Walk the Line: Government & Regulatory Affairs in a Changing Landscape

Chapter 1

Operation Engagement

A constant on the corporate agenda

The modern world is one of persistent change. The rapid rate of digital innovation, a fluctuating political landscape and an economic climate of uncertainty have all combined to create the perfect storm for businesses looking to maintain success and deliver profit. As a result, government and regulatory affairs has seen a rapid rise up the agenda in terms of its relevance and strategic consideration at executive and board level.

This is a trend that since June 2016 has only been magnified by the UK’s decision to leave the European Union: the more political background noise, the greater the need for skilled leaders to tread the path between business, government and regulators to provide a translation service for each side.

Over recent years, intervention in the way business is done has changed almost beyond recognition, argued many of our interviewees for this report. This intervention has much greater power to impact the way in which a business is shaped and is now a clear priority for business leaders. While government affairs, regulatory and policymaking issues have always been embedded into strategy, particularly for big businesses, they are now absolutely recognised as organisational priorities. Indeed, everything a large business in the UK does is underpinned by regulation: ‘it’s fair to say that [government affairs and regulation] are front and centre, whether named or not, both in terms of the strategic and the day-to-day perspectives’.

Leaders in this space face a challenging path at present then. They must think proactively and work alongside government and regulators to help steer them towards the policy environment in which their organisation can best survive, with the ‘recognition that there’s a serious risk of dramatic regulatory intervention that could change the shape of the business’. Crucially, they must continue to operate as go-betweens, conveying messages from business to policymakers and regulatory bodies and vice versa, and ensuring buy-in from both parties.

Keeping the board on board

A vital part of guaranteeing that government and regulatory affairs do not become a strategic afterthought is to ensure that senior leaders – both executive and non-executive – recognise their importance and in particular their ability to add value.

With the political atmosphere less predictable than ever before, there was a general agreement amongst those we spoke to that engagement with public affairs teams is greater than ever before both in terms of the board and the senior executive team: ‘there is a genuine interest from the CEO down – keen to look to us and learn from us’.

While board members naturally maintain a degree of separation from delivering on strategy, there is a strong sense that they must be invested in strategic issues, particularly when it is something that requires compliance with legally binding regulation or policy. If the function of a board is to help ensure the future viability of a company by guiding its strategic direction, then ensuring that non-executive directors are engaged with and invested in matters of public affairs is absolutely vital.

It was clear from our conversations that many recognise the fundamental importance of these issues: ‘I can’t think of a board or management team agenda without a significant regulation or government affairs issue towards the top of the agenda’. In a world in which the only thing that is certain is uncertainty, being tapped into the thinking both of government and regulators plays a crucial role in adapting strategic direction to maximise productivity. There is a desire from business leadership to look around the corner to understand what the potential legislative and regulatory developments are and what kind of scenarios that could lead to: ‘they need to consider what the best response would be to avoid the worst-case scenarios’.

However, it was repeatedly opined that the real and urgent need is for businesses to be looking far enough ahead. Indeed, many highlighted that long-term horizon scanning isn’t nearly common enough: ‘the strategic horizon of our organisation tends to be 18 months to three years – pretty much the tenure of a CEO’. In times of political fluidity, party politics and principals can fluctuate rapidly over unprecedentedly short time periods, therefore there is a greater need than ever before for businesses to be monitoring the horizon. Business leaders in this space need to have the confidence to push their board and executive leadership teams to think more creatively to ensure they are effectively planning for the long-term success of their business, regardless of the political hurdles that may be placed before them.

Is everyone listening?

While there is a general acknowledgement that government and regulatory affairs have moved rapidly upward in terms of their strategic importance over recent years, there is still work to be done to ensure that senior leadership in businesses is really listening. There is a careful balance to be struck to ensure that leadership teams – both executive and non-executive – are kept abreast of key developments in policymaking and political positions, but that simultaneously they aren’t bogged down in the day-to-day workings of corporate communications teams: ‘what our team really wants to know is what our strategy is for delivering outcomes. They don’t want to know how we’re going about it, they just need the headlines’.

Without this element of editing, the ins and outs of departmental politics and regulatory debate could easily become stale for those without a good depth of understanding. It is, essentially, about distilling the information into easily digestible chunks that allow leadership teams to engage with the key points without becoming overwhelmed or distracted.

There is also work to do to ensure that the individual priorities of different parts of large organisations are aligned in their objectives and that they know how changes to legislature or regulation could impact the way in which they work, and the potential success, or indeed otherwise, of their endeavours. There was a recognition that ‘it is fundamental to understand people’s agendas from a personal perspective to secure their buy-in’.

The proof is in the pudding

One of the crucial ways to ensure buy-in to public affairs work is by creating tangible links between this and the overarching strategic aims of the business: ‘we associate what we’re saying very closely with the commercial priorities of the business’. This is something that many of our interviewees highlighted as a key learning from their role: if you are able to prove that your job has a real-world impact on the bottom line, even a leader with little experience in your field will struggle to deny its worth and therefore its relevance.

Measurement and data collection are becoming more sophisticated and more tangible – whether that be in terms of media reach, tonality, insight into digital reach or data about corporate or commercial value. The data points available are growing ever-more refined and are therefore invaluable tools through which to demonstrate the impact of work around government and regulatory affairs.

Significantly, leaders in this space also appear to be developing their ability to use their influence internally as well as externally. Indeed, often senior leaders in government affairs or regulatory roles are seen as valuable resources into which companies should tap into frequently: ‘I’m actively sought out by the executive team on a regular basis – if I need an audience, I can have an audience’. They are increasingly able to position themselves as authorities to whom sector leaders turn in times of insecurity in an attempt to plot a route forward.

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Chapter 1: Insights

• Government and regulatory affairs have seen a rapid rise in importance as a result of unprecedented change to the UK’s political climate.
• The function is attracting greater interest around the board table, and rightly so. The issues teams seek to address have the potential to have a considerable impact on a company’s bottom line and often concern matters of legal compliance. There is a real and tangible strategic impact.
• There is a calling for greater consideration of long-term horizon planning from both the executive and board teams to ensure the survival of business in the UK: all too often there is a reactionary approach.
• It is vital that the correct mechanisms are in place to ensure that public affairs leaders can demonstrate exactly where they and their teams can add value and influence the policymaking agenda

Chapter 2

The Corporate Diplomat

As the operational priority granted to government affairs and regulation functions continues to grow, those leading in these fields are finding the scope of their jobs increasingly diverse. The role is no longer just about reactively managing day-to-day issues (of which there are increasing numbers), there is also a huge need to give strategic insight into where the world might be headed, what the drivers of that are and what the business’ options to play a part in that might be.

The most successful leaders in this space must, then, be experts in a whole range of fields. They must have an eye not only on the political environment and the public’s political mood, but also on the economic direction of the country, the impact of consumer opinion and spending patterns, the internal politics of their business, and so much more.

Strategy over schmoozing

Government affairs is, now more than ever, focused on adding value to the strategic direction in which the organisation wants to head. Those driving the most successful teams forward can no longer rely on apparently knowing the right people and making connections, as some suggested it was in years gone by.

So often preconceptions of these roles focus around the ‘interesting’ or ‘high-profile’ elements: the networking, the wining and dining, turning up to political events or being connected to the latest person in power. These are no doubt important in terms of the connections that can be made, but they ultimately cannot deliver the greatest value to an organisation. People change externally – there is a seemingly endless churn in the upper echelons of British politics – but business problems fundamentally don’t.

Being able to deliver real added value to an organisation is reliant on having a firm grasp on the business’ overall strategic direction and knowing inside out what its priorities are for the delivery of that strategy. As a business grows, often this becomes more and more difficult to pinpoint. Public affairs leaders must ensure that they have lines into the correct people within the business who are able to help them refine exactly where the company wishes to head, and the steps that can be taken to achieve that. As one interviewee put it: ‘if you don’t have a hand in making the bullet, you stand much less chance of knowing how to fire the gun’.

Significantly, modern-day government and regulatory affairs professionals are a world away from the stereotypical connotations of a smooth-talking political schmoozer. As we will explore further in Chapter 3, the profession has become substantially more technical, requiring leaders to have broad economic and data analysis skills alongside the ability to communicate in a succinct and engaging manner. Those working in this space need to work hard to prove their worth and indeed the business case for their trade.

A boost from Brexit?

There are differing opinions over the extent to which issues of government affairs have been pushed up the agenda by the current political climate. While many of our interviewees suggested that ‘times have changed, and the political agenda has moved on – our roles are taking a greater stage, it’s a non-negotiable part of a company’s reputation’, others argued that they didn’t think the change has been so significant as all that, rather it has been a degree of emphasis: ‘it’s easy to say yes, but I think it’s just been amplified more because of the current political landscape’.

For many sectors, Brexit is by no means the business priority that is most pressing, however since the 2016 referendum, many have found that government is operating on a much narrower bandwidth, with markedly less capacity to consider policymaking outside of the UK’s exit from the European Union. For many, this has meant that there has been a real lack of direction in terms of the policymaking agenda.

One thing all our interviewees agreed on is that there is a real drive from UK business to return to more domestic issues, with individuals citing themes such as technology, data, consumer expectations and employment practices as issues that ranked further up than Brexit for their business.

Business as usual is good for business

A lack of consistency or confidence in business presents a difficult position for the business, its employees, its customers, and for investors. It is vital that business leaders can push through political uncertainty to create strategies that allow them to continue to ensure the success of their companies, particularly through turbulent times. After all, while the mood in government and with regulators may change, the primary ambitions for most companies will remain relatively stalwart.

Big businesses in the UK are, more often than not, reliant on global markets to continue to compete and ensure their ongoing success. As such, there is a real need for public affairs professionals to step in and ‘hold feet to the fire’ at times where issues outside of the day-to-day domestic agenda become overwhelming. Business in the UK cannot be held back by gaps in policymaking, or the economy on a much broader scale will begin to suffer.

And it is here that the relationship businesses hold with regulators and government truly comes into play. It is a vital element in helping to ensure that businesses can continue to thrive and evolve within the parameters of an economically and politically stable environment.

There are, however, others who argue that policymaking in the UK had, prior to the Brexit vote, reached unprecedented levels, to the point where business often struggled to operate in a constantly changing environment. For these individuals, the relative lack of policy ‘churn’ since 2016 has meant that despite insecurity about the future of the UK’s relationship with the EU, businesses have been operating in a more stable environment than they have been used to. These individuals argue that there has been less need to adapt to new policy or appease regulators and therefore businesses have been able to focus on other areas in need of attention.

Whatever a business’ belief about the state of policymaking in the UK, one thing is clear: the key to success lies in the relationship with regulatory bodies and government. Without a solid and reciprocal relationship here, there is a sense that you may as well be shouting into a void.

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Chapter 2: Insights

• Government and regulatory affairs teams must be experts in distilling mood and showing exactly where they can add not just political, but business and economic value, by developing an in-depth understanding of business priorities.
• Schmoozing days are a thing of the past. There needs to be a much more professional function for these teams that enable them to understand the data and legal implications, whilst also having the capacity to communicate well to demonstrate impact.
• Brexit is just taking up bandwidth rather than being a strategic priority for the majority of businesses.
• However, the policymaking churn has dried up somewhat in past three years, which does offer positive opportunities to look at other priorities within the organisation.

Chapter 3

The Business of Engagement

A relationship of good faith

It perhaps goes without saying that relationship-building is pivotal to being successful in this space. The relationship between business and policymaker, regulator or government must be one of reciprocal good faith, built and developed both proactively and reactively to ensure that when issues arise they can be handled in a measured way: ‘you’ve got to build relationships based on trust and mutual understanding in peace time – those relationships shouldn’t be there to fire fight’.

For many of our interviewees, this was about knowing when to pull punches and when to refuse to yield. Indeed, often there is a healthy level of challenge required between the two functions: ‘having a good relationship is not the same as seeing eye to eye all the time’. This was an element of the relationship that a number of those to whom we spoke highlighted as an area in which there is work still to do: ‘In the past we perhaps tended to be a little apologetic. We have to be bolder and sometimes say “this won’t work – you need to bear this in mind”.’

As we have previously discussed, despite the turbulent political landscape, businesses must continue to serve their customers, and therefore must be able to adapt to the times in which they find themselves: ‘we have to operate in the political environment in which we operate – we have to crack on and be practical’. For many, this means working with government and regulators in a different capacity to that which has gone before. The role of a leader in this space is often to act as a mediator, moving between business and policymakers to offer a ‘translation service’ between the two: ‘We may offer a business opinion, but that might not resonate with politicians. We need to do the translation to show if you go ahead with that, this will be the impact’. The two functions often operate from very different standpoints, and there is a real need for government and regulatory affairs teams to draw a line between the two in an attempt to align targets and help shape policy that works for both sides.

In the face of increased scrutiny, both from media and from the public, there is a real need for regulators to demonstrate that they are acting in the best interest of the consumer or customer, not of business. Where there was previously a ‘cooperative and collaborative relationship with industry, working to the same goals’, there is now a sense that regulators must be autonomous from those they regulate.

The digital revolution has made the relationship between the regulator and regulated still more challenging. Real-time data is available to regulators and the Government: they can monitor social media for example to establish what the changing public appetite for regulation is and amend the way in which they operate based on public perception.

Brave new world

Government in the UK is facing a time of enormous change and upheaval. With a hung parliament, and no sign of an overwhelming majority on the horizon, public affairs professionals are having to work harder to be more all-encompassing than previously. Indeed, many of our contributors highlighted that ‘the role is changing as a result of the new context in which we work’. It is becoming much more politicised, and there is a real need for leaders in this area to think more closely about the detail of politics, ‘the dynamics of constituents, the party’.

One key area of political engagement that has changed significantly in recent years is the need to spend increased amounts of time developing relationships with the opposition. Indeed, one interviewee stated that ‘30 per cent of our engagement is now with the Labour party’. Traditional party differentiators are increasingly breaking down, with the status of the Conservatives as the ‘party of business’ beginning to be called into question, and Labour’s position as ‘not constitutionally very pro-business’ much hazier. As a consequence, government and regulatory affairs teams are having to spend greater time ensuring they have developed strong and lasting relationships across party lines.

British politics in the modern day is ‘a very nuanced world with lots of different drivers’, requiring leaders in government affairs to be more multi-faceted and adaptable than ever before. The breadth of the work required has also increased enormously for businesses that are ‘playing across wide government agendas, including devolved administrations, metro mayors and so on’. The regions have never been more powerful, or indeed more complex, and there is a real need to engage across the entire mix to truly ensure success for large businesses operating in the UK.

Amplifying the voice of industry: the role of trade bodies

Many of those to whom we spoke made a point of highlighting the importance of trade associations: ‘we obviously do a lot of dialogue ourselves, but they’re really crucial for many of our conversations’. To help put this role into context, we therefore chose to speak to a number of people who work in government affairs or regulatory posts within trade associations about the part they play as conduit between business and policymakers.

This role is twofold: it is ‘both defensive in terms of making members aware of legislative and regulatory changes, and in a more active sense in terms of lobbying to secure different outcomes’. If a trade association is doing its job well, then government should ultimately see it as the voice of the sector it represents. It can speak to the whole sector through that association and in turn, the association can work to get senior ministers around a table with chief executives of big businesses.

Trade associations do, however, face what one interviewee termed a: ‘thematic challenge between being endlessly engaged with government on a negative basis and balancing that with shouting about the good things going on in the sector’. As the voice for the sector, it is important that this balance is struck in order to maintain a positive focus on the industry it represents.

While it could be argued that the benefits of trade association support are greater for smaller businesses without the capacity to support an in-house public affairs team, the impact of bringing forward an overarching voice of industry cannot be understated: ‘the more we can show that the business voice is united, the more likely government is to listen’. Indeed, for many organisations, and even some larger ones, having an in-house government and regulatory affairs team isn’t yet a priority: it is ‘not a non-negotiable role everywhere yet’. The trade associations perform a vital function then, serving as that translation service between business and policymakers.

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Chapter 3 – Insights

• A close working relationship with government and regulatory bodies has never been more important or more valuable. Organisations need to be able to work collaboratively but also have the ability to push back to ensure their strategic needs are heard.
• Uncertainty across the political spectrum has, however, meant that relationship building has less value than it did. There is more political churn now, with individuals moving from post to post with increasing rapidity.
• Devolution of power to regions of the UK has meant that there is a need to consider relationships beyond those at a national level much more closely.
• The role of and support for trade associations as the ‘voice of industry’ is still hugely valuable and presents an opportunity to unite and drive policy and other changes across sectors. Presenting a united front is exceptionally powerful when it comes to pushing forward with strategic change.

Chapter 4

The Face of the Future

There is a greater need than ever before to have the very best people ready to take on leadership roles right the corporate sector. Succession planning is something that is increasingly high up on the agenda for businesses of all shapes and sizes, however our contributors generally acknowledged that this tends to be more prominent and structured in roles such as finance, where there are very clearly defined pathways to leadership.

There is a recognition that planning for the future needs to be given more time and thought, but for a job that is so broad ranging many suggested there is reason to be concerned about the talent pool.

The polymath applicant

Traditionally, there have been two main avenues through into senior government and regulatory affairs roles: ‘ones from the world of politics and those who have been policy wonks, civil servants’. As was mentioned in Chapter 3, there is a growing need for regulators to demonstrate their autonomy from those they regulate. As such, the pipeline has changed significantly over recent years as the pathways between the regulator and the regulated have become less permeable, a fact that has caused concern for many. Indeed, the traditional pathways have deteriorated to such an extent that a number of contributors suggested that the most effective recruitment tends now to happen through the grapevine, with the very best candidates passed on by word of mouth.

Not only is there less movement between the two sides of the regulatory piece, there is also a growing demand for applicants who can showcase a much broader range of skills: ‘it is a polymath world after all’. The most successful applicants for these roles tend to be those who combine hard data and analytical skills with ‘softer’ skills: ‘skills with words – that is the ability to speak coherently, to organise them, to tell a story with a mind for the audience – seem to me to be in very short supply.’

Successful candidates need to have breadth of experience, but that experience needs to come together to demonstrate a well-rounded individual, something that many of our interviewees highlighted as a challenge. One individual stated: ‘I see a lot of CVs that are very bitty – while lots of these things might be relevant, they often don’t map into a coherent skillset which then maps onto the job to be done’.

As in almost every walk of life in the modern world, digital skills are paramount. There is a real fear that ‘the market is still full of people doing things in an old-fashioned way’. Technology is moving on apace, and it is vital that the leaders of the future are digitally savvy: not only do they need to have an awareness of the capacity for digital disruption, but they also need to be able to consider data points that can help inform their business’ views on where regulation is headed.

One interviewee summed up the concerns expressed by many: ‘I’m not sure that that many people have really got to grips with digital disruption or that they have a firm grasp on the political uncertainty we’re dealing with at the moment or that there are enough people coming through who are versed in the internal strategic dynamics of these roles’.

When walking the walk isn’t enough

Future leaders need to be hard-working, multi-skilled and willing to invest in the forms of engagement that can deliver the greatest value to their organisation. They need to not only have the right skills and experience on paper, but they also need to be able to perform well under pressure and maintain a clear head when faced with a challenging work environment: ‘ultimately you have to think to yourself “would I put them in front of a minister?”’

Many of those to whom we spoke reported a notable rise in the number of candidates coming forward who look perfect on paper, but in reality fail to deliver. Often, this is because they have the experience required but lack a firm grasp on the scale of the political uncertainty facing the UK at the moment. They must also be versed in the internal strategic dynamics of these roles, something that is often missing if individuals haven’t been able to follow traditional routes through the ranks.

To be successful in a government affairs role, you need to ‘be able to step outside from an internal viewpoint and shine a light on your organisation’. You must have the confidence to both feel comfortable within and outside of the organisation to be able to offer a balanced viewpoint about what is needed from government and regulators.

Confidence is also key in terms of the increased attention this function is now receiving. Leaders must feel their convictions strongly enough to speak out and challenge policymakers as required, as well as being able to hold the hand of senior executives and reassure them of the path forward: ‘your chief executive may know all there is to know about the industry, but nothing about speaking to a minister. You need someone confident to hold their hand and put them at their ease’.

This confidence must not ever become brash, however. There must always be humility in a leader in this sphere: they must be able to step back when the relationship with regulators and government requires it, while simultaneously knowing their business inside out to ensure they are able to raise their voice when the occasion calls.

Politics under the microscope

British politics have rarely been played out on so public a stage as in the present day. The UK’s vote to leave the EU has been global news since 2016, with policymaking under scrutiny as never before. As a result, many argue, ‘graduates may have had their interest in politics piqued as at no other time – they will have a different lens on how business relates to politics’.

There is, however, a difference in opinion as to how this will play out in terms of the next generation: will they be more bought in, having seen the impact that political engagement can have, or will they be disenchanted with the concept having seen a government facing in-fighting and indecision?

Significantly, the millennial generation is perhaps more politically attuned than previous generations, but the ambiguity around the role there is to play could prove challenging in terms of recruitment. Indeed, ‘there is no longer the Government, sorting all the political stuff, and then regulation, which details implementation’. This makes the role much harder to pinpoint. It is increasingly becoming blurred, no longer easily defined by interactions with government or those with regulators. Rather, regulation is becoming ever-more politicised.

There is perhaps therefore a need to reframe the function, particularly if the next generation of leaders is to be attracted and retained. It is about corporate reputation-building, not corporate protection: it is about the proactive positioning of a company and its values, rather than reactive face saving. It is, above all else, about building and maintaining relationships with government and regulators: ‘there’s a recognition that government and regulators determine policy between them, and you can’t really do a public affairs job without joining these two together’.

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Chapter 4 – Insights

• Succession planning is gaining traction in terms of importance, but there needs to be more focus on how to find the right people with the broad range of skills, attitudes and experience required.
• The polymath applicant is absolutely the holy grail, however there is a worrying lack of candidates. Often, those who look ideal on paper are not able to make a multifaceted career translate into cohesive practical experience.
• The leaders of the future need to have greater confidence both in relationship building across political parties and in speaking out to challenge policy makers as and when it is required.
• Looking to the future, the millennial generation is more politicised than most that have gone before them thanks to the prominence of politics in day-to-day life. However, there is question as to whether this will encourage them to think about government affairs roles or put them off for life.

Conclusion

At a time when the political climate is changing constantly, the role played by leaders in government affairs and regulation has never been more vital to ensuring the continued prosperity of business in the UK.

As such, the skills required to drive forward these agendas, both internally and externally, are beginning to see a step change. These roles are becoming increasingly reliant on analytical and technical skillsets: no longer can a ‘silver tongue’ ensure success. While maintaining a good relationship with both government and regulators is vital, this cannot ever become too cosy: it must carry with it a level of challenge in order to achieve the overall strategic aims that will allow business in the UK to continue to flourish.

Brexit has, of course, provided a real and tangible distraction for policymakers, who have less capacity than perhaps anyone could have predicted as a result of the continuing negotiations over the UK’s future relationship with the EU. While there is no doubt of the knock-on impact this will have on the UK’s ability to continue to compete in a global market, it is vital that business continues to compete. The distractions of the UK’s negotiations cannot be allowed to come in before the day-to-day priorities of business.

Ensuring that there are talented individuals with broad experience and the right skillset coming up through the ranks to take on leadership roles is vital – they will need to be prepared to take on a role that is ever-expanding and guide their organisations forward with confidence in the face of a political future, the shape of which has yet to be determined. This will be vital to ensure that government affairs and regulation continue to have a place at the table, even in peace time.

Methodology

In producing this piece, we had the opportunity to speak with individuals in a variety of roles, all of whom lead their organisations in government and regulatory activity. We asked them to share their thoughts on the extent to which their roles have become tied into the strategic direction of their business. We also explored the ways in which they are able to maintain a healthy and effective working relationship with government and regulators, or whether indeed that was even possible in a world of ever-changing political moods.

We also asked our interviewees to consider the skills needed to be successful in their role, and whether they felt these had changed in recent years. A particular focus was placed on the leaders of tomorrow, and whether the pipeline of talent is strong enough to ensure that these vital roles will continue to shape the strategic direction of their organisations.

To help give our report balance, we also spoke with representatives of trade associations to explore their role in supporting member organisations in their interactions with government and regulators and the practical advice they are able to offer.

Our questioning was open-ended to give participants the opportunity to express their opinions and to provide their individual view of government and the public sector. We conducted these interviews over a period of ten weeks.

To encourage our contributors to speak openly, we assured anonymity. This ensured that we were gathering honest thoughts, observations and learnings. We have incorporated anonymous quotes throughout this piece to reflect our conversations and the themes arising, and to give an indication of thought and response.

Throughout our conversations there was a clear recognition of the vital role that those in government affairs and regulation have to play in ensuring the continued success of business in the UK. Regardless of the political climate, businesses must continue to deliver for customers and shareholders alike; maintaining a dialogue with those charged with setting policy is fundamental to that.

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