We hear a lot about equity in the business world. It's usually defined as the difference between the value of something and what it costs to own and maintain it. You might have heard of the different types of equity we often talk about in business, including shareholder equity, ownership equity and brand equity.
All the types of equity named above are important, but there's another type of equity that may have an even greater impact on your business: relationship equity.
What is Relationship Equity?
Equity theory studies the distribution of resources between relational partners. For example, it examines whether what the parties in a relationship get out of a relationship is equal to or greater than what they put into it.
According to this theory, relationship equity matters because people seek relationships where there is balance. If they get more than they give, they feel guilty about it. If they give more than they get, they may feel used. According to equity theorists, time, effort, skill, enthusiasm, trust, etc., are "investments" that have value and cost you something, so you naturally expect a return when you invest them in others.
Three Reasons Relationship Equity is the New Lead
In a business context, relationship equity can come in the form of access to information, communities, individuals or markets. It could also come in the form of referrals, insight or knowledge, financial investment, or any other returns your investment in relationships might make possible.
Here are three reasons why you need to take relationship equity seriously if you want to grow your business.
On a small scale, this is why referrals work better than cold calls. On a larger scale it could mean that investments you make in relationships within your community is a form of upfront investment that may pay off later in future business.
Building Your Relationship Equity
Relationship equity might simply mean helping people and providing access to individuals and communities by networking on an informal basis. A more formal option might be joining and participating in a local professional association. You could even start an association of your own, like Minneapolis-based consulting firm York Solutions.
York developed a peer-to-peer professional development association called Think IT in response to a need it saw to help IT workers that were being affected by the last recession. Since its inception in 2009, the organization has helped more than 2400 members in the Minneapolis and Chicago areas access mentorship and professional development opportunities. The association also allows York Solutions to develop long-term, trust-based relationships with IT professionals in the regions the company serves.
Another option is to invest in communities and relationships that reflect your company's values and meet community needs. This was the strategy Chicago-based technology consulting firm SPR Consulting followed. "We love the idea of investing in people as a way to build our network and support our community," says Pat Maher, Director of Civic Engagement at SPR Consulting. "It truly is a balance; we 'give' education, trust, and time, increasing each individual's skills and career opportunities, and in return we "receive" diversity and engaged and dedicated employees. It's a true partnership!"
Finding skilled IT resources to meet client needs is challenging for consulting firms like SPR, yet there are some candidate pools - such as people with disabilities and veterans - that are traditionally overlooked. SPR began working closely with community organizations to promote diversity and more inclusive hiring practices in the IT industry. This has paid off in stronger relationships within the technology and local community, as well as better access to qualified candidates who might otherwise have been underserved.
The Key to Unlocking Relationship Equity
Making genuine investments in relationships is the key to relationship equity, because businesses are made up of people who want to make real connections. You'll be most successful if you invest in relationships, partners and communities you truly care about and want to help. Thinking in terms of how we can help others is the key to unlocking relationship equity.