overlooking the city of Rome. The sun was setting, and I was delivering a speech welcoming everyone and introducing myself to my new role. I still remember the thrill of this new adventure and being overwhelmed by the room full of decision-makers I never met. One of my mentors whispered in my ear, “you'll need to get to know every one of these people; the relationships you build will determine the success of your career here”. Oh wow. Really?

It turns out that the time we spend together in the next ten days will create a bond that will last a lifetime. It turns out that the hilarious events we got to experience together during that trip will be talked about and laughed about together during our business calls and strategy meetings. It turns out that the relationship that was built actually affected our bottom line regarding who purchased our product vs. our competitors. It turns out that relationships did matter. Almost too much.

Don't believe me? How about some factual insights into numerous studies that have highlighted the importance of relationships in various aspects of business?

• Customer Relationships: According to a study by Bain & Company, increasing customer retention rates by just 5% can increase profits by 25% to 95%. A Salesforce survey found that 73% of customers say that one extraordinary experience with a company raises their expectations of other companies. Harvard Business Review reports that acquiring a new customer can be five to 25 times more expensive than retaining an existing one.
• Employee Relationships: Gallup's State of the American Workplace report found that close work friendships boost employee satisfaction by 50%, and people with a best friend at work are seven times more likely to engage fully in their work. A study by O.C. Tanner found that 79% of employees who quit their jobs cite a lack of appreciation as a key reason for leaving.
• Networking and Partnerships: A HubSpot survey found that 85% of people say they build stronger, more meaningful relationships during in-person business meetings and conferences. According to LinkedIn, 80% of professionals consider networking essential for career success, and 61% say they've found jobs through their professional network.
• Supplier and Vendor Relationships: A study by AT Kearney found that companies with strong supplier relationships typically outperform their competitors in key financial metrics, such as revenue growth and operating margins. The Harvard Business Review reports that companies collaborating closely with suppliers can reduce costs by an average of 20%.
• Entrepreneurial Relationships: The Global Entrepreneurship Monitor (GEM) found that entrepreneurs with strong networks are more likely to start businesses that succeed and grow. A study published in the Journal of Business Venturing found that entrepreneurs with solid relationships with mentors are more likely to survive and thrive in the early stages of their ventures.

While these statistics may not directly measure the importance of relationships in business, they provide valuable insights into how relationships impact business performance, including customer satisfaction, employee engagement, networking, and collaboration. Building and nurturing relationships is essential for long-term success and growth in any business context.

Do you believe me now? Well, you don't have to yet. I am starting a new series called "The Relationship Factor." In it, I will dig deeper into this mysterious world of business and relationships. I have a feeling it's not going to be all sunshine and rainbows. We'll tackle some negative impacts of relational business as well. But before I go, here's a quote to consider this week.

"Business is all about relationships…how well you build them determines how well they make your business”. - Brad Sugars

You might be right, Mr. Brad Sugars, so let's investigate further, shall we?

Talk to you soon,?

Hanju