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Return on relationshipBy Greg Wolf I noticed recently that political candidates are arguing about capitalism, their respective contributions toward it and the failures of others. That got me thinking again about just what the definition of capitalism really is. According to Merriam-Webster, it is: "an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by completion in a free market." Private decisions and free markets, as compared to decisions or markets commanded or controlled by a central government. The idea driving capitalism is simply that free people, seeking to better their own interests, will make the best economic choices possible. That is perhaps an oversimplification, and definitions I'm sure would vary, but that is getting pretty close to the fundamental premise of capitalism. However, one of the (subtle) arguments against capitalism is that it is amoral if not immoral--in other words, it rewards vice over virtue, greed toward oneself over grace toward others. I think that some of the philosophical differences hinge though on the description of capitalists "seeking to better their own interests." Those best interests can certainly be virtuous, and even given that they not always are, capitalism still is predicated on the belief that are inherently at least as virtuous as those in control of a command economy. Return on equity is the bottom-line measurement of capital performance, given an appropriate balance with risk assumed to earn that return. Jack Welch, former CEO of GE, spoke about how capital will always flow to its highest level of return, given the risk parameters of the owners. Return on assets is another measurement used to measure the performance of all capital invested in a business, whether ownership capital or debt capital. Both are great measurements of the capital performance in a business. But several years ago I started using another measurement that, although it is more challenging and subjective to calculate, is equally valuable in measuring business performance. It is Return on Relationship. Since "not everything that counts can be counted, and not everything that can be counted, counts" and the "best interests" of ownership go far beyond economic returns, I believe it to be a valid and valuable measurement of business performance. How we function as families, as businesses, and in other settings where people work together is a huge part of what success means, and our satisfaction (which interestingly is an economic term) derived from relationship with others is directly related to investment in those relationships. My colleague and friend Dr. Hubert Brown has a remarkable way of addressing these relationships: Workplace conflict is an ongoing issue for business and unless it is tackled, it will harm and overshadow the possibility of improved productivity and profitability for the business. Also, it will surely dampen the possibility of stronger relationships for the workplace. Many businesses, for example, are afraid to address problems because they fear that simmering conflicts may explode. Therefore, they often avoid honest and sometimes painful communication about the reality of their situation in the interests of maintaining the "myth" of corporate harmony. There is no question that maintaining harmony is important, but addressing conflict is crucial to the growth of individuals and the company. Conflict is neither positive nor negative; however, if handled correctly it leads to new thinking, better planning and decisions--and a stronger sense of trust and harmony. Again and again I have discovered it to be true that the quality of relationship among people in a business has a twofold contribution to capitalistic success. First, it actually affects the "productivity and profitability" of the business. And second, it provides satisfaction for the very interests of those involved in ways transcend other economic measures. I also appreciate what Hubert has written about conflict being neutral--it is not something to be avoid, but to be managed--for where people gather, there will be conflict. How that conflict is acknowledged and worked through tells the tale of whether it strengthens or sabotages. It is easier to write about than to properly address conflict. In daily reality, it is often difficult to put handles on relationship challenges and conflict in order to work with and improve them. Hubert has created a helpful acronym, CARE, to provide a starting place in approaching conflict. I'll share them briefly here, even though much more could be said about each one: --C stands for Confront. One needs to confront the conflict. --A stands for Accept. One needs to accept the conflict. --R stands for Resolve. One needs to work to resolve the conflict. --E stands for Embrace. One needs to work hard and embrace an agreement. Return on Relationship is a powerful measurement of business progress and success. In this, the first month of a new year, it is timely to consider the Return on Relationship of your family and/or business. Though inherently a subjective process, it is not impossible to gain an accurate assessment from all the people involved of their sense of "return" (satisfaction) in relationship with others. That assessment provides a roadmap both for correction of weak areas, similar to what we would do with a financial weakness, as well as planning for longer-term investment in relationship toward future returns that strongly satisfy. Editor's note: Greg Wolf is a consultant with Kennedy and Coe, LLC (www.kcoe.com) and works to help clients of the firm navigate toward better returns in all areas of their businesses. He is based in the firm's Pratt, Kan., office and can be reached at 620-672-7476.
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