Making Government Work for You

Small-business owners need to play the political game, says Harvard's Professor Michael Watkins, who sees campaign contributions as a good way to start

It's no secret that small-business owners have little love for the government. Nor is it hard to see why. After all, if there's one thing on which the nation's entrepreneurs agree, it's that they don't like to be told what to do. However understandable such attitudes may be, they are counterproductive at best -- and at worst, downright harmful, says Harvard Business School professor Michael Watkins.

Along with former U.S. Rep. Mickey Edwards and fellow Harvard researcher Usha Thakrar, Watkins is the co-author of Winning the Influence Game: What Every Business Leader Should Know About Government (John Wiley & Sons, $34.95), a guide for business owners seeking to influence the legislative process.

Packed with examples of how companies like Microsoft Corp. and Disney misread the legislative tea leaves (and paid the price), the book also is full of lessons for the nations' smallest businesses, which often have more at stake in the process than their larger competitors. Unfortunately, by adopting a fierce, anti-government stance, entrepreneurs often wind up missing out on important opportunities to influence the process. Watkins recently spoke with BusinessWeek Small Biz Editor Larry Kanter. What follows are edited excerpts of their conversation.

Q: Why do small businesses need a legislative strategy?


Small business can be both helped and hindered by the government -- even more so than big business. Government can play a huge role in getting a small business off the ground, whether through research grants, federal contracts, SBA programs, import-export financing, or state and local economic-development programs. But small business is also more vulnerable to being damaged by the government. For one thing, they're affected by more layers of government. An increase in municipal taxes is a fleabite for a big company, but it can kill a small business.

But people running small businesses just don't like the government. They see it as slow-moving and inappropriately privileged -- and that's a very dangerous attitude.



If you're not willing to embrace the need to work with the government, they're not going to help you. And they might hurt you. Isolating yourself isn't the answer, and thinking these people are idiots isn't the best attitude. It doesn't help you protect yourself. And it certainly doesn't help you take advantage of what they do have to offer.

Q: But most entrepreneurs lack the time and money to hire lobbyists -- or even to travel to their state capitals. Given that resources are so tight, what should they do?


Build a foundation in your community. Begin by reaching out to your representatives to local and state government. To these people, you're a big deal, especially if you can meet with them in conjunction with other small-business people. Figure out which political leaders see the world the way you do, and get involved. A thousand dollars, which means nothing in a Presidential election, can mean a tremendous amount to a local congressional candidate.

Second, find other people in the community who see things the way you do and form alliances, even if it means working with your competitors. Small businesses consistently underestimate their political clout. It's like mom and apple pie. Politicians love being seen as a friend of small business -- and you can play [that to your advantage].

Q: It seems like every time a politician wants to sell a piece of legislation, they dress it up as a small-business issue. It's hard not to be cynical, to wonder whether they really have small-biz interests at heart.


Absolutely. But even if they're being cynical, they're also going on record as being in support. That kind of attention is not necessarily a bad thing.

Q: Both inside government and out, there's a growing interest in entrepreneurs and the impact small companies have on economic growth. Do you sense any corresponding growth in political influence?


It's a mixed bag. I can easily make the case that this is an unparalleled time of big-company influence in politics. Look at soft money -- most of it comes from big business, and it's having a huge impact on politics.

There is definitely a halo effect around the entrepreneur today. It has been dimmed a bit by the Internet crash. But the entrepreneur's stock is still high, and it's highest in the local arena, where there are local politicians that want to be seen as pro-entrepreneur. And that's the exact person you want to get to know.

Q: Are the interests of big business and small business in sync? Or are they at odds with one another?


On a broad array of issues -- regulations, OSHA, health care, product liability, the minimum wage -- they're in harmony. But you do see significant divergences. Big business can be very politically sophisticated in using government to cement their strategic advantage, vis-à-vis their competitors and vis-à-vis small business.

We've seen cases in which big business doesn't fight on certain health-care or environmental regulations, because they can afford to comply. Small companies can't. People in large companies often have far more nuanced attitudes about their relationship with the government. It's sad the way small-business frames the issue as "us vs. them."

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