Public policy is a lot more important than many people realize, especially in business. It helps shape how businesses operate and respond to changes. Public policy is intertwined with business, and there is a lot of overlap between the two. The principles used in public policy also apply in business, and thus there is a relationship between public policy, business, and business leadership. This article will focus on how the three are related and how public policy impacts both businesses and business leadership.
What is Public Policy?
Before we look at how public policy is related to business leaders and business, it is important to first understand what public policy is. Public policy is a set of guidelines, laws, and actions put in place to help control the behavior of people in certain settings. This may be at the workplace, in their daily lives, or an administrative division such as a country.
All of us are governed, guided, and restrained by public policy as it dictates what we can and cannot do. Influencing public policy means that the person doing the influencing is trying to cause some form of social change. The reason is that changes in public policy mean a change in the way we interact as humans, how we relate with each other, how we do business, social behaviors, order, and much more.
Public policy is often tied to doing what is best for the institution that has put the policy in place. For example, the government might want to put policies in place to help regulate businesses to help avoid inflation. A business leader might put policies in place that are governed by moral decision-making to help the business thrive.
Relationship Between Public Policy and Business Leadership
From all the above, we see that policymaking is an activity or process that involves making decisions that impact people within an institution. These decisions require human interaction, thinking about how the policies will affect those they are made for, and ensuring a representation of relevant parties in the decision-making process.
In business, leaders must think about how they make decisions and how these decisions impact not only the business but also everyone involved. Good leadership in business calls for understanding different decision-making models, as well as how effective and non-effective leaders make decisions.
Business leaders must also try to make collaborative efforts to come up with solutions to business and public issues that require nuance, cooperation, critical thinking, and more. Lastly, they must also think about alternative conflict resolution strategies.
Conflicts will arise within the business and because of business interests clashing with outside public policy. Business leaders must know alternative ways to resolve these disputes to ensure everyone gets what they want.
Whether you decide to work in government, non-profits, or business, these principles will help make the best decisions, understand public policy and how it impacts your business, and make you a better business leader overall.
How Public Policy Affects Small Businesses
Apart from there being a relationship between business leadership and public policy, there is also a strong relationship between business and public policy. Public policy impacts business creation growth and prosperity.
While great public policy can help businesses thrive, it can also cripple businesses and lead to economic devastation. To better understand the relationship between business and public policy, we need to understand the various ways such policies affect businesses.
Public policy impacts the ability of businesses to grow and expand. When there are different laws in different regions, businesses cannot expand to these regions because public policy provides a barrier that is insurmountable for most businesses. For example, there may be licenses and certifications that businesses require before expanding into the new regions.
This is a common problem for businesses in the healthcare industry where certifications are required to practice in different areas. The good news is that this is becoming less of an issue for healthcare professionals like psychotherapists but is still an issue that requires changes in public policy to resolve.
Second, the distribution of infrastructure impacts the ability of businesses to expand to certain regions. In the United States, for example, some areas are not covered by broadband due to public policies that are in place.
As we all know, the internet has become an essential tool for doing business in most parts of the world. Not having broadband connectivity impacts not only on the businesses in these areas but also their communities. It would be difficult to establish manufacturing plants that now rely on internet connectivity in these areas. It would also be difficult to bring in tech jobs in these areas, putting their residents at a massive disadvantage.
Lastly, public policy can take away the voice of small businesses. Small businesses already know the challenges that affect them. To create a better business environment, businesses would need to talk to their legislators to help put policies in place to make the business environment better. The only problem is that changing public policy is quite difficult in some areas and thus business leaders do not have recourse in making the business environment better.
Small businesses might not even know how public policy impacts their insurance rates, ability to hire people, ability to invest, and much more because of convoluted public policies. With businesses strangled so much by public policy, it becomes challenging for businesses to thrive in such climates.
Seeing all the above, we can agree that public policy can dictate where businesses thrive or do not. It is important to get people in positions to help craft better public policy whether they work directly with the government or other types of organizations. Completing a Masters in Public Policy and Leadership at the Pepperdine University allows you to get into positions where you can influence public policy. The advanced degree helps you understand both the public policy and business side of things, making you a great public policy advocate. Combining both of these areas of study will help you thrive in different sectors, whether it be in government, business, or in other sectors.
Why Business Leaders Should Study Public Policy
Once we understand how public policy impacts small businesses, we can begin to explore why business leaders should study public policy. The most obvious reason to do so is to understand how public policy can impact businesses. We have seen that the government and the public policy put in place impact every business, mainly through regulation and dictating what a business can or cannot do. Business leaders must keep an eye on public policy to see how it will impact their business decisions.
Understanding public policy also makes it easy for business leaders to change their companies’ plans for the future. Understanding how public policy will change in the future can give a business a massive edge. Predicting how these policies will change and having proper plans in place can be beneficial in helping a business take advantage of business and legislative trends. Some business leaders prefer this to using politics to help shape business strategy.
Additionally, knowing what changes are coming can help a business know when and how to change direction. If a public policy makes a business environment less conducive, there is no advantage to staying and waiting for the policy to change again.
A common example is changes in taxation. An increase in taxation causes the cost of production to go up and a business might want to start thinking about relocating to areas with favorable public policy. Other policies that can cause a business to change direction include incentives and changes in how and when a business can hire.
Next, understanding helps business leaders specialize in their industries. In industries that are highly regulated by the government, ensuring your business stats afloat often means understanding how public policy and legislation will change. When the Affordable Care Act in the United States was enacted, a lot of healthcare providers were impacted.
All these professionals are part of a business, and it is up to them to know what changes are coming and to align themselves with these changes if they do not want the businesses they work for to go under.
Lastly, businesses must try to understand public policy if they want to understand their audience. It does not matter what a business calls its audience, the business may call them consumers while a public servant could call them constituents. Whatever they are called, they will likely make decisions depending on the public policies affecting them. Studying public policy gives business leaders an edge in understanding what people will do in these circumstances and thus act accordingly.
Policies That Affect Businesses Directly
It is well established that public policy impacts businesses and how business leaders make decisions. The question we have to ask is, what are some of the public policies that impact businesses directly?
The first type of policy is what is known as a market catalyst policy. This is a policy that changes the behavior of players in a certain industry or market. The best example is the charges and taxes levied in some countries for carbon-based emissions. Governments can change the behaviors of these businesses by offering incentives such as lower taxes for businesses that have lower emissions levels. Punishment for those who do not abide is also a way to change their behaviors, especially if the punishment or fine is large enough.
The government also underwrites the use of certain technologies, which we have seen done in the electric vehicle market. By offering incentives and other rewards, the government is pushing a shift towards electric vehicles in different industries, thus acting as a catalyst for market movement.
The second type of policy is sending and taxes. All governments rely on taxation for their expenditure. To spend more, governments have to tax people more or borrow this money, which will be repaid through taxation. An increase in taxation discourages investing since there will be little incentive to risk starting a business to be taxed exorbitantly.
Reduction in investments and the rate of starting new businesses lead to lower production levels and job loss.
Another type of policy is interest rates and financial policies. These policies affect how businesses borrow and lend money. The government can set a policy where it increases interest rates. Doing so means less borrowing for both consumers and businesses. The result is a decrease in consumer spending and business investment, both of which lead to the effects discussed above.
Policies that dictate lower interest rates encourage borrowing. Businesses can then invest since they know they will be able to produce more goods and the public has enough money to purchase their products.
Governments often influence interest rates by printing more money. If not well controlled and regulated, doing so can lead to inflation, which results in lower buying power. Businesses do not perform well when there is inflation and this is why policymakers are asked to keep a tight leash on printing money, interest rates, and inflation.
Lastly, we have policies that affect regulations and permits. Here, there are too many policies to point out, but the notable ones are permits and licenses, minimum wage requirements, and trade regulations. All of these impact the ability to start a new business, hire new people, and expand.
New regulations and permits mean businesses have to spend a lot of money to be compliant. This is money that would have gone back to the business or to a new hire. Such regulations might be unnecessary or ineffective, but they stunt business growth. However, these policies can promote business growth if they are effective and fair.
Public policy remains a complicated subject, especially when we start thinking about how it intertwines with business. We can understand how public policy impacts business and how business leaders can help put policies in place to help in the decision-making process and help businesses thrive. Business leaders play a part in the creation and shaping of public policy by being involved and finding ways to make those in power know how public policy is impacting businesses and the surrounding communities.