It’s Time to Start Wrapping Up Both of Your Annual Value Reports

Influence Functions need to proactively justify value to internal leaders, not just external observers and stakeholders.

At this time of year, we return from summer vacation and start to think about the things we need to get done by the end of the year. After all, we would regret not meeting our annual goals for the department and miss out on a bonus kicker.

For many organizations, this translates to the annual report on sustainability and social responsibility that compliments the annual financial report. It has been underway for much of the year already and the main themes and data sets are well-developed. This is the report to external stakeholders such as investors, customers, business partners, new recruits, regulators, and NGO evaluators.

Call it the external-facing value report. Many companies draw on agency support to drive the production process. It is usually an influence function that leads it. GRI establishes standards for these reports.

With all this focused effort, it might be surprising to learn that there is a second report that influence functions often skip. Just because you told the public all about how great the company is doing, that may not make it clear to people operating the business how your function helped them.

This internal report builds supporters for your cause – and reinforces what makes you an influence function dispensing strategic insights, services, technical expertise, and other knowledge. The report also builds meaningful engagement because it is shared with leaders and discussed rather than produced and distributed.

A good model to follow – the two-page memo

An SVP of R&D for a very technical company described how he was able to regularly obtain the highest level of R&D spend as a portion of revenue in his industry. It was not about the company’s comparatively advanced technology. They were right in the middle of the pack, struggling with making sensitive production processes successful just like the rest of the industry. Their products were good, but not the most innovative. On the product front, one could call them a competent fast follower.

What was unique was the way the SVP wrote a two-page memo to each business unit head. It outlined what technical problems they had solved, what new production steps have been introduced, and other details that collectively made the year successful or set them up for future success.

Not only that, but after sharing the memo, the SVP sat with the leadership teams of each business to discuss reactions to the memo. It was considered a draft until the discussion occurred. Then based on feedback, it was refined, accepted, and signed.

Of course, that two-page memo took some time to assemble, and it was not the SVP writing it from memory. The entire R&D leadership team gathered information and participated in drafting each document.

The process also ensured that the R&D leadership team was aligned with what each business needed from R&D, and revealed how the R&D team needed to be flexible and mutually supportive to be successful.

The memo closed with what R&D planned to do next fiscal year to provide better service to the business. It touched on organization, process, technology, and skill areas as needed.

No technical background was required to understand the memo. It just described what R&D was doing to make the business in question run better. It was focused solely on the business being reported on. It illuminated how R&D projects either helped capture new revenue, or reduce costs compared to competitors. The reader had no doubt how the activity described led to better business results.

The equivalent “two-page memo” for an influence function is the internal value report for the business. If you don’t produce one, you are missing a big opportunity to strengthen your influence and value in the company.

You could call this part of the business partnership pillar of radical influence.

It can be prepared solo, or in conjunction with other influence functions that work together frequently. If you band together it can be to show how your organization’s influence functions are, together, protecting and advancing the business.

Three key topics to cover in an internal value report

A balanced plank with money on one side and windmills on the otherThis first key topic is the ROI value. It shows how your influence function is creating value far exceeding your budget. This reinforces the notion that your budget is “worth it”.

This can be done for a portfolio of issues, or illustratively for select issues. By isolating the opportunities and risks of key issues, along with representative revenue and cost impacts, you can describe the total potential impact on the profit and loss statement.

Then compare that business value to the size of your budget. Usually, this analysis shows many multiples of return. It is not surprising to see 5, 10 or 15X in value being produced in relation to budget spent. For large and complex organizations that are heavily regulated, I have seen numbers that exceed 100X.

This approach works well for clearly articulated issues. In government affairs, issues show up as proposed legislation or regulation. If you are tracking things at this level, it is can be relatively easy to impute the profit and loss impact of each and tally it.

If the issue is big and far-reaching, it makes better sense to look at it as a singular impact to the business. Then you can estimate the level of resources that various influence departments are devoting, and compare that to the potential financial impact on the business over the short and long term. Again, this should show many multiples of business value when compared to the investment made by the organization.

The second type is Strategic value. This proves through illustration that the influence function directly supports the achievement of the company’s strategic priorities and initiatives that are outlined in the strategic plan. You want to get full credit for all of your on-strategy activity by linking the work to a specific element of the strategic plan. In parallel, you want to minimize your off-strategy activity. Maintaining line-of-sight to the company strategic goals is essential.

The third area is Reputation value. Here, you can touch on how your influence function protects the social license to operate and the ability to attract investors, customers, business partners, and new recruits, all of which return value to the business.

So, don’t undersell the value your influence function can provide. Demonstrate your worth proudly to your internal stakeholders. Put it out there in clear terms that leaders relate to. Don’t just assume they fully appreciate and remember all you did for them. Have a two-way discussion about how to get better at it next year.  If you do that, you will not regret how you ended this year.

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