Is Relational Capital the same as Reputation?

27 January, 2017

It is certainly true that your business is impacted by people’s perception of it; people such as employees, customers, suppliers, regulators and society in general.  But relational capital is more than reputation.  It is also about the structure and configuration of your company’s relationships. Being clear about what we mean and don’t mean by relational capital is crucial to understanding how it fits into the International <IR> Framework.

The fact that a TV personality has a great reputation does not mean that they have a strong relationship with the audience. One bad news story can remove the reputation and the TV personality is left with little ability to mend what they called their relationship with the public. Similarly, many premium brands have excellent reputations but little actual relationship with their customers let alone most of the general population.

The dynamics of retail brands are particularly interesting.  An apparently strong marketing campaign can promote a clear positive image of the store or the product.  However, if that campaign has the effect of discouraging dissent either within the company or by the customers and suppliers, the company is forced to believe its own press. A strong image is not the same as a strong relationship.  “Do you know who I am?” is not the same as “Do we have a good relationship?”

My image is about me.  Our relationship is about us.  It isn’t even about what you can do for me.  It is about a whole range of dynamic elements.  My perception of your image does matter and so does your perception of me. However more significant for a sustainable future is our ability to connect, to influence each other and whether our objectives are aligned.  Break-through organisations are those looking beyond tactical, transactional and temporary relationships.  They are looking beyond building an image, to building real relationship.  Investment in this area provides differentiation in today’s challenging marketplace.

Measuring and managing only the reputation component of relational capital is like measuring and managing only the assets and not the liabilities of financial capital.  Integrated Reporting means taking an integrated view of each capital and not just having a single KPI for each type of capital.