Relationships

Leadership is about building and sustaining healthy relationships. Today I'd like to introduce some concepts I find quite different and extremely powerful.

Let’s begin with a simplistic business model.

Gross Revenues – Production Costs – Transaction Costs = Profit

In this model, Transaction Costs are the costs of building and maintaining effective relationships.  This variable has always been there, but because traditional accounting systems were built to track and analyze production costs, true transaction costs (relationships data) have generally been absent.  Relationship data that is gathered is considered “soft”, and gathered retrospectively, making it of marginal / limited predictive value.

Now let me introduce some underlying tenants regarding the value of relationships:

1. Businesses (and projects) leverage relationships to produce goods and services which are marketed and sold to customers, again leveraging relationships.
2. Thus, one might appropriately conclude that, from a variety of perspectives, relationships (both internal and external) are an organization's (and a project's) greatest resource.
3. Healthy relationships are more beneficial and less costly than unhealthy relationships.
4. Healthy relationships reduce transactions costs - while transaction costs associated with unhealthy relationships can be exorbitantly high. Thus, organizations and individuals (market entities) successfully establishing healthier relationships are more efficient and, therefore, more viable in a free market than entities with less healthy relationships.
5. Relationships based on or motivated by power, self-interest, greed, and benefit for one at the expense of the other are more costly, and thus irrational in a free market.

So it might be reasonably concluded that to keep project costs and cycle times down, our goal as project leaders should be to establish and maintain healthy relationships (with core team members, sponsors, stakeholders and customers).  

But what are the criteria for healthy relationships?  Relationships are complex and you might expect that the criteria for successful relationships might be very long and dependant on many variables.  Well, you're going to find this surprising. There are only two, the relationship must have;

1. Mutual, and approximately equal benefit to the parties involved, and
2. Mutual pleasantness

And, what is even more surprising is that there are just four causal conditions for healthy relationships.  There must exist;

1. Intersection of purpose - the parties must share a common or intersecting purpose
2. Mutual respect
3. Mutual trust
4. A means to conduct the relationship

Over the next few weeks, I will provide some conclusions from this cutting-edge research on relationships. In this posting I will introduce only one of the underpinnings; respect.

Respect is the result of 4 important attributes:

1. Competence (both technical and interpersonal)
2. Integrity (moral virtue, values, and consistent / aligned behavior)
3. Responsibility (commitment of necessary resources, dependability)
4. Charity (genuine, active concern / desire for the welfare and success of others) 

Competence: The project leader and team members must demonstrate consistent competence in their roles and facilitate learning within the team. Competence is adequacy, sufficiency, qualification, appropriateness and mastery.

 

Integrity: Those working on the project must demonstrate high levels of integrity. They must honor commitments, act predictably, maintain high values, perform to high standards and always be forthright.

 

Responsibility: Project team members / leaders must demonstrate commitment and dependability. Respect has much to do with predictability.

 

Charity: Good leaders (and team members) are perceived as genuine. They demonstrate sincere concern for others through frequent appropriate small actions / deeds. Demonstrating charity is showing true concern for the welfare and success of others.

 

Just as we are able to manage production costs, we are able to manage transaction / relationship costs.  More in the weeks to come . . . .

 

I'd really enjoy hearing your reactions!