11 Nov

The Relationship of Relationships to Productivity

productivity

Connecting the Dots

Economist Paul Mills gave a remarkable speech at the annual conference of the Relational Thinking Network in Cambridge at the end of September. He examined a range of subjects, offering “relational solutions” to global financial instability.

It was fascinating to see the connections made between seemingly unrelated matters, showing that our current economic model is geared towards proliferating and exacerbating the pains of ordinary people suffering at the hands of an inherently flawed and unjust economic system.

In his talk, Paul connected the dots on a range of topics – the housing market, household debt, wage stagnation, income inequality, structural flaws in the banking model, corporate structure, the implication (and responsibility of) limited liability, taxation, the intergenerational crisis, and so on. Against each of the key areas, some relationally grounded solutions were briefly explored. Several days later, the implications of all that are still sinking in.

The most surprising fact however, lay tucked away in a one of the presentation slides:

“the declining rate of productivity growth”

Productivity Growth

Why is this significant? Because growth in productivity can be regarded as one essential factor which could help to dig us out of the current global economic doldrums.

I later learned I wasn’t the only one to have picked up on it. While discussing the day’s events over a drink at the pub, several of us mentioned our surprise at the notion of declining productivity growth which we all assumed was at an all-time high, given the age of technological proliferation in which we are living.

I had asked Paul about this during the coffee break and he explained that “most of the low hanging fruit” of technological innovation had already been “picked”, and that what lay next on the technological horizon was costlier progress in areas such as energy and transport – requiring far greater infrastructural investments.

My Experiences

This is where I got to thinking and to connecting what Paul had said to my personal experiences as a business consultant working in the relational field, and helping organisations to achieve growth in the three domains of culture, profit and social impact.

My experience has been that individual and team performance is underpinned by engagement and motivation. We know from numerous polls (Gallup, KPMG, Deloitte etc.) that workplace engagement is roughly stagnant around 35-40%. That means ~60% of the average workforce are either actively dis-engaged or only passively engaged – with immense and perhaps obvious implications for individual productivity and company performance. My experience (and the research bears this out) has also been that engaged people represent more productive (as well as happier) people. My experience has also been that good relationships lie at the very heart of well-functioning teams and thus are critical to engagement and productivity. This is the common thread of all facets of the Relational movement, that relationships underpin healthier, happier, more productive people and societies.

In other words, we may be overlooking our greatest opportunity for growth in productivity. Instead of looking to technology alone to fuel growth in productivity, is it time we reversed the equation and looked to relationships to fuel productivity and technological growth?

Consider the invention of smartphones. No doubt, these are an outstanding technological innovation with immensely positive implications for growth in productivity. Yet, that growth in productivity, can (and has) been turned on its head when the use of that technology overtakes its intended optimum: overuse of a smartphone can cause chronic back and neck pain, especially in the cervical spine due to the lengths of time we hold it in positions which are un-ergonomic. Lengthy exposure to the electro-magnetic fields that it emits are considered by many to be harmful to health and can deplete energy. One only has to do a quick Google search to learn about the detrimental impact of smartphone overuse on face-to-face relationships, even marriages. Smartphone overuse has also been linked to sleep deprivation, depression, anxiety and several other disorders. Thus, our relationship to technology can not only serve to increase our productivity, but it can also threaten and undermine our productivity!

My point is this. The next phase of growth in productivity should come from deeper engagement with ourselves and our contexts; with our friends, class mates, families, colleagues and the strangers we have the opportunity of meeting.

The Relational Lens

Thankfully the relational model offers a clear pathway for doing this through the Relational Health Audit – a tool designed to assess the health of key business relationships and for developing those relationships to increase engagement and productivity. The 5 dimensions or pillars of successful relationships are:

  1. Directness – the nature and style of communication
  2. Continuity – the degree to which a relationship shares a common thread of past, present and future
  3. Commonality – the degree to which a relationship shares common goals
  4. Parity – the balance of power in a relationship
  5. Multiplexity – the variance in the contexts within which you know or have known someone

The tool measures the perception of relationships in respect of the above dimensions and the difference in perception is where the gold dust lies. As Rob Loe pointed out during his talk on the Relational Schools project at the Cambridge conference: “perception is reality”. Thus, understanding and comparing individual perceptions of a relationship provides the essential first step to understanding its strength. The differences in perception provide the areas of focus for exploration and they in turn give rise to the powerful interventions which can be applied to improve a relationship.

So while we continue to navigate the treacherous waters of global financial instability, we can start to make strides in a positive direction by expanding our relational lens to increase engagement, productivity and the raft of other associated benefits in the workplace. Perhaps a return to solid relationships will be our greatest weapon in the battle to return to long term financial and social stability.

Nashak Billimoria
Founder, BeUnlimited
http://www.be-unlimited.org/

14 Apr

‘Big government’ anti-relational? Not when it comes to income inequality!

Goldfish income inequality for RTN website

Over the last decade, research on well-being has increased exponentially. While the main focus of economists is on the relationship between well-being and GDP per capita, they are becoming increasingly aware of the role of income inequality. This is an important topic for relational thinking as well, since income inequality is closely related to social cohesion and trust within a society. While relational research often focuses on interpersonal relationships directly, the structure and organization of societies and their economies can be a major source of stress. The impact of poverty is widely understood, yet income inequality can put relationships under a similar kind of pressure. Much is still unknown about how inequality affects well-being and what can be done about it. This blog aims to give a first glance at ongoing research on the matter, from a relational perspective.

When discussing income inequality, we should first ask ourselves what do we mean, and why is it worth to be studied? A classic approach is to look at absolute income differences within a country. Yet, as humans are social beings whose well-being depends on interaction and comparison with others, it is relative income inequality that social scientists should be most concerned about. A commonly used measure is the Gini-coefficient, a complex mathematical function that unfortunately tends to overestimate inequality between incomes in the middle of the distribution. Due to the nonlinear nature of income inequality, a better alternative is to look at the % of national income that is earned by the richest 10% of the population of a country. For European countries this number ranges from about 24% in Denmark, up to more than 40% in the UK. This means that on average one third of all income in a country goes to 10% of the population, leaving two thirds to the remaining 90% . This may not sound very alarming. Yet a similar pattern can be seen within the 90% group. In the end, high inequality means that a relatively large group is left with relatively little income. Several researchers have argued that the current level of inequality causes polarization of societies, as different income groups tend to become isolated from one another through consumption patterns, education, and even residential areas. When inequality is furthermore perceived as a sign of unfairness, it can pose a serious threat to social cohesion and mutual trust, even further deteriorating relationships.

Closer investigation of the matter shows that while perceptions of inequality are important, countries with higher levels of income inequality have lower average life satisfaction irrespective of cultural differences. This is especially true for countries with relatively high standards of living, and the relationship is causal. The question is then what causes income inequality, and can it be influenced without major distortions to the functioning of the economy. Ideally, productivity should determine one’s income. Productivity can however not be directly observed, while differences between supply and demand of labor may lead to unequal bargaining positions. Thus, market structure and government institutions have a major impact on the distribution of income. More formally, these are called the degree of economic freedom of a country. As an indicator, economic freedom is usually divided into five sub-indices, being size of government (consisting of government expenditures and fiscal policy), the quality of the legal system, sound money, free trade, and the degree of regulation of capital, labor, and credit markets. Of these sub-indices, tax policies and low regulation have a strong and very significant impact on income inequality. As suggested by Piketty (2014), a country’s tax structure has an important signal function regarding what kind of earning system and income distribution are acceptable to a society. In addition, government regulation of an economy strengthens the bargaining position of the weak and poor and offers them protection against abuse of power. In addition to its potential direct positive impact, this leads to more equal outcomes, strengthening both work and family relationships.

What does this mean for relational thinking? While a lot of things can be left to the responsibility of local communities, sound macroeconomic structures are essential to contain income inequality, strengthening these communities and supporting healthy relationships. Thus, how paradoxical it may sound, ‘big government’ is not always such a bad idea!

Bjorn Lous is a second-year PhD-student at Tilburg University, studying the relationship between economic freedom, income inequality and life satisfaction.

13 Feb

What to do about Greece’s Debt?

debt

The election of Greece’s left-wing government on a promise to reduce the country’s mountain of debt, has brought the issue of what to do with Greece’s debt firmly on the agenda.

The journalist Gillian Tett recently wrote about this in the Financial Times. She recollects a meeting where Economist Benjamin Friedman discussed whether Greece should have its debts forgiven. Some argue that as Germany received forgiveness for its debts, so Greece should be forgiven. Others argue that it’s immoral to forgive Greece its debts – “how can you forgive debt when a country has a retirement age of 50?”

Gillian Tett writes:

Either way, what became clear that night was that the question of how to handle Greece is a deeply emotional issue, not just a matter of economics — even (or especially) among central bankers. In one sense, that is no surprise.

As David Graeber noted in his seminal book Debt: The First 5,000 Years, credit is a social and political construct. And whenever societies have operated in the past with few constraints on how much credit they can create, this has invariably caused debt to spiral until it either triggered social implosions or the society has used rituals to forgive that debt. In the past, there have been many such safety valves, be it the debt jubilees used in biblical Israel or the practice of “wiping the slate clean” (that recorded debts) in ancient Mesopotamia.

The issue of Greek debt and whether it should be forgiven, is a strong reminder of the relational issues surrounding debt.

Earlier this week in The Daily Telegraph, there was a discussion about whether the current low interest rates should be an opportunity for people to pay off their mortgages, or to borrow more for a greater financial return. As well as ignoring the financial problems that taking on more debt causes, the article doesn’t take into account the relational implications of debt.

Firstly, the relationship between lenders and borrowers, at any level, is inherently unequal. There is a lack of parity between the parties. When unexpected events leave the borrower unable to service the loan, calamity often ensues.

Secondly, debt finance does little to reduce relational distance between corporate borrowers and corporate lenders. It is seldom associated with close involvement by the lender in the affairs of the borrowing company because the security provided for the loan acts as a convenient substitute for close monitoring.

Thirdly, increases in national debt in effect constitute a promise that future generations will meet the cost of the interest payments and eventually repay the debt.  What would be considered a grossly unfair transaction between contemporaries is waved through because future generations have no voice.

Finally, financial difficulty, and particularly debt, is a major cause of stress.  A Barclays survey showed that money was the most frequently cited reason for arguments between partners.  The psychological pressure resulting from personal debt is linked directly with child abuse and physical violence between adults in households.

Whatever decision is eventually taken on Greece’s debt, the impact of debt on relationships is clear.  As Graeber notes, when there have been few constraints on debt,  there has either been a social implosions or the society has used rituals to forgive debt. Debt is not a relationally neutral financial action. One hopes that with all the discussions surrounding Greece’s debt, society will wake up to the relational impact of debt and will be far more reluctant to borrow.