For many leaders, the importance and value of solid, long-term business relationships is never more apparent than during economic downturn. In the current recession, those who have failed to create and maintain good relations with their key stakeholders, be they suppliers, customers, employees or their shareholders, are likely to pay the price for this neglect. Why? Because when times are tough both individuals and businesses turn to those they can trust. Those who have consistently demonstrated they are trustworthy and can deliver value, will be called upon before others. These are the companies that will weather the downturn most successfully as they have laid a good foundation for winning business and support from their contacts and partners.
Building effective relationships is a core skill. This may seem obvious but you'd be surprised how many executives I meet who turn relationship-building opportunities into a sales pitch with only short-term gain in mind. Selling is, of course, very important for business but so too is ensuring long-term success and future sales.
We only need to look to companies with true longevity, such as family-owned business Wates Group, to understand the role that relationships can play in commercial success. Paul Drechsler, the firm's Chairman and Chief Executive says: "The Wates Group has been around for 112 years. We understand the importance of long-term relationships; with customers, employees, suppliers and local communities. Some of these relationships have lasted over 40 years. Hard times are great to see the quality and depth of trusted relationships and how they deliver benefit for all. Indeed, our entire organisation is focused on developing trust and respect, ideals that sustain business through good times and more difficult times."
Banks have clearly played a key role in the current recession, not least because we have seen drastic reductions in the amount of credit available to businesses. At the beginning of 2009 business lending was almost non-existent, creating major problems for companies looking for funding. In many ways, the situation highlighted the importance of relationships and having closer, more direct contact with your bank manager. In today's environment, where banks are bigger and more complex, these relationships have been lost to the detriment of organisations. Steve Cooper, Managing Director, Barclays Local Business, comments: "The current economic climate highlights the importance of building and maintaining close relationships across a variety of stakeholders. Knowing that you are likely to get paid by those you trade with, or getting short-term help from your suppliers could be the key to staying in business. It's the same when dealing with your bank. It's proven that the more they know, the more they can help and the more timely this can be. It's also a great time to start shaping the future by building better relationships with employees and regulators."
As well as relationships with banks, suppliers and shareholders, businesses and leaders should not underestimate the importance of customer relations. The downturn provides an opportunity to build upon relations with your customers who are navigating their own way through the storm. Andrew Hosty, CEO, Technical Ceramics, Morgan Crucible comments: "It is in difficult times you find out who you can depend on, how real a business partnership is and who is in the business for the long-term. It is times like these that your customers can really need your help. It can be as simple as temporarily extending payment terms or making an extra presentation or visit. Doing such things brings rewards later on."
When it comes to relationships, commercial companies could learn some valuable lessons from not-for-profit organisations, which rely on the strength of their contacts to achieve funding. As Molly Jackson, Director, The National Museums of Science and Industry explains: "Long-term relationships are very important to The Science Museum when it comes to donors and sponsors. Many of them are not in a position to be able to support us in the short-term by being involved in our capital projects, so we have to keep them interested and committed to our cause for the future."
Executive's tend to forget that it's the basics that really make a difference to successful relationships. Good communication, keeping up-to-date on your contacts' current issues or concerns, making time for face-to-face meetings will all strengthen your company's visability leaving a marked impact in the long-term. Phil Smith, Managing Director, UK & Ireland, Cisco Systems has this to say: "I believe communication is vital to any relationship and no more so than in business. In the current climate, there is ample opportunity for misunderstanding and confusion, hence it is vital to increase the level of dialogue and communication to stakeholders, customers and employees. In difficult times you can't over communicate."
Relationship building is cleary a subject close to Criticaleye's heart and we have some great articles and event Write-ups on the topic. Leadership Networking by INSEAD's Herminia Ibarra and Mark Hunter is a great piece on building the relationships an executive experiences throughout their career and Building Relationships with Customers Thought-Leadership by Accenture's Terry Corby provides a practical way for companies to reinforce relations with customers for the long-term.
For more specific relationships see a Write-up from one of our previous events The Importance of Relationships Successful Supply Chains - How to Handle Complexity.
Please get in touch with me directly if you would like to comment on or discuss any of the points raised in today's newsletter.
I look forward to seeing you soon,