This week's blog is by Public Affairs Council Vice President Sheree Anne Kelly.
You can reach Sheree Anne at skelly@pac.org.

May 11, 2011

I wouldn't feel comfortable if our head of IT asked me to disassemble my computer, rebuild it and then go back to using it. I bet I'd enjoy the process of seeing what's actually inside my PC, and I might even learn something. But how likely is it that my computer would function properly after such an exercise? Odds are pretty slim. When it comes to motherboards, I've had no training. I'm flying blind.

Many global companies are also flying blind when it comes to managing their in-country public affairs activities. According to the Public Affairs Council's 2010-2011 International Public Affairs Benchmarking Report, most country managers (business heads in a particular host country) lack consistent public affairs training. Yet they are often responsible for the public affairs function.

The survey examines how firms organize, staff and resource global public affairs. It also looks at common decision-making processes, activities, challenges and trends in the field. In addition, respondents rated their ability to have an impact on public policy in markets such as China, the EU, Argentina, India and South Korea. Copies of the report can be ordered on the Council's website at www.pac.org.

Sixty-one percent said their company's in-country business leaders manage both operational and public affairs activities. This makes sense because of the natural synergy between business interests and public affairs objectives. In fact, respondents said more than 12 percent of the average international public affairs budget is allocated for business development.

What doesn't make sense is the lack of training provided to these business executives so they know how to engage political leaders and confront public policy challenges. Fewer than 20 percent of companies provide regular (at least annual) training on company or industry-specific business issues. Advocacy skill training is regularly offered by only 18 percent of companies. Education programs on the inner workings of government and national decision-making processes are also rare - only 14 percent provide this type of training. Coalition-building skills are taught and reviewed even less frequently (by only 10 percent of companies).

This is not to say that companies forego training altogether. Anti-corruption training? That's a priority for many organizations. Seventy-five percent provide instruction at least once a year. Ethics training is also offered on a regular basis by 71 percent of respondents. Those numbers ought to be 100 percent, however. And public affairs-specific guidance is provided regularly in less than one quarter of all companies.

Why is there a dearth of training? That's a good question, especially when you review other study results. When asked to identify key political challenges in the international markets where they operate, respondents ranked "managing legislative and regulatory processes in host countries" the most difficult. If that's the case, then it would stand to reason that firms would want to ensure the people charged with managing public affairs activities had the necessary political knowledge and tools to do their jobs.

In addition, preparing country managers well has become critical because of the growing global cynicism about the role of corporations in society.  Edelman's 2011 Trust Barometer surveyed thought-leaders around the world to see if they trusted business to do what's right. In the United States, a dismal 46 percent gave a positive response. That's down eight percent from last year. Major countries with low levels of trust in business also include France, the UK and Russia.

Other studies have confirmed that the public affairs function is becoming more important than ever. A study last year by McKinsey & Company showed that government is more likely to affect a business' economic value than any other group except customers. Nearly two-thirds said they believe government's role in their industry will increase in the next three to five years.

If you want to see evidence of what happens when corporate employees approach global public affairs the wrong way, just read the headlines. In India, the giant conglomerate Tata Group may be implicated in a high-profile scandal, reports The Financial Times. Parliamentary panels are probing allegations that the company's business executives practiced graft and other misconduct when dealing with government officials. In China last year, four executives from Rio Tinto, an Australian mining company, were sentenced to prison for bribery and stealing commercial secrets. CNN called this incident "a wake-up call for foreign firms in China."

Could more training have helped these companies do the right thing? I would hope so. When you consider the cost of a negative public policy outcome, a missed opportunity to open a new market, and - most of all - the damage caused by a major ethics scandal, it's short-sighted not to equip executives with the information they need to be effective.

The risks are simply too great to fly blind.