Transactional Business versus Relationship Business - Dimension Analysis
The sexy doesn't always pay the bills.
There are a lot of ways to delineate and categorize in the realm of business and work. One interesting way I’d like to explore here occurred to me from an exchange a while back with a friend. Here is the relevant excerpt—note: the names and other details have been changed to protect the innocent.
Friend:
As much as we try to get away from a transactional business, it is difficult. Alice [the prior person in a particular business’s marketing role] didn't like transactional business models. Bob [the new person in that role] and Alice are big buddies. Bob doesn't like a transactional business model either but knows it is part of our business.
Johnnies [a local fast-casual burger chain] like to do catering and has a catering manager that can help plan events, but they know an important part of their business is simply handing you a hamburger and you give them money.
Me:
That's a really good point and distinction. Relationship business feels better and seems like a future every business should strive for as it assumes more stability. But it is often a mirage. There is a hidden motive there too for people who push for it—it is loose, vague, and indeterminate making it easier for the employee to obfuscate how well or poorly they are doing. This hidden motive can easily be hidden even from the employee themselves as it is self-reinforcing. I.e., the employee doesn't necessarily realize they are pushing a strategy that increases their own job security.
At the extreme transactional business can be dehumanizing for the employee(s)/suppliers and unsatisfying for the customers/demanders. Yet, that doesn’t mean the business at its essence is not a transactional arrangement.
Striving for a relationship model is admirable if not outright good business. You as an owner or manager want all employees to think of the customer as having an on-going relationship with you, and you also want customers to think of the arrangement in that way. But there can be downsides. Everything from “the customer is always right” to going Six-Sigma on every detail can easily let cost overwhelm benefit.
So a balance is always called for. That balance will vary by orders of magnitude beyond any attempt to summarize it because of the simple multiplication of number of businesses times number of product lines times types of customers times conditions of the market environment.
Aside from that, at some point you have to decide what type of business you are going to be in even if it is a combination of the two at different times and places. Problems arise when transactional metrics are used to evaluate relationship quality and vice versa. Problems compound when we pretend to be one thing when the market is rewarding us for being the other.
Transactional business makes the world go ‘round. Relationship business is the oil and glue helping it to be smoother and keeping it bound together.
Related to this, I think, is the dimensional comparison of work from home (WFH) versus traditional work from the office (WFO). Consider this paper (pointer from Tyler Cowen). From the abstract:
Our key outcomes are the quantity and quality of ideas submitted by employees. Based on an event study design, the quantity of ideas did not change during the WFH period as compared to WFO, but the quality of ideas suffered. During the later hybrid period, the quantity of submitted ideas fell. In the hybrid phase innovation suffered particularly in teams which were not well coordinated in terms of when they worked at the office or from home. Our findings suggest that remote and hybrid work modes may inhibit collaboration and innovation.
The strongest advocates for WFH I encounter are accountants and IT (programmers, help desk, etc.). Like everyone, they see the world through their own eyes, which means their idea of work tends to be very formulaic and transactional. Therefore, it is rather obvious to them that there should be little to no fall off from WFH. They deal in quantities—transactional.
Contrast that with the CEOs and other C-suite execs as well as regional presidents that I encounter. They are very much concerned with the fall off from WFH. It isn't a control/micromanagement issue—that's an uncharitable dismissive. They care about creative production—relationshipish including intrafirm.
In the middle are salespeople and those who manager them. They want to the point of demand a work-away-from-the-office arrangement. In my career the worst thing a boss can say to a salesperson is "what in the hell are you doing here?!?", and the only thing they fear when the salesperson is not in the office is that they are simply HFW. Salespeople and their managers care about productive relationships that lead to transactions.
