Managing a Public Relations Firm for Growth and Profit, Second Edition

Alvin C Croft

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781136614514
• Edition: 2
• Topic: Business
• Subtopic: Business generale
• Index: Business

The one-of-a-kind how-to book that puts effective agency management strategies at your fingertipsThe classic text that describes in detail how to successfully manage and market a public relations firm, has been completely updated with three new chapters and is now more than 50% longer. This one-of-a-kind new edition is bursting with creative tips, instructions, philosophies, theories, and guidance, all to help you steer your firm to success. It demonstrates how to market, promote, and sell a firm to attract, win, and hold the right clientele. You will learn how to manage a new or existing firm so that it is productive and profitable and has a long-range future. Information in Managing a Public Relations Firm for Growth and Profit, Second Edition is based on author A. C. Croft's extensive experience in the fieldalmost twenty years as a consultant to PR firm principals and more than 25 years as an employee or principal of three medium-sized successful PR agencies. Croft begins each chapter with a brief profile of a seasoned and successful PR firm principal from a mid-sized firm. These professionals tell of their successes and also relate early mistakes that you would do well to avoid. The text includes tables and figures to make data easily understood.The extensively revised Managing a Public Relations Firm for Growth and Profit, Second Edition discusses pertinent topics such as:

• keys to new business success
  
• developing a marketing plan
  
• serving clients
  
• communication to prospects
  
• management strategies for success
  
• installing efficient systems and procedures
  
• managing staff productivity
  
• forecasting income
  
• management systems and procedures
  
• managing profitability
  
• client and agency budgeting
  
• recruiting, training, and retaining staff
  
• crisis planning
  
• planning the future of your firm

Covering everything from billing practices and self-promotion to the use of computers and student interns, Managing a Public Relations Firm for Growth and Profit, Second Edition is one guide you are sure to refer to again and again for practical advice. It is must reading for owners of small- and medium-sized PR firms; senior managers of small, medium, and national firms who wish to expand their management knowledge and ability or who are considering starting their own firm; lower-level staff members who want to increase their knowledge of agency management; and university public relations professors who would like to include a primer on PR firm management in their classes.

PART I:

INTRODUCTION—THE REAL WORLD OF PUBLIC RELATIONS FIRM MANAGEMENT

Chapter 1

What Is a Public Relations Firm?

If you are reading this (and I assume that you are reading it, otherwise, why are you looking at the page?), you are probably in one of two situations: (1) you are thinking about or want to become the owner or manager of a public relations firm or (2) you are already the owner or manager of a PR firm.

If you are not already the owner/manager/principal of a firm, you are probably either working for a PR firm at some level of supervision or management or are a corporate PR executive (or were until recently working for one of these organizations). If you have experience in the agency business, most of what follows should make sense. You probably know a lot of it already. If your experience is limited to corporations or not-for-profit organizations, you are in for a real learning adventure.

True, both an agency principal and a corporate PR executive need to be consummate communication professionals and able counselors. However, beyond the professional area, their responsibilities are about as similar as a rattlesnake’s bite and a lover’s kiss.

Corporations are pretty much alike. (Okay, so maybe some of them are different.) However, about the only thing standard in the agency business is that there are very few standards. Hardly any agency operates exactly like any other agency. If the agency business has one major business weakness, it is this lack of standards. If this book contributes to the establishment and acceptance of more operating standards, the author will have achieved a major goal.

The majority of the dollars in the agency business funnel into about fifteen mega international agencies, most of which are owned by holding companies. On the other hand, there are several thousand small PR firms, with an average six to seven employees, operating at various levels of success. Weber Shandwick Worldwide, the largest agency in the world, had more than $400 million in annual fee income and 2,800 employees according to a recent edition of a national directory of PR firms.

At this writing, it’s hard to get a fix on the current status of the majority of the international firms owned by holding companies because of reporting restrictions imposed by Congress in 2002 via the Sarbanes-Oxley Act. For current rankings of independent PR firms, including annual fee income and staff size, see the annual directories published by PR Week and the J.R. O’Dwyer Company.

Agencies measure their size—and their stature—by their “net fee income.” This is the amount of revenue that a firm earns from its clients through staff time hourly charges and markup or commissions earned on purchased items. Sometimes, if a firm wants to look bigger than it actually is, it will report “billings.” Billings are the total amount invoiced to clients by a firm, including staff time, markups, and the cost of material or services that the agency buys in behalf of its clients and then bills back to them, usually with a markup added.

The 17.65 percent markup commonly added to out-of-pocket costs by PR firms is derived from the 15 percent commission that advertising agencies historically earn on purchased advertising space or time. Stick with me, this gets complicated. If an advertising agency is charged $100 for an ad that it has purchased in behalf of a client, it sends the client a bill for $100 but only pays the media $85—the real cost of the ad—thus earning a 15 percent commission. If a PR firm buys printing worth $85, it is actually only billed $85 by the printer. To earn the same real dollar commission, it then adds 17.65 percent of $85—$15—and sends the client a bill for $100. Remember that formula; there will be a pop quiz on Tuesday.

Just to make sure that everyone is running on the same track, let’s talk about a PR firm’s function and purpose. They are different and often provide a source of conflict to agency principals.

A public relations firm has only one function: to serve its clients to the best of its ability and in their best interests at all times. Sometimes, this means telling the client that he or she is wrong and refusing to do the client’s bidding.

An ancient piece of PR industry lore says that public relations practitioners should go to work every day prepared to resign rather than compromise their principles or ethics in their employer’s behalf. The same wisdom holds true for public relations firms.

Every company or institution has the right to have its side of the story told to and examined and judged by the public. However, no agency has the option or right to color the truth or delete facts to make the story better or shine a purer light on its client.

Agencies should be prepared to resign an attractive piece of business rather than place their integrity, credibility, and reputation in harm’s way.

In some cases, particularly when the article or news release describes a company’s past, present, or future financial condition, the agency can be held as responsible as the client for communicating untruthful information. More than one firm has faced legal attention for wittingly or unwittingly playing with the truth. In one case, a number of years ago, the owner of a prominent Midwest firm, accused of distributing misleading information about a client, was forced to resign from the Public Relations Society of America, the industry’s largest professional organization, rather than face an ethics tribunal.

On the other hand, a PR firm also has only one purpose: to achieve and maintain levels of income and profit that will ensure a reasonable financial return to its owners and fair and competitive compensation to its employees.

The client needs the best possible service, and the agency needs the highest possible income and profit. Therein lies a potential for conflict that every agency principal will encounter sooner or later and that must be managed with a win-win approach and results. Standards of ethics, integrity, and credibility must guide your actions.

“Account management”—the responsibility umbrella under which every agency practitioner functions—has been defined as “bringing the agency’s management, professional and creative services to bear against a client’s problems and opportunities so that we serve the client with maximum effectiveness while also generating maximum income and profit for the agency.” No small chore!

A PR firm has only one thing to sell. Its basic product is the time that employees invest in behalf of the firm’s clients. “Results” are hazy; a “maybe” kind of thing can’t be promised or really measured in a way that satisfies everyone. “Time” is rock hard solid; you either invest it wisely or you squander it. You can track it and measure it.

Such a system requires a great deal of trust—trust by the firm’s principal/s that employees not only will invest the proper amount of time in the client’s behalf (ideally, neither more nor less than the budget calls for) but also will record that time honestly, frugally, and accurately.

In return for his financial support, the client is asked to trust that the invoice from his agency is a fair and accurate representation of the time invested in his behalf as well as an honest accounting of the expenses and out-of-pocket purchases made by the agency in his behalf. When this trust evaporates—for whatever reason—ugly situations can develop, such as the recent case when the Los Angeles city controller accused Fleishman-Hillard of overbilling the city more than $4 million over a six-year period.

This emphasis on the use and value of time is unique to service organizations such as legal, accounting, and public relations firms. The importance and relevance of time places heavy responsibilities on a PR firm’s professional employees. It can, if not handled carefully, unduly emphasize the need for productivity and profit rather than the need for top-notch client service and satisfaction. Of course, if the agency’s level and degree of client service does not translate into results that can be measured in terms of client satisfaction, the agency’s longevity will be severely endangered.

This emphasis on time creates oft-strange jargon; “billability” is hard to say, but everyone in the agency business knows what it means (i.e., the ability of an individual to bill a large portion of his or her on-the-job time to clients). Practitioners’ value to an agency may be judged by how “billable” they are.

A PR firm becomes profitable by (1) serving its clients well; (2) controlling its costs (salaries and overhead); and (3) charging fair, competitive hourly rates.

Historically, agencies used a simple multiple of hourly salary costs—three to four times salary costs—to set hourly rates. However, such a basic approach fails to cover modern and continually rising technology and health care costs. Today, many firms establish hourly rates—or project cost estimates or fees based on them—by using a formula that divides the sum of an individual’s salary and benefits costs, a share of the firm’s overhead, and the desired profit percentage by the number of hours that the individual is expected to bill annually. (More on this formula later.)

IS IT A FIRM OR AN AGENCY?

There are two types of public relations firms: those that are independent—owned and managed by a single individual, a partnership, or a group of individuals—and those that are a department, division, or subsidiary of a national PR firm, holding company, or advertising agency.

Some PR practitioners insist that there are public relations firms and advertising agencies. Many of the same souls who insist that only firm be used also frown on abbreviating public relations as PR. Owners and employees commonly refer to their “agency” except in more formal situations, such as a new business presentation, when they may discuss their “firm’s” capabilities and exploits. To acquire new public relations representation, corporations conduct “agency searches.”

However, the Public Relations Society of America formerly insisted that firm be used in all Society communications, evidently feeling that agency is somehow disparaging to its members. On the other hand, everybody understands when you say, “I’ve been in the agency business for X years.” Nobody says, “I’ve been in the firm business for X years.” I tend to use firm and agency interchangeably, and I don’t mind PR. Use whichever term you’re comfortable with and that fits the situation. Don’t worry about the semantics.

ON BEING SUCCESSFUL

There are agencies that are successful: growing and profitable. And those that are not. Being either independent or subordinate has little relationship to whether your firm is successful. However, as a member of a corporate group of firms, you may be required to carry a hefty corporate overhead burden on your books over which you will have no control but which will impact on your bottom line if you manage a profit center.

On the other hand, as part of a multioffice/agency corporate family, you will have the corporate bank account as backup. As an independent, you will be largely on your own financially with the ever-pressing need to meet your monthly “nut” (minimum cash outlay including salaries and rent as well as all other nonrebillable out-of-pocket costs).

As a corporate entity, you will have the strength and varied resources of a large national firm available to you and your clients. As an independent, you can offer prospects fast turnaround and consistent counseling by senior personnel.

YOUR BASIC RESPONSIBILITIES

To ensure that your firm is successful (i.e., growing and profitable with a staff of highly competent professionals and a bevy of satisfied, prompt-paying clients) at a minimum you must meet the following six basic responsibilities:

1. Listen to the voices and tides impacting on your clients. What is the media saying? What public movements are gaining credence and momentum? What nascent trends are evident? Who is more or less important than a year ago?

2. Report and interpret what you hear. Will burgeoning public opinion create a problem for your client; what will be the timing, dimensions, and scope of the problem? What disruptions can media comment, public opinion, or popular movements create in such areas as product acceptance, employee productivity, or share value?

3. Recommend policies and programs that relate corporate and public interests. Develop programs to soothe and solve environmental concerns while protecting the organization’s bottom line. Develop training or retraining programs to meet minority or senior citizen needs, compensate for economic cut backs, and/or produce upgraded skills for technology jobs.

4. Communicate honestly and fully in anticipation of and in response to the voices and tides. Deliver your client’s messages concisely, coherently, and consistently to critical audiences and markets as broadly and precisely as necessary and possible.

5. Prove that your effort moved mountains. With the help of benchmarks, demonstrate that your communication campaign influenced public behavior, fostered product acceptance, promulgated new ideas, calmed negative opinion, dampened a fire storm, stimulated audience reaction, and reached the eyes and ears of those who control your client’s life or death.

6. Get your bills out on time. Never let a client owe you money longer than thirty days. It’s called “cash flow”!

And you will need it. Coupling wisdom and vision with finely tuned abilities to listen, interpret, respond, communicate, and demonstrate—not to mention collect what’s owed you—will generate and ensure your clients’ attention and confidence. And guarantee your firm’s success.

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