Tuesday, August 01, 2006

Where does relationship value come from?

Today I identified the McKinsey has begun to take relationships seriously as a corporate asset.

This theoretical framework has to resolve the issues associated with identifying relationships (Ledingham,& Bruning), description of an organisation (Coase/Sonsino) and the means by which organisational value can be described, valued and changed.

It is this that enables us to develop a Relationship Management model of public relations practice when defined as: “influencing behaviour to achieve objectives through the effective management of relationships and communications”

(Chartered Institute of Public Relation and the UK Department of Trade and industry “Unlocking the Potential of Public Relations: Developing Good Practice” 2003)

In essence, I posit that peoples' (actors') cognition is expressed explicitly as tokens in the formation and maintenance of relationships. The formation and maintenance of such relationships is through networks which allows these tokens to be recognised and through which the values actors' attribute to tokens can be understood. Such understanding, when they converge in a process of cognitive consistency, are the conditions under which a relationship is formed. As the array of convergent tokens becomes richer, the relationship deepens. As more people recognise these tokens and their values, they coalesce into social groups such as organisations.

Using this approach, one can identify the nature of an organisation and the nature of relationships between organisations, their members and social (often commercial) groups.

Organisation value need not be merely financial (Hall) or physical such that relationships, brand and corporate values (including Intellectual Properties, tacit, explicit and process knowledge) can be, and mostly are, of greater significance in valuing an organisation, government or even nation state than, for example, share price. John Kenneth Galbraith coined the concept of 'intellectual capital', the imbued, actualised and evolving 'know-what', 'know-how', 'do-what' and 'do-how' of social groups in the form of an organisation and its sphere of influence.

The significance of attributes inherent in relationships, brands, reputation, IP, process knowledge and capital is that they are the elements that describe the assets of an organisation. Such attributes are, in actuality, only held by individuals. Such descriptions are all metaphors (Lakoff 1993) even when apparently describing physical assets and their asset value. The values we ascribe to these token-values need not be financial. Value is to a greater or lesser extent unique to each actor. For example brand values can be explicit, implicit and or tacit and are 'My brand values' and may be different to everyone else. Another example may be a token as tangible as an office. For one person it can be an impersonal blot on the landscape and for another a place of social interaction, work and fulfilment. Such values can be held tacitly, implicitly, metaphorically, or explicitly. In seeking to identify value, we have to look, as nearly as we can, from the perspective of the actor.

The value of tokens can be described explicitly, implicitly or metaphorically but cannot be described when tacitly held.

There is an old soldier who, having fought throughout the Second World War, had a distinguished career in politics. In his garden is a lump of concrete with rusty bits of iron poking out of it. He shows it to all his visitors and tells them it is his most valued possession. It turns out to be part of the Berlin Wall that separated the Western democratic part of the City from its communist neighbours for four decades. The value of this lump of concretes is in its representation of subjugation and division and its iconic symbolism of demolished oppression and the resulting freedom it presaged across Europe. To the old soldier and all he show it to, it has many values – it represents the apogee of his life's work as soldier and politician. The lump of concrete sticks in the minds of his visitors and changes their opinion of the this old man. The tangible manifestation of all these values is nothing more than the rubble to be found on any urban building site in the world. Tangible assets seldom have any value except when they are associated with intangible values.

To gain cognitive consistency and in resolving dissonance, there is a need for shared understanding of the token and its values in order that it can be identified as relevant in creating convergence.

There is a need for the other major ingredient in the Relationship Value Model. The old soldier, needs visitors so they can enjoy is values.

The rose, valued in terms of a coin's monetary value can be worth £1 to a florist and yet valued by the wife as a token of a loving relationship after the husband has been out for a night with the boys. This needs a structure for the token to be exchanged. Some form of network that allows the husband to present the rose and its associated values of romantic attachment. In other words the actors, tokens and values need a mechanism to ensure material relationship values are available to the parties and achieve convergence in terms of value exchanged at a cost acceptable to the parties. In management speak, a cost effective relationship.

Picture: Perfect Rose