The ability to build and maintain strong relationships with other organizations is a key business asset and often a critical success factor in the achievement of business goals. This has never been more true than in the current business environment, which is increasingly relationship-based.

The many benefits of authentic business relationships that have been documented by researchers include increased market share, improved financial performance, business growth, reduced costs, improved organizational learning, and better innovation performance.

The benefits of authentic relationships derive largely from the replacement of contractual forms of governance with more informal, trust-based linkages. These facilitate the flow of information and expertise between organizations and allow for the use of informal governance methods that improve flexibility and adaptability and facilitate conflict resolution.

Other benefits and performance improvements often arise over time as the participants adapt aspects of their respective organizations and working practices to the needs or characteristics of their business partners, resulting in improved synergy and cost-effectiveness.

Despite the well-documented benefits of authentic business relationships, their importance as a business asset is often overlooked, and few organizations work systematically at improving their relationship-building abilities. To do so effectively often requires a holistic organizational transformation, which can be challenging for many firms, though the potential business benefits are significant.

There is a need to ensure, for example that:

• The organizational purpose and values are properly defined
• Employees have the right skills and attributes to develop trust-based 
relationships
• Relationship building is a central focus of business strategy and receives appropriate levels of commitment and resources, and
• Organizational systems promote rather than hinder relationship development

Schroeder & Schroeder Inc.’s Art and Science of Transformation® framework was developed in recognition that effective organizational transformation projects require both “science” and “art”. This holistic approach balances the application of systematic change management methods and techniques with the softer skills and attributes necessary for influencing the attitudes and behaviours of people. It also helps ensure that organizational culture; systems and strategy are all well aligned and designed to promote authentic relationship building.

Authentic Relationships in the New Business Environment

The ability to build and maintain strong relationships with other organizations is a key business asset and often a critical success factor in the achievement of business goals. This has never been more true than in the current business environment, which is increasingly relationship-based.

Advances in information and communications technology, along with economic pressures, are driving the adoption of new collaborative working arrangements between organizations, often across geographical borders. As a result there is a renewed emphasis on relationship building skills and on the need to work collaboratively to meet shared objectives. Now more than ever, successful business relationships are associated with a range of business benefits and overall performance improvements.

Not all types of business association are equally valuable, however, firms often have just a few strong relationships that generate the most benefits and have the greatest impact on performance. What matters most is the ability to form and build the “authentic business relationships” that will prove to be significant business assets.

Benefits of Authentic Business Relationships

The many benefits of authentic business relationships that have been documented by researchers include increased market share, improved financial performance, business growth, reduced costs, improved organizational learning and better innovation performance.

The benefits of authentic relationships derive largely from the replacement of contractual forms of governance with more informal, trust-based linkages. These facilitate the flow of information and expertise between organizations and allow for the use of informal governance methods that improve flexibility and adaptability and facilitate conflict resolution.

Other benefits and performance improvements often arise over time as the participants adapt aspects of their respective organizations and working practices to the needs or characteristics of their business partners, resulting in improved synergy and cost-effectiveness.

Characteristic of Authentic Business Relationships

Authentic business relationships typically have common features that enable them to generate business benefits. Being aware of these and ensuring that the organization is able to achieve them are important aspects of improving an organization’s ability to build authentic business relationships:

Trust: Authentic business relationships are characterized by strong-form trust, which requires a high level of reciprocity or “give and take” between the parties, as well as a tacit and mutual understanding of acceptable standards of behaviour and the intent to maintain these.

Respect and Reputation: Authentic business relationships involve mutual respect between the business partners. Respect based on an organization’s existing reputation often precedes the development of trust and it is the presence of both that makes the biggest difference. To earn the respect of others, firms must be genuine and transparent, defining their organizational identity and intentions through their mission, core values and business objectives, and consistently living up to these.

Commitment: Developing authentic business relationships generally requires a significant level of investment in time, effort and resources, as well as the willingness to open up the organization to certain risks.

Interpersonal Linkages: The growth of a web of personal relationships between individuals is an important condition for the growth of inter-organizational ties, helping facilitate information flow and the development of collaborative working, and providing the settings within which the values and behaviours important for relationship building can be demonstrated.

Balance and Reciprocity: The parties in authentic business relationships are usually well balanced in terms of their power and influence. When a relationship is balanced, reciprocity usually occurs, such as the reciprocal adaptation of organizational systems, products or services to improve the functioning of the relationship and meet the needs of the respective partners.

Continuity and Complexity: Authentic business relationships typically endure for many years and involve repeat contracts or transactions. Over time, they become increasingly complex in terms of the numbers of inter-personal relationships and functions involved, and the relationship becomes institutionalized in the organization’s systems and processes. This helps to ensure that it persists despite turnover of key staff, and facilitates coordination and co-operation between the parties.

Shared Purpose: Formally defining the organization’s fundamental purpose is an important step in being able to identify and build relationships with suitable business partners. Authentic business relationships develop between firms that have a shared or complementary purpose, which enables them to work towards shared business goals.

Cultural Compatibility: As an authentic business relationship develops, the respective parties’ cultural norms and behaviours often need to be modified to ensure that they are aligned and contribute effectively to the achievement of the common purpose and goals. Values, norms and behaviours collectively shape a business relationship’s “atmosphere” which is crucial to its overall quality and effectiveness.

Organizational Transformation for Authentic Business Relationships

Despite the well-documented benefits of authentic business relationships, their importance as a business asset is often overlooked, and few organizations work systematically at improving their relationship-building abilities. To do so effectively often requires a holistic organizational transformation, which can be challenging for many firms, though the potential business benefits are significant. There is a need to ensure, for example that:

• The organizational purpose and values are properly defined
• Employees have the right skills and attributes to develop trust-based 
relationships
• Relationship building is a central focus of business strategy and receives appropriate levels of commitment and resources, annd
• Organizational systems promote rather than hinder relationship development

Schroeder & Schroeder Inc.’s Art and Science of Transformation® framework was developed in recognition that effective organizational transformation projects require both “art” and “science”. This holistic approach balances the application of systematic change management methods and techniques with the softer skills and attributes necessary for influencing the attitudes and behaviours of people. It also helps ensure that organizational culture; systems and strategy are all well aligned and designed to promote authentic relationship building.

For example:

• To overcome any employee resistance to new ways of working, there is a need for art to understand the concerns that employees have, and to effectively communicate with and involve them in the organizational changes so that they take ownership of them.
• Strong leadership and appropriate leadership styles are also essential to drive these changes and to inspire and motivate staff.
• But it is also important to apply best practice project management methods and techniques to ensure that the initiative is well planned and appropriately resourced, and that progress is monitored.
• And it is essential to systematically review and redesign the organizational “change shaping levers” that promote or hinder cultural change: for example the performance management system, the organizational competencies and the compensation and reward system.

As in any major change initiative, transforming an organization to improve its ability to develop authentic business relationships requires the right combination of art and science.