Should You Hire a Lobbyist?
When big businesses lobby in Washington, it can pay enormous dividends. Take the pharmaceutical industry. Watchdog group United Republic reports that pharmaceutical companies spent $116 million lobbying to keep Medicare from negotiating better drug prices, won their plea and as a result make $90 billion on what Medicare pays for pills. That’s a 77,500 percent return on investment.
It's not just pharmaceutical companies either. United Republic says oil companies got a 5,900 percent ROI lobbying for continued subsidies, while multinational companies swung a 22,000 percent payback by getting a temporary tax break on offshore profits. Returns like that appeal to savvy major corporations, especially defense contractors, which have historically been the largest lobbying spenders.
Last year Google showed its appreciation of lobbying’s value by plowing more than $18 million into Washington influence-buying, according to the Center for Responsive Politics. That put the Internet behemoth second among corporate lobbyists, behind only General Electric and handily beating the likes of Northrop Grumman, Boeing and Lockheed Martin, not to mention its archrival, Microsoft. Including associations like the U.S. Chamber of Commerce, the top overall spender at $138 million, Google was the eighth biggest lobbying spender. As The New York Times notes, Google has also signaled its seriousness by hiring a top lobbyist, former Republican Congresswoman Susan Molinari, to push its interests in immigration, privacy antitrust and other issues.
So much for big companies in Washington, D.C. Can small businesses do as well working to get input on regulations, contracts, tax breaks and other topics at the local and state levels?
Small Business in Washington
Lobbyists already tread the halls of Washington working on small-business issues. Organizations like the National Federation of Independent Business lobby Congress and the executive branch on broad topics such as health care, taxes and regulation that are relevant to all small businesses.
But many business owners want more localized input, say on a new law or regulation that will affect how they do business. For these issues, national organizations aren’t going to help.
Fortunately, business owners who want to follow in the footsteps of Big Pharma can do the same thing, on a local level. Local lobbying can relieve overregulation, increase tax breaks and help win contracts, just the way it does in Washington.
One plus is that while Washington lobbyists are heavily regulated, fewer rules generally apply to local lobbyists. Business owners probably don’t need to hire costly lobbyists, but can do it themselves. Or they can hire lobbyists who specialize in working with city councils, county commissions, state legislatures, local regulatory agencies and similar government bodies.
In a classic example of local lobbying, a business owner might want to get a zoning change on a piece of land for a new facility. The owner could hire a former mayor, city council person or zoning commission member to make the business’s case before the local zoning commission. Alternatively, a more do-it-yourself owner could try to get some face-to-face meetings with zoning department staff before the issue comes to a vote, to make sure relevant information gets to the right places.
Hiring a lobbyist to represent you before local governments could cost you $5,000 to $20,000 a month, according to The New York Times. And since lobbying doesn’t always generate instant results, that monthly retainer could wind up being paid out for a year or more.
One way to defray costs is to work with other businesses that have similar concerns. An existing trade or professional organization could provide a good starting point for that kind of alliance. If a single issue is critical enough, a business could form a new association of like-minded firms specifically to address it. (Of course, one challenge to that could be finding a way to work with rivals.)
The DIY Way
Business owners can save money and take a hands-on approach to lobbying by doing it themselves. One advocate of this style is Amy Handlin, an elected assemblywoman in the New Jersey General Assembly, marketing and management professor at Monmouth University and author of Be Your Own Lobbyist, a how-to book for small businesses seeking influence with state and local governments.
Handlin describes a three-pronged approach calling for homegrown lobbyists to select the right “targets, tools and tactics” to get what they want from government. The first step may be the most important. It calls for business owners to find out who can influence the decision they want to be made, whether it’s loosening a regulation, repealing a tax or something else. All governments are bureaucracies, and the real power to influence decisions may not lie with elected officials or agency heads, but with staff members. So it’s important to first figure out who to approach.
Next, lobbyists need to know what the officials in question want. It’s easy to assume that politicians are only interested in campaign donations. However, an opportunity to appeal to a certain voting bloc may be just as effective for an elected official facing an upcoming election. The prospect of favorable media attention can also be a good motivator.
When it comes to staff members and regulatory agency officials, money and votes are often of less interest. For these government employees, a business’s best bet is to deliver an appeal based on thorough research and flawless logic that will help the agency achieve its overriding goals of implementing public policy. For instance, a business could get a variance to emit a little more of a mild pollutant by showing that it would help reduce a lot more of a worse pollutant.
Effective lobbyists know their topics inside and out, and can act as useful and reliable sources of information for policymakers. They know the technical data and the political stances taken by major players, as well as why those stances were taken and what can get them to change.
Lobbying often requires follow-up. Sometimes, a lobbyist’s most effective move is showing up at the back of a room during a critical hearing, catching the eye of a politician just before a vote, and silently letting him or her know that someone is watching. Because legislation and regulations often go through many iterations before taking effect, lobbying can be a long-term, slow-payout endeavor.
While local lobbyists have fewer rules than Washington lobbyists, they do need to find out what rules may apply. Especially when lobbying state legislatures, lobbyists may have to register, providing information about who they represent, any campaign contributions they have made and positions on issues taken by their clients.
Business owners representing themselves have fewer restrictions. But some activities are prohibited for everyone. According to Daniel D. Purnell, a California attorney and volunteer with the Institute for Local Government, these are likely to include making false statements to public officials, and making gifts or donations beyond certain limits.
If you are hiring a lobbyist, Purnell warns against those who promise clients they can achieve a particular outcome. And he says rules often prohibit lobbyists from charging contingent fees based on whether a desired outcome is achieved.
Few business owners have $116 million to spend or a need to influence an issue as vast as how Medicare buys drugs. But even if their lobbying budget consists of little more than bus fare for a couple of trips to City Hall, and their objective is only to get a zoning change for a new headquarters, they can still achieve returns that few other business-related endeavors can offer.
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