The three types of intellectual capital which make up the intangible value of a business are its people (human capital), everything that is left when these people go home (structural capital), and the value inherent in its relationships (relational capital).
One of the most valuable assets your law firm has is its relationships. The network of people and companies that represent your leadership team, attorneys, board, clients, intermediaries, partners, suppliers, and employees constitute your relationship capital. These relationships underpin other types of capital, for example, your firm’s reputation, brand, and intellectual property.
However, unlike other forms of capital (think financial and intellectual capital), it has until recently been all but impossible to gain accurate insight and effectively measure and manage your firm’s relationship capital.
- So, How Do You Define “Relationship Capital?”
- Strong Client Relationships are Key to Law Firm Business Sustainability
- How Can You Measure Relationship Capital?
So, How Do You Define “Relationship Capital?”
At Introhive, we define relationship capital as the sum of all of the relationships of all of the people within your firm. These can be relationships with contacts such as board members, clients, intermediaries, partners, suppliers, and with your alumni, ex-employees, and people in your space with high influence.
When calculating relationship capital in the legal industry, broad areas need to be taken into consideration, including:
- Seniority of the contact
- Type of relationship
- Strength of relationship
- Depth of the relationship at an organisational level
- Recency of the relationship
- Activity levels and types
Strong Client Relationships are Key to Law Firm Business Sustainability
Measuring and actively building relationship capital is of strategic importance to your firm. Here are just a few reasons why relationship capital management is important:
- A reducing relationship strength helps you to identify threats early, helping you take actions to prevent a key client from leaving
- A strong relationship means there’s less motivation for clients to move to your competitors
- Weak depth in a client relationship could indicate a “key individual risk” where just one partner leaving may result in a client following them out of the door
- Business development and marketing costs decrease as winning business from a new client is 5 times more expensive than winning more business from an existing client
- Relationship strength and profitability correlate as existing clients are more likely to trust you are charging a fair price and are less likely to “haggle” or argue over the invoice
- Clients with strong relationships pay their bills faster, reducing lockup and improving cash flow
- Better matching of people to projects based on understanding who has strong existing relationships, increasing (and speeding up) the chances of clients instructing you
- Strong relationships improve advocacy, which generates additional revenue via client promotion and referrals
- Happier clients lead to happier employees, improving staff retention
How Can You Measure Relationship Capital?
Understanding who knows who in your firm—and how well—has until recently been incredibly difficult. Perhaps your firm has a CRM system which was supposed to be the solution? However, even if 100% of your contacts were captured within this, it would simply show a list of contacts with little insight into the type or strength of relationship. And studies show that over 60% of information doesn’t make it into your CRM, which therefore doesn’t help. Fortunately, Introhive can automate this for you.
Introducing Introhive: Relationship Insight Automation
Introhive passively collects and enriches all your firm’s contacts, analyses them, maps out an accurate picture of your individual relationships, and scores your business to business relationship capital.
Our machine learning algorithm considers over 25 separate touchpoints to ascertain who knows who and which of your people has the strongest relationships. Relationship capital scores are live and dynamic, allowing you to instantly see which client’s relationships are improving or decreasing, and importantly giving you insight into what factors are contributing to this. We can also map this contact, activity, and relationship data back into your CRM should you wish, saving you time and money on CRM data entry and upkeep. Finally, we will automatically email you this rich insight when required, for example when we see you have an upcoming key client meeting in your diary.
To find out more about how Introhive can help you to understand and leverage your firm’s relationships and assist in relationship capital management, request a demo with us.