Lobbying to stay competitive

Two-thirds of all bills introduced in state legislatures are filed at the request of state or local government agencies, business associations, social activist groups, companies, or individual citizens. Most of those are brought to the legislature by legislative advocates, or lobbyists. Indeed, for businesses, having an advocate at the legislature — both in Washington, D.C. and at the state capitol — is a crucial part of staying competitive, according to Gerry Keim, associate dean, W. P. Carey MBA.

Two-thirds of all bills introduced in state legislatures are filed at the request of state or local government agencies, business associations, social activist groups, companies, or individual citizens. Most of those are brought to the legislature by legislative advocates, or lobbyists. For example, an Illinois-based company with a subsidiary operating in Arizona wanted to relocate its headquarters to the state.

But the move would have had negative tax consequences for the company. So the company hired a legislative advocate to ask a legislator to sponsor a bill that would amend the tax code to protect the subsidiary's tax-advantaged status. Indeed, for businesses, having an advocate at the legislature — both in Washington, D.C. and at the state capitol — is a crucial part of staying competitive.

"It's understood that strategic thinking involves the analysis of threats and opportunities such as competitors' activities, supply chain management, and technological innovation. But the fact is that politics also affect a business's current opportunities and future plans and should be a part of that company's strategic thinking," said Gerry Keim, associate dean, W. P. Carey MBA.

Keim said that some companies try to advance their interests in the political sphere at their competitors' expense. "It's called raising rivals' costs. Companies use the legislative process to make doing business more difficult for their competitors." For example, a new company that built its factories to be environmentally-friendly would lobby the legislature for stricter environmental regulations that would make doing business very expensive for competitors with older, less environmentally-friendly factories.

If the regulations pass, the companies with older factories would be forced to undertake expensive renovations to comply, and that would put the company with environmentally-friendly factories at a competitive advantage. The importance of legislative advocacy was the topic of a recent two-day session at the Arizona State Capitol for students of the W. P. Carey School's Executive MBA program.

The session is part of a core course on business and government relations taught by Keim which also includes four days in Washington, D.C. The purpose of the course, Keim said, "is to give students the ability to think strategically about business in the political environment and to understand how they can participate in public policy decisions that affect their businesses."

How to be an effective legislative advocate

During a panel discussion about the role of legislative advocates in the legislative process, Jeff Kros, legislative director for the Arizona League of Cities and Towns, said that one of the most important qualifications for a successful lobbyist is a desire to be part of the legislative process. Pinal County Attorney Jim Walsh added that an understanding of that process is crucial.

"You really have to understand what the legislators are doing during legislative hearings and especially what the staff is doing. Having good connections with the staff and understanding what their role is and how they fit into whatever project you're going to do is very important," he said. "Oftentimes, what legislators hear comes through their staff," said Karen Peters, director of intergovernmental programs for the city of Phoenix.

So lobbyists need a good relationship with staff members to advance their issues. Over time, Peters said, staff members will come to trust and even rely on lobbyists for information. Kros agreed that personal relationships go a long way. "Personal relationships take the anonymity out of the process," he said. "If you can show how your proposed bill will change people's lives, you're more likely to succeed. Make your issue feel homegrown."

At the heart of good interpersonal relationships is education, said Eileen Klein, vice president of government relations for UnitedHealth Group. "For most of us, whatever our companies or clients are interested in, it really is just a matter of educating — one-on-one educating, committee educating, and spending time developing people's knowledge and expertise on your particular subject area. That's how we're able over time to influence the direction of legislation."

But choosing who to educate is key. To effectively lobby for an issue, Walsh said, it's important to "find a champion for your ideas." "There's usually a fairly obvious go-to person on any particular issue," Walsh said. "Find that person and talk to his or her staff." Rusty Bowers, executive director of the Arizona Rock Products Association and moderator of the panel discussion, added "You have to find a champion with influence over the issue you're trying to advance."

But having one champion — whether a homegrown champion or a professional — isn't enough, said Jack Lunsford, president and CEO of WESTMARC. "Once you've found your champion, go out and find other people to support your cause," he said. Whether those people are Democrats or Republicans shouldn't matter.

"It's all about the math. In Arizona you need 16 votes in the Senate, 31 in the House, and one on the ninth floor in the governor's office. What's important is to build relationships with enough people to pass your bill," Lunsford said. According to Bowers, one of the benefits of having many legislators and staff members to champion an issue is that it will give the issue — and the company behind it — longevity. "It's important to have a long-term presence that outlasts any single person in the legislature," Bowers said.

But convincing legislators — or their staff — to take time to meet can be difficult for lobbyists. Peters stressed the importance of getting the message across quickly. "You have to be able to state your case in writing on a single page," she said. "Or make your case verbally in a one-minute elevator speech." Ideally, of course, a lobbyist will be able to carve out more face time with legislators. "Spend time in between legislative sessions with your target legislators," Peters said.

She suggested using that time to cultivate a relationship and lay the groundwork for the issue. The point, she said, is for legislators to know and understand what is important to the company. Another challenge — one that particularly affects smaller companies — is how to create an effective lobby with limited resources. Walsh said one way to overcome that challenge is to gather a larger group of stakeholders. "Find other people who are not in your group that are interested in the same issue — even if for different reasons."

"Many of the accomplishments of the environmental groups I represented were because we gathered a large group of stakeholders who had influence beyond what my clients had," Walsh said. "Find out what other interests could be lined up with yours. You really have to realize that you may not be able to do it by yourself." And Walsh added that the "less firepower, in the traditional sense, that your organization has, the more creative you'll have to be."

For example, Walsh said, diplomacy can be very important in working with opposing interests. "You have to be aware of your opposition," Walsh said. "It's fairly common now that you go in to speak to a legislator and the legislator will ask 'Well, have you been to talk to Bill Smith, he's representing the guys that don't think this is such a good idea.' And you say, 'No, I haven't.'"

"The legislator will say, 'Well, you better go talk to him because I'm not going to have a fight in my committee. See if you can work something out.' So you've got to figure out the skills of diplomacy and negotiation." Lunsford agreed that creativity and flexibility are important in legislative advocacy, especially for companies with limited resources. Lunsford said that it's important to know when you may not be the best spokesperson for your cause.

"For example," Lunsford said, "We had a senator who really had a problem with Maricopa Community Colleges because of an experience she had as a part-time employee there. As the government relations director for the Maricopa Community Colleges, I couldn't get close to her. But my newly hired associate had been at Phoenix Union High School when the senator was a school board member there. I said, 'You go see the senator.' We have to drop our egos to succeed in legislative advocacy."

Relaying the importance of legislative advocacy to company leaders

On the other side of the legislative advocate's job is convincing company leaders of the importance of legislative advocacy. Jim Norton, government and public affairs director at R & R Partners, said that most large corporations do have sophisticated lobbying efforts. "But some companies aren't as engaged as they should be given the stakes," Norton said. "The importance of legislative advocacy to any given company really depends on what assets that company has at stake," he added.

The depth of a company's lobbying effort, Klein said, often depends on corporate culture. "Each company has to decide how much of its resources it's willing to dedicate to this process. Frankly, the government relations professionals within corporations spend a lot of time working with their leadership and convincing shareholders that lobbying is an important activity that really does contribute to the bottom line," she said.

One of the key roles of government relations professionals, Klein said, is to educate the corporate leadership on how political decisions will influence the company. Ultimately, the effectiveness of an organization's lobbying efforts relies on individual leaders. But the job of a government relations professional is made more difficult by the fact that success in legislative advocacy is often difficult to quantify.

"As government relations professionals, we have to constantly struggle to help our executives understand what we do. We have to break our work down into terms they'll appreciate as leaders so that they'll continue to invest in our area of the business," Peters said. But putting legislative advocacy into terms that an executive will appreciate is difficult, Peters said. "I can't focus on outputs — how many lunches I had with people.

It's ultimately, 'Did I deliver on a rate increase for my Medicaid company or did I not? Did I block legislation that would fundamentally change the small insurance market in Arizona or did I not?'" Lunsford says he communicates regularly with his clients so that they can see the process of legislative advocacy unfolding. "Keeping your clients involved in the process will really make a difference, so that the end isn't a surprise," Lunsford said.

Walsh added that educating the corporate leadership or client group on the potential for success during any given legislative session is important. "Sometimes, just getting a bill introduced is a major achievement," he said. Fortunately, Walsh said, legislative gains tend to be cumulative, so if the bill only got as far as introduction this session, next session it may well get farther.

Despite the challenges that a legislative advocate faces, the job is an extremely important one — especially in highly competitive environments, where a company's competitors will be at the capitol advocating for legislation that upholds their interests and harms their rivals'. "Often, successful legislative advocacy is an important key to a competitive advantage," notes Keim.

Bottom line for effective advocacy:

• Understand the legislative process
• Develop strong relationships with the legislators and their staff
• Educate the legislators and their staff about the issues that are important to your company
• Find legislators with relevant influence to champion your cause
• Organize with other stakeholders interested in your issue
• Know when you're not the best spokesperson for the issue
• Educate your company's leaders and employees on how political issues will affect the company's bottom line
• Educate your leaders about the potential for success during any given legislative session
• Communicate with your leaders regularly about the progress of your lobbying