I’ve had the privilege of working and interacting with some exceptional leaders who run great businesses and maintain impeccable reputations in their industries and communities. Unfortunately, I’ve also worked with the exact opposite. We all have.
One of the main differences between successful leaders and the lousy ones is largely due to where their decisions land on the Transactional vs. Relational Scale or TR Scale. The TR Scale is a method of understanding the impact and motivations of decisions.
Transactional decisions focus on results. It’s about maximizing value for the organization at the lowest cost.
Relational decisions focus on people. It’s about maximizing relationships with all stakeholders.
The goal, therefore, is to strike the balance (or equilibrium) between Transactional and Relational decisions. How can you maximize value, at the lowest cost and satisfy all stakeholders at the same time? Sounds easy, right? If we lived in a land of robots, the Transactional model would obviously win out. However, every business influences stakeholders from employees, suppliers, customers, industry associates, and the community at large which need to be considered in the Relational model.
But here’s the insight I’ve found, the best leaders lean farther towards the Relational scale than their counterparts.
Here’s why this is important.
1. It’s counter-cultural and therefore creates differentiation.
The majority of business professionals are taught in school and trained in organizations to be Transactional. Their goal first and foremost is to maximize results at the lowest cost and hopefully minimize or manage stakeholder needs. It’s very refreshing and different to work with someone who genuinely has your interest at heart first. This behaviour causes them to stand out from their competition, increases close rates, and even maintains employee retention.
2. Relational style builds trust.
People make decisions rationally but still buy with their emotions. One of the key elements to buying large purchases is whether there is trust in the relationship. Do you trust someone who operates in the Transactional style or Relational style? People are smart and we can all sense when the party we’re dealing with is truly looking out for themselves or if they care about ensuring a “win/win” for everyone.
3. Relational style requires a vision for the long-term.
The Relational style will typically cost the organization more in the short-term. Loyal relationships with suppliers, more benefits to employees, extra features and favourable terms with customers are more expensive decisions for the company. But here is the trade-off. Suppliers will help cover mistakes if they occur. Employees will stay longer and help recruit new people to join. Customers will be more loyal and spread word-of-mouth reducing advertising expenditures. These benefits are not realized in the short-term and are difficult to measure which is why they are less rare.
The Relational style is ultimately a heart issue of the leader. Truly caring for others and putting their interests above your own is not normal behaviour and it’s difficult to make it a habit. But it’s worth it if you try. Where do you fall on the TR Scale?