Relating is the key to a happy business

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MODERN COMPANY law still rests on the Victorian view of the duties of the company director and the need to protect scarce physical and financial capital. The Government's Company Law Review Steering Group has published a consultation paper which asks how to protect and empower today's scarce human, social and intellectual resources.

The steering group has identified the principles which many leading UK companies already practise - a recognition of their corporate responsibility to the society in which they operate. KPMG and The Relationships Foundation believe that the key to business success in the new millennium will be the successful management of stakeholder relationships. But if companies are to reach a higher level of success and consistency in this area, they will need more than legislation or corporate governance regulations. They must also re-define the way in which they manage relationships at both a strategic and operational level, in particular managing expectations.

We are developing a "relational audit" approach to this area. In one particular case, we used our methodology to look at differences in expectations between two organisations which had resulted in a "malfunctioning" of the relationship. By being able to identify, manage and eventually "re- negotiate" that key relationship, both parties were able to increase co- operation and set it back on track.

Five principles can be applied to assess the quality and likely long- term success of any relationship between organisations or individuals.

Commonality: are there common goals and objectives, and a sense of shared culture which acts as a basis for resolving differences of opinion? Are these differences seen as negative or as enriching the relationship in a framework of common goals?

Parity: what is the balance of power in a relationship and how is it managed and used? Do the parties have different types of power, such as financial, political, and veto rights? What level of participation and involvement do the parties have in decision-making and how does this affect individual morale? Are the deliverable benefits for both parties clearly defined and perceived as fair?

Multiplexity: what is the "breadth" of the relationship? Is there a shared knowledge of the extent of the range of skills and experience that individuals or organisations can contribute? Is there sufficient knowledge of a department, an organisation, a role or a person, so as to develop and build the effectiveness of joint working?

Continuity: is there sufficient contact between key parties to the relationship, and how are any changes, such as career progression and new personnel, managed without undermining the quality of existing relationships?

Directness: how do the parties communicate and what is the style and level of skill involved in their communications? Is the amount and quality of information exchanged sufficient to enable a better understanding of the key issues?

Our approach is based on the belief that all companies with ambitions of growth and success want to manage their key business relationships for the maximum and mutual benefit of all involved. If businesses focus on relationships it will go some way towards resolving conflicts.

Shonaid Jemmett-Page is a partner at KPMG; Michael Schluter is at the Relationships Foundation