Relational capital is not a new concept in business or life, but it is becoming more prevalent in today’s environment.

Relational capital can be described as the value created by people in business relationships (or life relationships). Put differently, it is goodwill built that allows you to have influence in that relationship.

Importance

It is this link to influence that demonstrates the importance of relation capital.

Influence gives the capacity to affect behaviour, people and change, among other things.

As the leader of a business or a team the ability to influence the behaviours of partners, clients, personnel and suppliers, are priceless.

However, influence that comes from a position of power or authority is fleeting, and often does not have a lasting impact. Where influence is based on a relationship, is built over time and therefore earned; this leads to lasting value.

An increase in relational capital will lead to an increase in value for all parties involved.

Workings

The best way to understand the workings of relational capital is to think of it as a bank account. Deposits are needed before interest can be earned.

There must be an investment into the relationship before value will be earned. In the same understanding, an overdraft (spending relational capital) is only viable after a history of investing, and it is costly in terms of value.

Relational capital can thus only be built, increased or spent. Leaders are responsible to protect all investments and need to determine what decision or action builds the most relational capital. Or spends the least value.

How?

In order to build or increase relational capital a few key elements are needed. I like to think of these elements in terms of the capacity formula: length x width x depth.

• Time is the length component. The more time spent on building the relationship, the more opportunities you have for understanding their business, obtaining perspectives and adding value.
• Understanding is width in the formula. Gain an understanding of the other party’s business, their objectives and their values. No real value can be added without regular conversations to build an in-depth understanding.
• The last element is reliability. Reliability is crucial to build trust and therefore provides depth to the relationship. Your actions need to support your words. Use the understanding you’ve gained for the success of the other party and not for self-gain.

The capacity to build and increase relational capital is only limited by the time spent, understanding gained and the reliability of your actions in terms of that person or business.

Value

The motivation behind investing in relationships will determine the value that is earned. If you are investing in relationships because of what you can get from it, that is what that relationship will be limited to. This can be likened to manipulation.

However, if the motivation for the investment in the relationship is the growth and success of that partner, the value will multiply with each of their interactions with others.

Influence increases, because of authentic interest in their success.

Conclusion

In the book The Go-Giver ¹ the authors define the Golden Rule of Business as:

“All things being equal, people will do business and refer business to people they know, like and trust.”

If you evaluate your relationships, is this the kind of influence you hold? Does your network consist of people that know you, like you and trust you?

Are your relational capital accounts in the green?