Relationship Capital

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Measure and Manage your RELATIONSHIP CAPITAL

What is it?

The network of people and organizations that represent an organization’s customers, partners, suppliers, employees etc, constitute its Relationship Capital.

However, unlike other forms of Capital (Financial, Intellectual etc) it has been impossible to effectively measure, let alone manage this resource, like other assets.

In 2004, Wharton professor, David Reibstein claimed in ‘Connecting Marketing Metrics to Financial Consequences’ that more than 50% of the value of the Fortune 500 was made up of intangible assets. Undoubtedly one of the most (if not the most) valuable of those is relationships, as they effectively underpin all the others e.g. reputation, brand and intellectual property.

Our Definition

We define Relationship Capital as the sum of all of the relationships of all people within an organization.

These can be relationships with suppliers, partners, ex-employees, nodes (people with high influence not necessarily associated with any organization), or other functions within your organization. Factors to consider in calculating Relationship Capital include:

• position (role-based) power and personal influence
• type of relationship
• strength of relationship
• number of touch points on both sides

In accounting terms, Relationship Capital constitutes a key element of ‘goodwill’ or intangibles. Goodwill reflects the difference in the valuation of organizations between say, their share price, and the value of their physical assets and current revenue streams.

This difference in values is often explained by intangibles such as the value of the brand name; copyrights and patents; knowledge, skills and proprietary systems and processes. Terms such as intellectual capital and human capital have become a part of the corporate lexicon; Relationship Capital will surely follow.