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 had the effect of severing the trust relationship between customer and supplier as both sides increasingly found that short-term measures were used 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 businesses that we are all run by metrics. In turn, business becomes increasingly transactional. In a company, your boss doesn’t care how much work the supplier may save you or the ¬†times when they have ‘helped you out’. Instead, all they are interested in is how your suppliers’ performance contributes to what they are measured by…..and so on up the ladder.

When you are ‘on the outside of a business relationship looking in’ then these kind of transparent, measured relationships are great. The implication is that the relationship is a commodity and you know exactly what you have to compete on to win your way in. However, when you are already ‘ on the inside’, the metrics take away a barrier to entry for your competition and the relationship is increasingly reduced to a commodity.

This is a very American style of business in which history counts for little. On the positive, It makes for competitive dynamism, ensuring maximum economic efficiency. On the negative, it removes much of the fun from business. In the age in which there were many more major owner-managed businesses there was more continuity of employment and decisions could be based on a wide variety of factors and understanding of value.

Still there is no use lamenting the past, the message today is ‘Make sure you understand exactly what is key to your partner giving you business.’ Make sure you give them the best possible deal on those key measures 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!


You may also like...

  • Paolo Vecchi

    I don’t think is just an American style of business but and English one as well. Being a foreigner (Italian) I’ve learn the hard way that “everything is fine until everything is wrong” with UK customers, often there is no in-between. While in Italy we are used to haggle and scream at each other for anything but then we get to a good compromise with British customers there is less of that and often very little exchange in terms of what the customer perceives about the services we are providing.
    Fortunately it only happened to me once about 15 years ago and since then I had to learn to read between lines that are much thinner than the Italian ones. And naturally as you say if the customer doesn’t want to pay for a quality product or service then I’m not the right supplier for him.

    • Miketrup

      The subject of differing business cultures is one I will return to on multiple occasions. I do think that business relationship values exist on a spectrum from the US where contracts seem to largely be the ‘be all and end all’ to Asia, where what is written down seems to be least significant part of the process of doing business. It is a fascinating topic that has a lot to say about the speed of trust, strength of independent legal systems and industrialisation and a sociological phenomenon.