Changing the Rules
Gerry
Keim's research shows there's good reason for companies to get politically
involved
Microsoft ignored the shaping of governmental policy until it found itself being investigated for possible anti-trust violations.
It’s an important lesson, says Ivey professor Gerry Keim, who looks at how companies make themselves more effective participants in the pubic policy process. Government decisions affect so many corporate issues, like taxation, environmental standards, intellectual property rights, human resource management, and trade policy. Many of these issues are not followed closely by the general public, but even a small change to a minor regulation can create a competitive advantage for a company. “Forward-looking executives are thinking today about how to compete in the political arena in the same way they think about how to compete to deliver products or services, or to attract resources to their organization,” says Keim.
Keim, who recently moved to Ivey from Texas A&M University, has studied how business affects political outcomes in both the United States and Europe. He has found that companies tend to act more independently in the United States, whereas in Europe they usually join large umbrella organizations. Now he’s beginning to gather data on how companies influence the public policy process in Canada. “In the short time I’ve been here I’ve noticed quite a bit of ‘retail politics’. Canadians are urged to become active and write letters and make phone calls on issues ranging from airline and bank mergers to government support of hockey.”
To gain a competitive advantage in the public arena, Keim says it’s important to develop a strategy that other companies can’t duplicate. Hiring good lobbyists and making financial contributions are tactics your competitors can copy. The best strategy, he says, is to get your employees involved in the political arena, a process that he describes as “grassroots feedback.”
Dupont, the chemical giant, is a good example. In the 70s, while other chemical companies were fighting the growing environmental movement, Dupont was encouraging its managers to become members of groups such as the Sierra Club and the National Wildlife Federation. As a result, Dupont was quick to see what was coming and develop products that were environmentally friendly. One such product was a substitute for freon, the chloroflourocarbon found in air conditioners. When it became clear that chloroflourocarbons were depleting the ozone layer, Dupont joined the environmental groups in advocating stricter standards.
Another example is MCI, the long distance telephone company, which was successful in lobbying against the monopoly of AT&T on long distance telephone service. “This is an example where the only corporate strategy was a political one,” says Keim. “MCI worked for a number of years to influence legislators and regulators and key opinion leaders to ultimately change the rules of the game, enabling it to become a competitor.”
Although some forward-looking firms are beginning to see the value of becoming players in the political process, Keim’s research shows that most companies have difficulty doing it effectively. The key, he says, is education. Employees have to understand, first and foremost, that political decisions are important to the success of the company. The second thing for employees to understand is how political decisions are made, and that a small number of people can actually make a difference.
When mobilizing employees, it’s important that management allow them to make up their own minds. Keim’s research shows that employees want to be sure they’re getting the whole story. For example, when he surveyed employees of a pharmaceutical company that was concerned with the issue of drug pricing, he found that they wanted to know how senior citizens felt. “Employees tend to be very suspicious of what they’re told by top management,” says Keim. “The best way to convince them is to let them hear what other people have to say.”
This sometimes results in employees taking contrary opinions, but that’s not necessarily a bad thing. He cites the example of ARCO, a large United States oil company with a reputation for being environmentally sensitive. The company has recently applied for drilling rights in the Alaskan National Wildlife Refuge. In its efforts to mobilize its employees, company management shared a lot of information about what other groups had to say. As a result not every single employee who is active on the issue takes the ARCO position. “But by not twisting arms,” says Keim, “ARCO has gained more credibility in its dealings with members of Congress.”
Giving your employees the freedom to come to
an informed opinion is a kind of reality check, says Keim. “If you can’t
convince your own employees on the worthiness of being active on an issue, then
who can you convince?”
On the edgeGerry
Keim is testing the idea that managers who make decisions
consensually are more entrepreneurial. Gerry
Keim sees a company as a sphere, with top management at the core, and
its employees on the edges. This notion is central to his current
research on how to foster entrepreneurial activity in existing
corporations. Entrepreneurship
is a three-step process, says Keim: discovery, evaluation, and
implementation. He believes that discovery happens among people who
are closest to the edges of the business. “If you accept that change
occurs as a result of what competitors and suppliers and customers and
regulators are doing, and then ask yourself who in the organization is
most likely to discover new ways to create value or reduce costs, I
think the answer is fairly obvious. It’s the people at the edges of
the organization.” One
of the obstacles to entrepreneurial success is what Keim describes as
‘arrogance of hierarchy.’ The higher people are in the
organization, the more arrogant they sometimes become. “They believe
that they have most of the good information, and therefore should have
most of the good ideas.” In
fact, says Keim, people in top management are often the least likely
to discover new opportunities because they’re the furthest away from
the vital exchange of information that’s taking place at the edges
of the corporate sphere.
When they accept this idea, they more readily adopt an attitude
of ‘intellectual humility.’ “If you’re a senior officer in the
company, and an employee comes up with a good idea, you’re more
likely to accept it if you understand that the employee, not you, is
the one who has access to the good information,” he says. “You’re
role is to evaluate these opportunities, because you’re the one who
has a more strategic view of the firm and know what its core
competencies are.” How
do companies encourage employees to convert information into
opportunities? Keim gives
the example of Charles Koch, the CEO of Koch Industries, a very large,
privately owned United States energy company. Koch tells his employees: “I want you to come to work
every day, and challenge what we do. When you see a better way to do
something, we want to know about it, because we want to discover the
ways to increase value or reduce cost before anybody else does.” It’s
also important to address corporate issues such as incentives,
evaluation, and education, says Keim.
“If a company wants to empower its employees, but doesn’t
change the type of people it selects and the way they are trained, and
doesn’t change the reward and control systems, how successful will
it be? In six months or a year after the consultants are gone, senior
management will find that the corporation hasn’t changed at all.” Keim is
currently working with a colleague from Austria, who has found in his
research that managers from different cultures tend to make decisions
in different ways. In their research, they plan to conduct surveys in
a large company to compare how managers’ decisions fit on a
continuum from autocratic to consensual. “Our hypothesis will be
that the people who are more consensual in their decision-making style
are probably those who tend to be more entrepreneurial.” |