Surviving Economic Nationalism

12 March 2009 Andrew Fairburn

The world’s richest countries have entered into a deep financial slowdown and economic nationalism – the desire to keep jobs and capital at home – has re-emerged as a force to be reckoned with. Andrew Fairburn of Regester Larkin outlines the key issues organisations must face when deciding their response.

The protectionists’ arguments are easy to understand. Why should we export hi-tech jobs to India when we have skilled programmers out of work here? How can it be right to import construction workers to do jobs that locals can do just as well? Why should banks lend money overseas when they are barely lending money at home? With varying degrees of passion, rich world governments continue to make the case for trade, pointing out that economic nationalism is the surest route to a full blown economic depression, but they are finding it increasingly hard to win the battle for hearts and minds.

This leaves the business world in a difficult position. ‘Traitor boss collects bonus by outsourcing loyal workers’ jobs’ is not the sort of headline a chief executive wants to read about him or herself over breakfast.

But what can companies do? Should they bow to populist sentiment and turn their backs on the economic facts of life, or should they instead take a stiff corporate brandy and plug their ears to all criticism?

The reality, of course, is that it is not an either-or situation. A company that ignores economic realities is not a company that will stay in business very long. But a company that is perceived to ignore their stakeholders’ concerns – especially in a recession when there is a widespread fear of redundancy – is a company that risks major difficulties with staff, customers and other key stakeholders. Nobody likes an arrogant business.

The key for companies outsourcing jobs or capital to overseas markets is to identify potentially difficult issues in advance of trouble and to actively manage them to minimise the risk of a backlash, which, as in the political world, requires bringing the communications team into the loop at the earliest possible stage.

It would be unrealistic for a major organisation to actively manage every reputational risk it faces. But it can and should identify and manage the most likely ones to cause it significant harm. This is a relatively simple process of discovery and prioritisation.

Once the contracts, operations or other activities that are most likely to cause a reputational backlash have been identified, the communications team should develop tailored reputation management plans. There are common principles, but there are no one-size-fits-all solutions.

In some cases, ‘managing an issue’ might involve little more that keeping things under close review. At the other end of scale, a considerably more in-depth communications campaign might be required to protect an organisation’s reputation.

The questions a chief executive should be asking his or her staff include:

  • Are we at risk of economic nationalism? What are our existing or upcoming flashpoints?
  • Of these flashpoints, which ones could cause us the most damage, perhaps by way of a consumer backlash, industrial unrest or political difficulties?
  • What’s the balance of risks between keeping quiet and actively going out to talk to key stakeholders? What happens if we don’t talk to people first and then things go wrong?
  • If we do engage with people, who should we be engaging with? Who has the potential to cause us trouble and – crucially – who could potentially be an advocate for what we have done?
  • Do we fully understand key stakeholder’s concerns? Is there anything we can do to address these concerns without undermining our basic business strategy? At the very least, is there something we can do to demonstrate we have been listening?
  • How can we build understanding for what we’re doing, both within and outside the organisation? Are there any simple illustrations we can give to show that our employees and our country will ultimately gain by a more international approach to how we do things?
  • Are there any unrelated things we might be doing elsewhere in the business that undermines our case for outsourcing? Is there anything we are doing that is tantamount to shooting ourselves in the foot?
  • If things do go wrong, do we have a crisis management plan in place? Can we ensure both business continuity and reputation management?

Economic nationalism is a powerful force that ebbs and flows with the economic cycle. It is not a force to which companies should surrender. But it is a force that wise organisations seek to handle sensitively.