Transactional versus Relational

By Bob Bruner-

Here, at the height of the MBA recruiting season, my conversations with students sometimes turn to negotiating terms of employment. In one recent chat, the student was enumerating a range of terms to be sought—this was mainly more pay in the event of more travel, more late nights and weekends, more project-management responsibility and so on. By the time this person got finished enumerating all the conditions the job sounded like piece-rate work, vaguely similar to the terms by which companies pay for garment-sewing in East Asia or fruit harvesting in Virginia. I asked the student whose ideas were all these conditions? He beamed, and claimed them as his own: “I’m trying to cover all the possibilities,” he said. I pressed him on how the prospective employer would respond to this negotiating approach. He said, “I don’t know, but they’ve gotta be impressed with my attention to detail.” I replied that I know the company pretty well and opined that this approach would jinx the entire job opportunity. We’ll see whether the student gets the job.

A failure to read correctly a firm’s culture can have catastrophic consequences for one’s career. Culture includes a wide range of social qualities such as beliefs, sense of mission, values, norms, traditions, how victories are celebrated, physical layout (e.g., open plan vs. closed offices), how conflicts get resolved (e.g., consensus vs. command-and-control), leadership style (e.g., team-based vs. “Lone Ranger”), communication style (e.g., candor vs. diplomacy; speed vs. deliberation), and interpersonal practices (e.g., formality/informality).

One of the most important ways to parse a corporate culture is the extent to which it is transactional versus relational. The ultimate transactional firm is the piece-rate environment: everything about the progress of the enterprise is measured in financial terms; extra effort or output wins immediate reward; similarly, retribution for failing to meet goals is quick and Darwinian; and everything is measured by the size of the paycheck, which employees regularly compare to see who is more valued. There is no reward for assisting a colleague—it just takes time that you could be using to stay ahead. Boiler-room sales operations work like this; in more elegant surroundings you will find that some professional services firms and financial organizations offer essentially the same environment. To get ahead in such organizations, you must stay ahead of the average of your colleagues. Never admit weakness. And never hesitate to ask for a better deal. “If you don’t ask, you don’t get” might be the cultural motto. I’m not disrespecting the transactional enterprises; some of them are excellent. But if you’re going to play the transactional game, you must play it very carefully. The iconic transactional firm was Enron.

The relational firm is all about a more complicated social contract. What matters is the mission of the enterprise, rather than the prosperity of the individual. Surely, as the firm prospers, the individual tends to prosper. But the contract goes well beyond piece-rate and may include expectations for a contribution to the success of others, contribution to successes that probably extend well beyond the reporting period, and contribution to quality rather than simply volume. As the term, “relational,” implies, the glue for such firms is not the individual transaction, but rather the relations among employees, and between the firm and its customers and suppliers. Relational firms impose big burdens on their employees—they are asked to live up to a strong internal culture; the employment demands are probably ambiguous and open-ended. Employees feel pride in the ente Such firms ask newly-recruited MBAs to “drink the Kool-Aid” of the firm’s values. Many of these firms have very strong brands. The lists of the top 100 employers will identify some of the leading relational firms.

The relational enterprise that I know best is Darden. We choose to have a relational culture because it is consistent with the kind of learning experience we aim to offer. Our teaching approach depends vitally on teamwork, high engagement with students, excellent delivery, and freely-offered mentoring and exchange of teaching advice. Our faculty culture is highly consultative and consensus-driven–someone once called Darden the most Japanese business school in the world. We seem to meet a great deal. We talk regularly about mission and values. And it is a faculty culture of strong esprit. An annual surprise for me as Dean has been that one or more faculty members will suffer an accident or serious illness that unexpectedly prevents them from meeting classes—but equally gratifying is that faculty colleagues will rally to fill the teaching need, voluntarily simply as a gift: they do it for the colleague, the team, and the students. Many other B-schools choose to be more transactional—some of them are prominent. But when Princeton Review ranks our faculty #1 in the field, I believe they are recognizing the essence of our highly relational culture. We intend to raise our game in this dimension. This year, Professor Sherwood Frey is leading a special faculty team to deepen the integration and engagement among faculty members. Also, we will recruit new faculty members who resonate with our culture. One of my tests of faculty candidates is to see whether they have figured out what kind of culture we have.

What is true for the faculty experience is true for students as well. Students probably learn as much outside of the classroom as in. Learning teams, project groups, mentors, tutors, and over 35 clubs offer extraordinary relational learning opportunities. Our classroom experience is highly engaging—this is no place to be if you like to wait for the professor to tell you what you need to know. The constructive ambiguity inherent in our cases and learning experiences will bug the transactionally-oriented student—we offer no day-by-day checklist of learnings . Instead, we emphasize that the really important learnings are embedded in stream of experiences we offer. To gain those learnings, the student must trust the process.

Trust is the fundamental, single most important attribute, of a relational enterprise. The three foundations of trust are sincerity, reliability, and competence—if you don’t feel a sense of trust in the enterprise, you probably doubt one or more of those elements. I advise MBA students to gauge their sense of trust in the prospective employer and to look for a consistency of trust as they survey the top to the bottom of the enterprise. The career advice is straightforward: don’t work for someone you don’t trust.

Over the past 25 years, I have seen a pendulum-swing among MBA students and their recruiters between the relational and transactional cultures. In boom times students and recruiters seem to incline toward the transactional—I suppose that buoyant prospects may diminish the consideration of trust. Perhaps the student thinks, “if I get burned, another good opportunity will come along.” In lean times, students and recruiters turn more toward the relational. As I watch today’s unfolding financial crisis and rising probability of recession, I will not be surprised to see a renewed emphasis among students and recruiters on considerations such as teamwork, commitment, and trust. Great professional work does not exist solely on transactions. To be sure, one must close a sale, fill an order, and meet deadlines. But to fail to see that these are just punctuation marks in the longer narrative of relationships is a serious error.

Posted by Robert Bruner at 01/13/2008 09:04:52 PM