As the saying goes, if it’s not measured, it’s not truly managed. Measurement is said to be the first step to improvement. If you can’t measure something, you can’t understand it; if you can’t understand it, you can’t control it; if you can’t control it, you can’t improve it. Public Affairs teams and their advisers must add measurable value to the organisations they represent, or face the consequences.
In preparing a recent presentation to the European Centre for Public Affairs (ECPA) on how to measure public affairs, I found surprisingly little literature on this subject, with the notable exception of ‘Measuring and Communicating the Value of Public Affairs’ from the Public Affairs Council (PAC).
The majority of published work highlights the money at stake. As McKinsey points out in its study ‘Organizing the government-affairs function for impact’:
“The business value at stake from government and regulatory intervention is huge: about 30 percent of earnings for companies in most industries… Translating those percentages into euros can yield eye-popping results: one European utility found that the ongoing value at stake from regulation was €1.5 billion, or about €30 million for every employee involved in handling the company’s regulatory affairs.”
Hence, there has been the tendency of public affairs, in-house and externally, to define their value in terms of how many millions of euros they saved or gained through influencing legislation. However, given the glacial pace at which legislation can move sometimes, it can be difficult for an organisation to put a specific monetary value to its lobbying activity during any given year. Moreover, many factors and stakeholders outside an organisation will influence the final shape of legislation.
There are many challenges in creating a measurement system for public affairs which by its very nature is an inexact science. Indeed the time taken to administer a measurement system must be proportional to the exercise. Some companies have tried and failed to instigate reporting systems that were overly complex or rigid, for example one in-house EU affairs head told me that monthly reporting proved too onerous but when replaced by a quarterly cycle everybody was happy.
Rarely will a political breakthrough happen in a single meeting, rather more often success comes after many tactical outputs of an entire public affairs team working with colleagues across the company, and allies in trade associations, coalitions and other groups. Hence, it is very useful and sometimes easier to measure outputs than outcomes. Indeed in talking to public affairs staff, personal performance reviews and annual bonuses are often linked to output measures like how many meetings were held with MPs, how many briefing documents were written and delivered etc. however, let us turn our attention to the all-important outcome measures.
One senior corporate affairs executive told me: “The most important measurements have to link to your business which pays your salary. The priorities of your team have to deliver value to the business. Value is not just defined by selling products but it is also about reputation, relationships with customers, corporate and brand reputation and the value we bring to society which are all measures of public affairs success.”
The 10 Key Measures of Corporate Public Affairs Success
Having consulted with a number of Fortune 500 companies on this subject, I propose the following ten key measures for public affairs success:
- LICENCE/FREEDOM TO OPERATE. Governments are the key stakeholders in deciding a business’ licence to operate, affecting every sector from vaping to crop protection. Hence staying in business should be the Number 1 measure of the success of any public affairs strategy. Any restrictions on the freedom to operate will result in a measurable loss of business.
- OBJECTIVES ACHIEVED VERSUS PLAN. To achieve public affairs objectives requires a plan which should be linked to the company’s objectives and strategic plan. Most public affairs teams produce annual reports evaluating success at the end of the year not least to justify budget, headcount and annual bonuses. Such plans should be outcome focussed and cover the output/activities required to achieve overall objectives.
- AVOID COSTS AND POLITICAL RISKS. New regulation can be costly. For instance the chemical sector originally estimated the cost of the draft EU chemical registration laws on REACH would cost up to €30 billion, although the final figure is much lower as discussed below. Political risk is also costly – witness the fall in investment in the UK since the Brexit referendum. According to a 2019 report by S&P Global Ratings, Brexit had cost the British economy £66bn in just under three years. Successful public affairs can shape regulation to minimize the risks – examples abound of companies successfully navigating issues as complex as trade and Brexit with clear cost benefits. It is essential for public affairs teams to document concrete cases where their engagement saved their companies specific monetary amounts through legislative/policy wins.
- LEVERAGE PUBLIC AFFAIRS OPPORTUNITIES. In highly regulated industries, government can be the key influencer in helping to grow corporate revenue, and in others like IT and pharma, government is actually the customer. So whether showing the benefits of cloud computing to Members of Parliament or raising awareness of the burden of specific diseases, public affairs can create growth opportunities for business. Effective public affairs can also support public procurement activities, secure government subsidies and access research programmes. Moreover, it is interesting to see how public affairs threats evolve over the longer term to become opportunities. For instance, the European Chemical Industry Council Cefic now argues that if chemical firms around the world buy into a REACH-style system, which requires safety data on individual substances, then European chemical firms will be able to show that their products are among the safest and should face fewer barriers to trade. Incidentally, in 2019 the European Commission published an impact assessment which showed REACH cost €3 billion in the decade since it was introduced, which is only one tenth of some original estimates. As with countering threats, it is essential for public affairs teams to define specific monetary amounts they helped gain their company through identifying and leveraging opportunities.
- ADD VALUE TO CORPORATE BUSINESS DRIVERS. Business drivers are the key inputs and activities that drive financial results and growth, which vary between companies and sectors. Matching corporate business drivers such as innovation or sustainability with a government’s agenda can add to the bottom line. For example, government support has propelled the value of renewable energies, such as wind and solar, due to a shared agenda with business on combating climate change which can be measured in euros.
- GROW COMPANY PA FUNCTIONAL CAPABILITY. Given the financial importance of regulation noted by McKinsey and others, it is essential to grow a company’s public affairs capability to influence that regulation. In Europe, public affairs capabilities are needed not just in Brussels but in key member states and business markets where a company operates. While there is a correlation between capability and budget/headcount, there are many actions that can be undertaken at relatively low cost, such as knowledge-sharing sessions with colleagues by video conference and intranet sites. In the same way that companies have growth plans they also need public affairs growth plans that can measure capability in terms of people, skills, knowledge, resources and coverage.
- OUTPERFORM COMPETITORS THROUGH PUBLIC AFFAIRS LEADERSHIP. Leadership in a public affairs context can take many forms, such as investing in ground-breaking thought leadership and research, which may demonstrate the merits of pursuing one or other policy directions. Also one company measures how many leadership positions they have across Europe in key trade associations, with different points from committee chairs up to presidency. Many companies have learned the hard way that they ignore governments at their peril, whether through anti-trust fines or adverse legislation. Proactive public affairs strategies can secure commercial advantage through product preference, state subsidies and other forms of support. Nowhere is this seen more clearly than the fight for public affairs leadership between rival American, Chinese and European companies over the standards set by regulators for the digital economy.
- INTERNAL STAKEHOLDER SATISFACTION. Successful public affairs is best achieved with related corporate functions such as Legal, Regulatory Affairs and Communications. Indeed, when public affairs teams do not report directly into the CEO they may report into these functions so knowing what your bosses or peers think is important. Opinion surveys and interviews with annual report cards can be useful measures in this regard.
- EXTERNAL STAKEHOLDER REPUTATION. When a company exceeds the expectations of its stakeholders it will tend to have a positive reputation, and conversely a negative reputation when it fails to meet their expectations. Sophisticated polling techniques allow companies to measure their reputations with policy-makers and their key influencers at any given moment, and over time for benchmarking. Often these will yield surprising results, for instance some years ago I helped the pharmaceutical industry understand that contrary to their belief, most European policy-makers like their sector because they promote good health, combat disease and save lives.
- RETURN ON INVESTMENT (ROI). As the Public Affairs Council notes in their excellent paper to calculate ROI on Public Affairs: “Compute total gain (cost savings plus revenue created), subtract the fully loaded cost of public affairs and divide the total by the cost. If accurate data exist to support costs reduced/avoided and revenue created, then this method can be extremely useful. Senior management understands ROI. Much of the time, however, public affairs teams lack data to prove ROI.”
How Companies Measure Success of their Associations
On balance most trade associations add real measurable value to the companies they represent. In recent research on ‘How Companies Measure Success of their Associations’, I found that almost half of respondents believe that their European associations have saved their companies over €50 million in the last 10 years by avoiding regulatory and policy threats. Also, almost 1 in 5 respondents believe that their European associations have gained their companies over €50 million in the last 10 years through creating new opportunities including EU funding and intellectual property protection.
I have looked at this subject in my reports on ‘Key Success Factors for European Associations’ and ‘High Performance Secretariats’ and other studies. For instance I asked hundreds of corporate executives on how to measure an association’s public policy activities and objectives, reflected in the chart below:
Which would you consider as the most effective way for an association to measure its public policy activities and objectives?
According to my research everybody agrees that in terms of influencing final legislation, “getting in there early” is vital. Being consulted before legislation is even drafted is the greatest measure of successful public affairs. For instance, EU legislation is much easier to influence when it is an idea in the head of a Commission official, than when the European Parliament and Council of Ministers are debating a written proposal. One top lobbyist even told me that the ultimate measure is when you put the thought of drafting a new piece of legislation into the mind of a legislator.
This important observation has an important consequence for hiring public affairs people. As I have discovered over many years as a headhunter, personality is the key success factor for recruiting successful advocates. People want to listen to influential personalities and follow what they say. Knowledge and skills can be acquired and strengthened but personality is deep-rooted. For lobbyists to secure a place in the room having a trusted conversation with policy-makers requires special personality traits. In my experience people who are able to bring about change at a very high level commonly share three important personality attributes; trustworthiness; proactivity and resilience.