Yaniv Preiss

Collaboration is the greatest human invention. A group working together can achieve what no individual can achieve alone.

For this discussion we focus only on the employer-employee prism including contractors and freelancers, excluding suppliers, partners etc. even though it can be the same with them.

Relational company 🤝

Also known as a relationship-oriented company, is an organization that places a strong emphasis on building and maintaining long-term relationships with the employees.
It seeks to establish trust and loyalty through ongoing engagement and mutual value creation, investing time, effort and resources into nurturing relationships and recognize the importance of building rapport, understanding needs, and addressing concerns.

It still means:

• it’s not about making friends, it’s about being friendly
• performance is managed, results matter

Transactional company 💰

Focuses primarily on exchange of labor for compensation. It operates on a transactional basis, where this value exchange is the driver. It prioritizes short-term transactions over trust and loyalty.

It still means:

• people are kind to each other
• positive work environment
• employee development and career progression is possible

Comparison

From the loose definitions above, we can clearly see that a ping-pong table or a happy-hour is not the differentiator.

Assuming both transactional and relational companies manage performance relatively similar, practice 1:1s, feedback, coaching and delegation, there are stark differences.
Each could be seen as a competitive advantage, depending on the industry, leadership and personal preference.

Obviously it’s a spectrum, and for the discussion, we’ll examine both extreme ends, for both the company and the employee:

Benefits of being transactional

• Mutual agreement, easier to manage mutual expectations from both sides
• Likely to avoid the “friends” trap, especially in middle management
• Honest about relationships not lasting forever (or long term)
• Higher chance of recruiting and assessing based on performance (hard and soft skills) In the opposite, many conversations revolve around how happy an employee is or how nice something was, less about real performance, thus, higher risk that low performers stay and best performers eventually leave
• Easier separation of life and work, for introverts or those who have social anxiety
• Lower costs – money, time and effort that are not invested into relationships and activities
• Lower carbon emission, waste and trash due to gifts, such as: flowers, cards, gifts and farewell gifts
• No toxic positivity. Likelihood of not getting punished for not cooperating with team events and activities that are not pure work, or simply when not happy and cheerful
• People know they are treated as a liability, not an asset, and act accordingly, not over investing at work
• Easy to lay off or fire, also known as “adjust workforce to market needs” or switch workforce, e.g. to a cheaper country as there is no moral commitment
• Humans are not predictable and deterministic, it’s easier to treat people more like resources, not investing in relationships and care
• Easier on leaders, not needing to be role models beyond their functional competence or show vulnerability

Benefits of being relational

• Higher loyalty as relationships are worked on, not only optimizing for compensation, employees not moving easily to a higher bidder or in sign of difficulty. Less expenses on undesired attrition
• Mutual respect, transparency, and shared goals. Communication is more open and collaboration is encouraged, which can help with results. This is contrary to transactional which tends to encourage competition and preferring own benefit over the company’s gain
• Oftentimes employees are also connected to the company’s purpose, not feeling alienated
• Feeling of one team, same goals we all achieve together, greater purpose
• Socializing is a human need, most humans (over 75% considering DiSC) would prefer to not work with “robots” or keep conversations shallow (like the weather)
• Relationships are the basis of successful careers. Networks are helpful in case of layoffs, progressing work and ideas in the company, connecting to others, referring talent, asking for advice, coaching and mentoring
• Employees may exceed expectations to reciprocate company’s behavior. Employees know that the workplace does care about them, they’re not just a number, not only “what the person can do for us” mindset
• Psychological safety is more likely to flourish in such environment, which in turn promotes higher performance, learnings and meritocracy over authority
• Statistically, layoffs and firing are much more rare than day to day work, so why is it the main argument for being transactional? Why do we let the most extreme case manage us, instead of finding opportunities for mutual growth?
• Majority of the people are demotivated when they are not known (nothing about their lives) and not recognized for their work, which has a higher risk in transactional companies. Even high Cs that avoid emotions are touched by positive feedback and recognition
• Managers are encouraged to give positive feedback to directs, and this is usually worth more than bonus or a physical gift (many keep hand-written notes for years, but not payslips with a bonus). This doesn’t cost money. Other examples: on anniversary, sending the spouse a list of good things about the employee, or send flowers seeds which are cheap
• Relationships in the organization are like WD-40 or oil in the machine. When things get rough, they hold everything and allow overcoming. They are invisible though, like for a car winning a race, it’s not because of the oil, but oil is necessary
• More likely to have trust as people are more likely to be vulnerable, which reduces the 5 dysfunctions of a team, and allows more transparency and resilience
• Easier to lead change, as people are more engaged and resilient
• Easier to be “authentic self” and others willing to adapt, e.g. “I have a bad day, I need to take it slower today”
• Likelihood of higher eNPS* and more positive reviews by employees on Glassdoor
• People tend to prefer to be around who they perceive as generous and not saving every penny on them
• More volunteering and going above and beyond as it’s not only about the legal contract, less “why should I do more?” More participation in extra activities like meetups
• Referrals – employees tend to recommend people they believe would fit and like to work with to a workplace they respect and rspects them back, not doing it for unfit people to collect the referral bonus
• Work is easier – e.g. when you have someone you know on another team you need something from
• Unofficial exposure to important information like a new project planned (not gossip) form other colleagues
• Happy employees make happy customers – higher NPS
• Professional development is likely to be more successful, considering both the company needs and the employee’s wishes and desired career path – in terms of development plan and opportunities
• As part of trust and rapport building, honesty, fairness, and ethical behavior are promoted
• Managers knowing their directs’ personal situations, internal motivation and life episodes as well as career aspiration makes it easier to understand performance fluctuation, being considerate and optimize development growth and seizing opportunities
• As a manager, relationship-power accounts for 80% of the time, expertise-power for 15% and role-power for 5%. Therefore is easier to manage. The belief that a manager commands and things happen is false. People may comply (bare minimum), but not creatively beyond. See the importance of buy-in in delegation.

Culture in a company can be set deliberately or just happen, like a boat carried by the currents of the sea.
Drucker said that Culture eats strategy for breakfast, so whichever you believe is beneficial, better be intentional about yours.

Notes

* NPS – Net promoter score – is a market research metric that is based on a single survey question asking respondents to rate the likelihood that they would recommend a company, product, or a service to a friend or colleague.
* eNPS – Employer Net Promoter Score – measures employee satisfaction and loyalty.

NPS is a famous case of the RAS syndrome, usually referred to as “NPS score”, even though the “S” stands for score already. It’s so rooted, that some think that “NPS” not followed “score” is a mistake, in both verbal and written forms.
Other famous examples are “ATM machine”, “PIN number”, “ATS system” and “PDF format”.