The Government Relations function of Corporations

Hello and you're very welcome to this session of communique conversations. Today's guest is a global leader in the fascinating area of government relations. That tricky but vital interconnection between government and business. These are two totally different worlds with very different dynamics, yet there are huge interdependencies. His name is Paul Beyer and he works out of the Hague where where he is managing director of a company called Griq. He helps Fortune 500 companies and other large organizations build the government relations capabilities that help them create and protect significant value. Paul spent 23 years at Shell, first in senior finance roles and later strengthening the professionalism of Shell's industry leading global government relations organization where he helped to establish the backbone of the function as it is today. Through this, and also from working with a broad spectrum of clients in various sectors and jurisdictions, he's accumulated an invaluable set of experiences and insights on how to get the most from a government relations function. I met him earlier in the week and I started by asking him to give an overview of the context in which he works. I'd say what's important to give a bit of background, a bit of context to what I do is the notion of how valuable, how important government is in determining the value of companies. So obviously customers determine most of the value of corporations, but the government is the stakeholder out there that is coming in second as being extremely influential over what the company is actually worth. When you put that together with the fact that CEOs worry for years about in the top five concerns that they have, there's for years been geopolitical uncertainty and over regulation also referring to the behavior of governments, it becomes clear it's an extremely important stakeholder to manage well. And if you then look at what studies show about the quality of the engagements with governments. You see, studies say that only in 7% of the cases are CEOs convinced that there is frequent alignment between the interests of government and the interests of their companies. You also see from studies that CEOs and government relations leaders indicate that of all the processes to engage with external stakeholders, the one that is in place to engage with government is the weakest of all of them. So you can really see that not just because I'm interested in this topic, but that other studies show it's an area where there's room for improvement. Okay, so you're describing this obviously as government relations. So when you look at government relations as a function. Right. So could you define that for us and what it actually does? Yeah, so I Always say it's the corporate diplomatic corps. So they are the representatives, the ambassadors of the corporation vis a vis the governments. That's really what they do. And it means that they have a translation role. They need to translate the interest of business to government and the other way around. So government relations officials will put their ears on the ground, understand what the regulatory developments are, where the political climate is heading, and whether or not that's advantageous to the corporation, and bring that information back into the company so that the company can tweak and adjust their strategy to take note of what's going to happen in the environment or is likely to happen in the environment, or have influence on what's happening in the regulatory environment. So that's where you see the government relations role. Not just be the listener and the translator, but the influencer and the advocate. But given that, why is it such a low priority for CEOs? Well, it's a good question. I think CEOs find it sometimes challenging to explain what they expect from the government relations organization. It's challenging for them. They know what to expect from people in it. There's usually a large teams that deal with cyber threats and making the systems operate that run your business. They know how to deal with HR because they realize that talent is everything. And they know how to recruit, promote, and judge the staff that they hire. And there's lots of those people as well. So you got a big HR department, finance, obviously a traditional group of people of which you have large numbers that they know how to handle and, and they know what to expect of them. But the government relations outfit is populated by people with very different skill sets from those CEOs themselves. CEOs usually have a background in engineering. If we talk about industry and then they become CEO later in life after they've figured out some technical skill and do that really well. But what government relations staff do is relate, influence, advocate, strategize, build relationships and networks, communicate. And those are, I wouldn't say soft skills, but different skills than what CEOs expect to see around them. So they sometimes struggle with explaining what they expect from them. So given your experience of working with government relations functions, what are the main challenges that they're facing now? Well, part of it has to do with the other side of this CEO challenge, which means for government relations leaders getting a seat at the table, being allowed to bring what they can to the table and influence a strategy, it usually requires some sort of crisis, like the pandemic. Right. So government relations leaders really stepped up and Got more airtime from boards, not just CEOs, but boards in general. How to deal with this unpredictable situation and all the rules and limitations that government suddenly created, created and had to create to protect public health. So that is a challenge for the government relations folks vis a vis their clients, their internal clients, so to speak. But what is also a challenge is just their operation, the day to day work. So what happens outside that's relevant for them to understand, it happens faster. There's more political fragmentation usually, except for those countries where we have a dictator. But if I focus on democracies, there's therefore more voices to listen to. They get more amplified by social media, inter special interest groups. So there's an enormous amount of information overload that the government relations folks have to deal with. That's a real challenge for them. And then there's something when you are imagining, imagine you're in that situation that you got to fight for your seat at the table. It's hard for you to identify from all the stuff you get across your desk what is really important for those internal clients to know. Then you're confronted with this notion of, well, how do I improve the capability of my entire team, my organization, to deal with these challenges. And if they then look around them for help, they find IT people that they would ask questions to about, let's say, stakeholder management systems who know nothing about that. These IT people know how to keep all the finance systems in the air because that's much more important. They go to procurement to buy some service and some support to do their work and be able to deal with these operational challenges. But procurement people know how to buy maintenance services and equipment for industry. Maybe they have experience in negotiating contracts with big strategy consulting firms, but not with diplomatic government relations lobby clubs around the world that they might need in one or more capitals to have influence. And so what you see is that these government relations folks really want to step up and improve the way they operate. They don't have a lot of help from within their company. And how are they coping with that? Well, if they can't find someone to help them with that, they'll do what's right in front of them, what's urgent, like anyone would, right? You're going to focus, you know, you focus on the urgent stuff first and probably at the expense of the important stuff. But you got to keep that hamster wheel running. So it's really difficult for them to get out of that dilemma, so to speak. And in your interaction with them, how do you help them so What I do is offer a moment to step back. And it is quite simple. It's a matter of identifying where precisely in which processes do you experience the challenge. Not just you as a government relations leader, but versus what the business wants you to do. That's really important to always keep in mind. When I make an assessment of where the pain points are, I look at how is it today and how should it be. And I evolved the business in that. That's step number one. Once you identify where those gaps are, like for example, the processes or the systems that we talked about earlier, you create a roadmap and you plot on that roadmap how you get from good to great, what the big steps are. And they could relate to systems, but they could relate to many other things. Competency, building of your team. They could relate to the way you do your planning, your measure, results. We might get into that later, but you build that roadmap and then step number three is to help clients make those projects happen, to get them from good to great. But that's pretty much like any department or any function within an organization and how to make it most efficient that it can be. Is there anything in particular around government relations functions that's different, say for instance, to the marketing function or the finance function or anything else? There really is, because when you look at the way finance, it, hr, communications, government relations, and the way they operate, the processes that they use, it's not very structured. You can't automate it very easily. You know, when you're an accountant, you have certain booking processes and they're always the same. When you get the invoice, you book them, you can automate all that stuff. That's much more difficult when you do government relations. So to be able to make sense of a gap analysis like that or produce one in the first place, you need someone who knows what questions to ask. Okay, so what are those questions? Well, I've got 100 of them. Okay, well that's good. So we're not going to go through all of them, but there's a. Let's look at those areas that are, that are probably the priority ones to probe. Yeah, well, the key thing I always do in terms of probing and, or get started with such an assessment is I go to the senior business leaders and I say to them, considering what you want to achieve with your business, what is it that you need more of from your government relations outfit to achieve that or increase the chances of achieving that? And conversely, what is it you need more of to reduce the Risks of not achieving those business objectives. That's. It's a long question, but you can break it up in pieces. And usually from a conversation like that, I get everything I need to identify is in this organization the seniority, the issue in government relations, or is it the number of staff? Or are we not represented in some locations whereas we are in others, or are we hiring too many outsiders versus having our own stuff? Those themes come out from those conversations. Can you give us a typical example of maybe an organization that you've worked with, where you've gone in, seen an issue, and you actually worked your way through it? Well, there was one client who knew that they needed my help because they didn't really have a government relations outfit. They were basically relationships handled by the business leaders. And what business leaders sometimes do, obviously not always, but sometimes do. If they call the government when they have a problem but there's no credit in the bank, the government isn't there to solve your troubles when you need them. No matter how big you are, no matter how many tax dollars you pay, no matter how many people you employ, you might be an important company. But calling a government leader out of the blue to ask for help or for regulation to be stopped without having a relationship, without sharing information about the industry with the government so they can make better decisions. If you don't invest in the relationship, it's very unlikely that you're going to get a hearing when there's a problem. And CEOs or business leaders, they need to run a business. That's their objective. So it's almost always an afterthought when they realize, oh, we got a problem, let's call the government. And in this particular company, where you went and they didn't have a function, they had some sort of a loose arrangement, what did you do to get them up and functioning? Well, first show what it meant that they didn't have this function in the first place. Because you got to create the storyline to convince people to invest in a function like that. It's not obvious. So a list of all the values that were put at risk by the behavior I just described, which was not on purpose or bad. It was just they didn't have the expertise. And taking the expertise, then what's the typical profile of a really good operator in government relations? People that are extremely well connected so they know how to create and maintain relationships and networks. They are people who are extremely good at communicating. I mean, two, listening carefully and advocating in a persuasive way the position that they bring to the table. And the third thing is that they have a very strategic mindset, so they do not get bogged down in one line of argumentation. When they want to achieve a certain objective, they'll have various ways in which they'll try to get to their goal with government, and if they can't, they'll make propositions to the company to adjust their strategy. So creative mind and strategic mindset, the natural inclination can be to go towards ex politicians, former civil servants, or PR people. Is that necessarily the best route to go? Well, you need people with that type of profile if you're entering into a country where you're completely unfamiliar and you don't have a business, and sometimes you need first a relationship with government before you can actually build a business in a situation like that. Perfect solution. There's plenty of people who offer their services for situations like that. But if you ask me what would be a good average profile in a company that has a government relations outfit that runs and contributes day after day, it's probably a mix of people from the business who really understand the drivers of value of a refiner, a refiner, of a chemical company, of a mining company, because, you know, ex diplomats perhaps don't understand that so well. In combination with those, well, networked ex government officials, you see the two work together quite well. Okay, so that's what you do when you're working with people, your clients. You said earlier that really that technology is not part of this. But can technology be part of the solution as well in terms of automating some parts of that, of the approach? Well, what I said was that the work that government relations folks do is not so structured, but there are bits that are and can be structured if you're willing to do so. And there's people, technology companies that have identified that opportunity and developed solutions to address the recurring activities of government relations folks. So for example, there are companies that try track specific regulatory developments and where they are in the process and report that back to you, but only the ones you want to get alerts on. There are companies that allow you to map your stakeholders in a very visual way so you can identify the decision maker at the center of the web. And okay, who do I know around that individual to create a plan, a strategy to get to that decision maker with the right arguments and advocacy strategies. So there are definitely tools out there to help you with that. And if I look at the capability of a government relations outfit, that's always one aspect of it, to look for improvements, processes and tools. But you also have to look at, well, how are we organized and how do we govern the work. That's lens number two, as I call it. You also need to look at competency and the skill set of the staff that do the work. That's the third lens I look at. Very important to be successful and prove your capability is that you have a very articulate plan and you report the results against that plan. Also back to the business, right? Who is your internal client? And of course, a very important point is how do you lead this organization? How do you bring people together and create a culture of collaboration where I can learn what you have done with a very complicated government that doesn't speak between the ministries, because I have the same problem, because it seems to be a local type of function, but there's a lot to share on a global level and between regions as well. So taking those various lenses that they're looking at now, and they've got to do with the strategy, they've got to do with the processes and all that goes with that, when you are working with an organization, how do you manage to keep all that organized, as it were? Well, by recommending per bucket what needs to be done essentially and convincing that those lenses are actually there are the five pillars for any organization. It doesn't matter whether you are trying to improve the value add of, of HR or procurement or your strategy department or your research and development team. You always need to. It's like a business. If you look at improving the way you run your business, these are the five things that you look at. And it's what I say to government relations. Look at your shop as if it's a business and a profit center that has to add value for the cost that you charge. And then these five buckets, if you will, really help you organize your thinking. Yeah. Can you give us some examples of where government relations has really worked on two sides of the table? One, where it's managed to convince government to change policy that suits the company. And on the other side, then, that the company, having got sight of what's coming down the track, for instance, in regulation, and that early warnings from government relations have managed to change the strategy of the company, of the business. Let me start with the first. So, for example, there was a gas field, very concrete example in the United States and gas and oil, they don't really take account of state boundaries when they grow and develop over hundreds of years or millions of years rather. And so this field was positioned underneath a location where three states met the borders of Three states met. And so you could actually drill a hole from any of those states to get to the gas. Now, if you're an oil and gas company and you have the right to develop that gas field, you're in a pretty good position to influence regulation because you can actually ask these states, all three of them, to compete for your plant to be put on their land in terms of tax breaks, investment grants, whether or not the people that you are going to bring into that facility are going to be unionized, and if so, in what way. So there's a lot you can do to convince government to give you the, the benefits that is most attractive. Okay, what do you say to people who are uncomfortable with the fact that government relations people seem to be kind of super lobbyists who are out there using big business versus politicians and government? I'm going to answer that question, but maybe I can first answer the other question you asked, which was about the other side of the table. Yeah, the other side of the table. Because it's not just. Okay, you want me to keep that in mind? Keep that in mind. Okay, tell me about the other side of the table. Go on. Okay. Yeah. So I remember a conversation early on in my career in government relations, in my last job at Shell. And this was a situation where the company had develops engineering wonder. It was a floating LNG vessel, had not been done anywhere in the world. It was basically a floating liquid natural gas vessel that did everything from getting the gas from a deep water well at 2000 meters below sea level or something, pump it up to the ship, purify it, cool it, transfer it into an LNG tanker and then move it to the market. That had never been done in the world. And Shell was very, very keen to show that this was a really good way of operating a deepwater gas field. By the way, the traditional way is you. You build your well locally, you move a pipeline and have all the purification, cooling, storage and transfers done onshore. But this was all offshore on a ship, an entire facility on a ship. And so when the company went to a government and said, this is how we want to develop this field, of course we're going to pay you royalties and taxes and everything that the government should get, the government wasn't interested in that because the leaders in the province said, but I want to show to my people that we're building a facility on land and I want these people to come and have a job. There's no visibility if you're out there hundreds of kilometers from the coast. So then the Question was asked to the business, what would you do? How should the deal look like for you to be indifferent, whether you use your fancy engineering wonder or actually build what the government is asking you to build. And then you can influence this strategy of the company because of course the field must be developed. The company wanted that. Fine. Coming back to my question. Yeah. Which was, what do you say to people who are uncomfortable with the notion that super lobbyists maybe like yourself, right. Are out there trying to influence government for the company's benefit and the shareholders benefit from rather than for the citizens benefit? Yeah. There are conflicting roles of government and business. So that's a fact. I'm not going to change any of that. Let's not be foolish about that. But the first thing is, if you deal with a conflict of interest, that's systemic, that's actually what you're saying. Because people worry about this all the time and they're right to worry about it. You can't not have these conversations that doesn't make any sense. But you need to regulate them. And I would say that the lobbying regulations, they exist, they exist in the uk, they exist in Europe, they exist in America. But they're mostly about registering who you speak to, how long you speak to them, how much money you spend on xyz. What is being discussed isn't shared. So I think what you will see, I can't predict when. What you will see is an increasing demand for more transparency. And I think that's a good thing because I don't think companies should have anything to hide if they make a case. Other people also make a case to government for xyz. So that's one. I think the second thing is, and that doesn't diminish that people can and perhaps should be skeptical about what happens behind closed doors. But I would say when you look at what the people who call themselves or who the public calls lobbyists, what they do, they also engage government very often on their request. Because to make regulation and law ruling or regulating a certain industry, you need to know how that industry operates. So they bring a lot of knowledge and information that allows government to set the rules in an appropriate manner. And of course, as we just mentioned, the people who operate in these roles spent an inordinate amount of time also influencing their colleagues in the business. From a regulatory point of view, obviously regulations are different in different countries, but is there kind of a common framework or maybe a generic framework that applies no matter where you are? Well, what most companies do when they look at the regulatory framework in all countries in which they operate, they determine the standards that should apply globally. Otherwise it becomes very difficult to audit your processes and draw global conclusions. Right. That's often driven by the country in which the shares are listed. So for companies that have their listing in the uk, in America or the Netherlands, anti bribery and corruption regulation is more relevant in their global standards than for companies who either don't have a listing and operate from the Middle east, for example. So different companies have different standards. So when you are in government relations, you tend to speak a lot to your peers in other companies because you share the same industry association, for example, where together you exert influence on government. Well, antitrust, anti competitive rules are extremely important to observe when you share information with your peers. So there's exposure to government relations people when they operate in those environments, which means you need to train them to stay on the right side of the law. Government relations folks also deal a lot with personal information from government leaders. They record that information, they process that information so that the company can decide on who to influence, how to influence that individual, what advocacy strategy to apply to a certain political party. Well, privacy law is applicable to everything you're writing down about those government stakeholders. That's number two. Number three, obviously is your engagement with the government officials themselves, which are regulated by anti bribery and corruption rules. So you need to register when you have a bribe, buy a cup of coffee for someone, and don't go beyond a certain value in your engagement with those people. So those are very important considerations. It means that of all the people, perhaps except for the CEO and the board that work in a large corporate, the group that needs to be most often trained, retrained and obtain their certificates is the government relations outfit to manage these risks. When you look at the less advantaged countries or less developed countries, there is a narrative that says that the larger companies have got a greater sway than perhaps they should have in those countries because the regulation is not as sophisticated as it would be in the more developed countries. Have you seen that in your experience or is it just a matter of that? There needs to be a good collaboration between government and business because they do operate. Government needs business to be successful and business needs government to coexist with them. Well, there's plenty of stories that corroborate what you just said in the news. Right. So it doesn't require me to comment on anything specific other than saying that I think companies are increasingly aware that they have one reputation and that whereas perhaps 10 or 15 years ago you could contain a reputational issue in a particular jurisdiction these days. If you violate the law of the land in Africa, you can be charged in another country like in the Netherlands or in the uk. It's also of course true that separating the shareholder from civil society, from the customer, from the investor, which is of course a very silo mentality. And this is how many companies were thinking of dealing with all these stakeholders as separate stakeholders. You yourself, you invest in stock investors and you buy products and you vote and perhaps you are politically active. So one person does all of those things. And so in the way companies approach their stakeholders, I think they're increasingly seeing that they need to do that in an integrated manner. Getting back to the government affairs, government relations function, the governance of that obviously is an important matter. So obviously that's something that you advise people on. So talk to us a bit about the governance and how you see that and how you see the standard of governance being kept at the level that it should be. Yeah, for that. So let's first establish that government is still primarily a local affair, right? Yeah. A nation has their borders and a government to regulate within those boundaries, that's a local affair. But business isn't or not anymore. So business leaders, they run from headquarters, a complete business across the globe. And many companies have at their board level, divisions with all a global responsibility. Thirty years ago you would at board level have regional directors. Now you have divisional directors with global accountability. That means something for how the business shows up. In a country there will be a general manager for chemicals, there will be a general manager for base chemicals, another one for fine chemicals, another one for pharmaceutical derivatives for those. So you have a chemical company. Right. You have three different general managers in a country, all with their own bottom line and potentially all with a different desire to get something from government. And so increasingly to go to governance, you still want to have one face towards that one government as a corporation. Which means that very often what you see is that locally One of the three actually also puts on the hat of being Mr. Group or Mr. Company to represent the company with one voice towards the government. With all of this activity, it all very intangible. So from a company point of view, and particularly from CEO point of view and the board, how do you measure success? Because it's intangible. So how do you advise, what do you advise companies to do to measure the success of the function, this more soft function that's there? Yeah, it's an interesting question because it's the question I get most asked by government relations people. KPIs measurement metrics. The first thing I need to say is there is no holy grail for this. And the second is you shouldn't try to become too precise in creating metrics for the government relations function. Usually it's a small group of people. We establish that earlier. So if I go and advise on this in a GR outfit, there's usually between 20 and 100 people that we're talking about, you know, that have this desire to report their results. And so what I say to them is, well, first, try to identify and translate your objectives into a dollar number. What is it that you're doing that will add value to the business and how much value is that if you cannot? Because it's sometimes very difficult. Yeah, I need to bring the CEO and the president together four times a year. I don't know what that's worth. Or I'm trying to get the Mexican government to adjust four clauses in their constitution so that an international oil company can actually bid on concessions again, which was forbidden for a very long time. How do you put a number on that? Sometimes it's difficult. But then you take that other objective and create that into something, turn that into something measurable. Yeah, because it has to be seen in terms of return on investment, really, hasn't it? Yeah. And the investment in what, 80, 100 people, you know, it was a big investment. So you're saying the way to tangibilize that is to put a dollar figure on whatever you can, is it? Yeah, correct. And you know the way, it's sometimes very difficult for people to believe that that's possible. And I remember you have the magic sauce for doing that. No, well, I mean, it was my colleague, it wasn't even me, but I remember a colleague in Singapore, he basically said, look, I've got, I don't know, 15 people, but I've got hundreds of priorities I can put them on. So he went to the business and said, look, if you don't give me a dollar number, you're not getting my support. And then people become creative and give you what they think it's worth. If there was one piece of advice that you could give to CEOs or indeed head of function in government relations who are tuned into us today, what would that be? Firstly, I would say when people go through their career in big companies, the moment at which they come in contact with government relations, it's not during their internship or their first years as an engineer or researcher in the lab. It is when they start getting accountability for a P and L for a business. And so that usually takes some time in big corporations before you get given that responsibility. I think it is good for a company to identify their talents that they think they want to develop and have those business talents do a stint in government relations. So they start to learn not just how to deal with customers and running profits and building their brand, but also how to deal with the realities of these stakeholders, including government stakeholders. How the world works is a really good lesson to learn earlier. So I would say CEOs, try to maneuver your high potentials through a stint in this department, if you have it. I would say to government relations leaders who look to improve their capabilities and the value that their unit can add to the business, to treat it as a business, to look at their function as a profit center and identify where they can add more value at lower cost and reduce the risks at the same time and do so in a very transparent way. It is possible. It's hard, but it's possible. And it will safeguard you from random cuts into your team when the company is facing a difficult time, for example. And I've seen that happen, you're very transparent about what you're delivering and what that costs. It's a good mechanism to protect yourself, even if that's all you wanted to do. And then I would say to the government relations professional, they are people that use diplomacy, relationships, language, persuasion. We talked about those skills before. But it is really important for them to succeed more often to speak the language of the business. And so what I always say to people a bit more junior in the government relations outfit is that they should meet the economist in the business who does the numbers and who makes the analysis of whether this investment in this plant or debottlenecking project or acquisition, whether that's a good decision or not. They use valuation methods. And government relations people can actually help these economists understand the value of influencing government to do X, Y, Z, because that has an impact on those models. But those people who do graduates need to get a little bit more comfortable with the numbers. Paul Beyer, thank you very much and really appreciate your time today. Thank you. Thanks again to Paul for that and I hope there have been plenty of valuable inputs and insights that you can take away and apply to your own businesses. If you'd like to set up a government relations function in your own organization from scratch or feel a need to explore how an existing one can be improved. Paul's contact details are on your screen. Screen. So till the next session of Communicate conversations, goodbye and good luck.