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Sunday, March 28, 2010

A NOTE FROM THE CHAIRMAN: Big Banking and the Loss of Relationship Capital


by Adam J. Kovitz

Last week we debuted Joe J. Wallace's new column, Living Outside the Box, in which he spoke about banks, their policies, the current economy and their negative impact upon small business. I, too, have been thinking about this issue from the standpoint of Relationship Capital, which I have spoken about in the past and am quite passionate.

To briefly review, modern Relationship Capital Theory states that Financial Capital (money, or "FC") cannot exist without who we know (Relationship Capital, or "RC") and what we know (Intellectual Capital, or "IC"). It also states that RC can be quantified in a way that applies to people, products and (aggregately) organizations. Some people mistakenly view RC as "trust", which is certainly a component, but there is more to RC than I will go into here - for the moment, let's just look at it as the signal strength of the relationship between two entities.

Therefore, if we have known someone for a long time and still communicate regularly and possess positive feelings for them, chances are that the RC will be high. If we have met someone for the first time and do not yet have any prior information about them, RC hovers around zero. If we have had bad dealings with them in the past or they have betrayed us, RC becomes a negative value.

Long story short. Human systems, like all things in a physical universe, follow basic laws of physics - RC is no exception. Since FC is a manufactured construct of both RC and IC, it is apt to error and loss in quality, much like a second-generation recording is never as good as the first.

Therefore, think of your own relationship with your bank or lending institution.

If you had to rate your RC value with that bank on a scale of 10 being the absolute best to -10 being the absolute worst, what would it be?

How about the U.S. Federal Reserve or other banking regulatory agency?

How about the politicians that represent your local community, state, province, etc.?

How would you have rated it back in 2007 vs. today?

Chances are, if you have in any way been affected by our current global economic crisis, either from the standpoint of an employee who has lost their job, an owner of an emerging business struggling to stay afloat, a person on unemployment whose benefits will be running out soon or know of someone close to you that has been affected adversely, those numbers should be lower.

What have you done in your key relationships when you have sensed a drop in RC? Did you say you're sorry? Take the person out to dinner? Buy them a gift basket? Send them a referral?

Although banks do not currently measure RC, they do recognize the negativity surrounding them as they were bailed out at U.S. taxpayers expense. This is of growing concern to them.

Recently, Arianna Huffington of the Huffington Post, began the Move Your Money Campaign in which she is asking the American people to withdraw their money from larger banks and put them with local community banks.

What will banks to to preserve what's left of their RC?

Why...what any one of us do to (re)build!


Through social media...everyone from Wells Fargo-Wachovia to CitiBank to Goldman Sachs are blogging, Twittering and aiming to become more "transparent".

Perhaps it's time they learned about RC.

Then again, perhaps it's too late?

What do you think? Click the button below...


All my best,



The National Networker Companies

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The Emergence of The Relationship Economy

The Emergence of The Relationship Economy
The Emergence of the Relationship Economy features TNNWC Founder, Adam J. Kovitz as a contributing author and contains some of his early work on The Laws of Relationship Capital. The book is available in hardcopy and e-book formats. With a forward written by Doc Searls (of Cluetrain Manifesto fame), it is considered a "must read" for anyone responsible for the strategic direction of their business. If you would like to purchase your own copy, please click the image above.


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