With the implementation of the Bribery Act underway we need to think really hard now about how it could negatively impact our businesses, even though any impact would likely be an unintended consequence says Nick Groom of gdz event analysts.
Let us not forget how important corporate hospitality still is for business, and perhaps the Act can serve as a timely reminder to review our strategy and approach for the first time in a very long time.
Most markets have generally relied heavily on good old fashioned sales operations for the distribution of its products and services to generate new, and retain existing business. Kenneth Clarke MP confirmed that “Reasonable hospitality to meet, network and improve relationships with customers is a normal part of business”. So we could be forgiven for thinking that it won’t affect us! “It surely can’t be aimed at us; it really must be intended for all of those folk working in international markets and passing brown paper envelopes across to foreign government officials to entice them to intervene in the procurement process for a new contract or cross border deal”.
But unfortunately that isn’t quite the case. We do need to take steps to get our compliance act together and we need to know where the bodies in our business or connected businesses could be buried. We need to know who is giving and receiving what and to whom, as well as any third party arrangements in place where you may not have complete control. So those working on your behalf for example; outsourced sales businesses, agents employed to negotiate contracts for you, partner businesses and joint ventures. You must, in order not to be caught by the Act be seen to eradicate the chance of Bribery in your organisation through your own internal controls and compliance.
All this scrutiny of the corporate hospitality budget must though now be music to your finance director’s ears; what value do we really get from this significant part of the sales and marketing budget? For many years your FD has sent you the same amount with perhaps an addition for inflation, never asking where it went and how you spent it as the board approved and agreed that it was something we must do for the future of the business. And as long as he got his occasional Wimbledon or Lords invite to join you and your sales manager at the corporate hospitality table for 10, he was happy.
On that table for 10 ideally would be 2 of you from the company, but that’s now 4 with the usual 20% dropping out prior to the event; a chap from accounts now who has had an early Xmas present (as he loves his cricket)and Lucy from the admin team. The sales manager left it too late to get his top targets, so ended up with 4 of his best mates from the industry; great advocates for the business, but at capacity for new business. The final 2 are made up of the ubiquitous event goer, always at events but never any business – and one real wild-card; a partner in one of the big accountancy firms who happened to respond to a speculative invite from your PA as he loves cricket.
So what value do you think you got from that event?
If there are 4 now attending from the company, 4 mates who will struggle to give any more business this target year, one chap that is always at events with you or your competitors and has no allegiance to anyone in particular and the one wild-card, then Mr Finance Director, we do have a problem.
With an event of this type costing around £10,000 for a good quality package, the amount actually working towards producing real value (ROI) for your organisation, the working event capital is likely to be in the region of around 20% of the consideration involved – not an exact science, or rocket-science, but making the concept of converting that into positive value quite difficult to now comprehend.
This scenario unfortunately is the norm and is being echoed throughout the land in most hospitality tents and corporate boxes. UK business is wasting billions through inefficiencies in the corporate hospitality process and through poor strategies based on a study recently conducted by gdz.
The Bribery Act will most definitely bring about greater governance and compliance around the process. Let us hope it also raises the question to UK business of what real value or return we are getting from our corporate hospitality budget. Although there are justifiable reasons for the lack of financial knowledge in this area, there are serious consequences in remaining blissfully ignorant. However help is at hand and the science available now to not only understand the value, but how we can improve it dramatically.
And who knows, we might at long last be able to calculate, locate and record where the bodies really are buried!