Harmony with Government Entities

In conducting your business, you have to interact on a more or less with a whole crowd of government entities – local, state/provincial, and central/federal. If you do business internationally (and globalization makes sure that sooner or later you will), you will also have to deal with foreign and international government bureaucracy. In other words, you have to be involved in some form of GR – government relations.

What do you want from these government entities? To help you make money (financial value), to perform functions ‘naturally’ delegated to the government (functional value), to be treated well and to generally enjoy the process of interacting with the government entity (emotional value). The latter, is, obviously, sort of a miracle, but still this is what you would objectively want.

In your business (in fact, in any business) time is money. Often, a whole lot of money. And quite often, this time is influenced by a specific government entity (e.g. when you need a government approval, registration, certification, license, etc. to perform a specific business transaction or a process or to conduct a specific project).

In this case – to maximize financial value created by the transaction, process or project in question - you would want this time reduced to absolute minimum. Likewise, you would want to minimize (ideally – to eliminate completely) any and all government interference with your business – audits, interviews and the like. One of the best ways to make money is to stop wasting time – and time spent on government intrusion is almost always wasted.

On the positive side, you would want to use to your maximum advantage all government assistance programs offered to businesses. These are especially valuable to small businesses and to all companies trying to enter new geographic markets – domestic and especially international.

Training, consulting, advisory and contacts provided by business assistance programs and departments can be very valuable. In terms of money, functionality and even emotional value – emotional support and a drastic reduction of frustration practically inevitable in any new endeavors.

Bigger companies (those who have serious lobbying power) are usually spending a significant amount of money and efforts to make government entities make executive and/or pass legislation (local, state/provincial and central/federal) that will improve (sometimes radically) conditions for doing business in a specific geographic area. Which can – and does – create a significant amount of financial value.

However, if you decide to engage in such lobbying, you must make sure that (1) you have decent chances of success and (2) you get a competitive payback period, NPV and IRR/MIRR from this investment project. Competitive with your other potential investment projects, that is.

What will you have to give in return? First – pay your taxes. Local/municipal, state/provincial and central/federal. Obviously, the absolute minimum that you absolutely have to pay without getting yourself into a serious legal trouble (the latter is never worth it). Paying your taxes is the primary way to create financial value for the government – at all levels.

Second – abide by the law. Find a way around the law (or a loophole in the law, or whatever), but never ever break the law. It is never worth it. Whatever short-term financial benefits might be, in the long term you will always lose. One way or the other.

Third – donate your money. To causes and projects valuable to the government entity (or a specific official) that you need to influence. Yes, it will effectively increase your tax burden, but you might very well get your money back – and more.

However, you must always keep in mind that your business (or any other business, for that matter) is not a charity. In fact, business and charity are simply not compatible. For a business enterprise, there is no such thing as a charity. Only an investment.

Which means that you must treat each and every charitable contribution as an investment project. And calculate and evaluate all the usual KPI - payback period, NPV and IRR/MIRR from this project. Before making a contribution, you must be sure that it makes financial and economic sense. There is nothing morally wrong about this approach, by the way. Because everybody wins.

The same is true when you are donating time – your or your employees – to a specific government entity to help it perform its function. For example, free management training. Your time – and the time of your employees has financial value. Therefore, before making this donation, you must (1) calculate this financial value; (2) develop a simple – but realistic – financial model – for this small project and (3) make sure that it makes financial and economic sense.

And, finally, there is the inevitable issue of gifts – freebies – to specific government officials making decisions that can make a significant influence on financial value of your company.

Here you have to essentially use the same approach as in previous cases. First, always stay within the limits of the law (to be sure of that, you will probably have to consult a competent lawyer). Second, every freebie is in investment. Therefore, you must calculate all the usual KPI – and make sure that it makes financial and economic sense.