Corporate PR Departments Avoid Layoffs, Cut Agency Spending
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Holmes Report

Corporate PR Departments Avoid Layoffs, Cut Agency Spending

The economic impact of the recession on the public relations and communication functions of U.S. organizations has been relatively modest to date, according to a study conducted by the USC Annenberg Strategic Communication and Public Relations Center.

Paul Holmes

The economic impact of the recession on the public relations and communication functions of U.S. organizations has been relatively modest to date, according to a study conducted by the USC Annenberg Strategic Communication and Public Relations Center, which found that the starting 2009 communication budgets of nearly 200 organizations participating in the survey were, on average, just 7.4 percent lower than what the organizations actually spent on that function in 2008. 


Thus far in 2009, surveyed organizations have further reduced their spending by an average of 3.9 percent relative to their planned budgets for this fiscal year. To address those budget reductions they have, up to this point, largely avoided dramatic cuts in their internal communication staffs, preferring to reduce compensation paid to their external agencies and/or take action to freeze or reduce compensation paid to their own staffs.         


“Overall the news appears to be somewhat heartening for the profession,” said Jerry Swerling, director of the SCPRC.  “While the recession has certainly hurt, and there will  undoubtedly be more pain in the future, our survey respondents, who come from a wide swath of the economy, have experienced significant but not debilitating budget cuts and have been able to prevent, at least through today, widespread layoffs.


“This is a significant change from the historical pattern, which saw precipitous cuts, and sometimes near total elimination of PR/communication, in difficult economic times. The only plausible reason for this change is recognition that in our hyper-informational, increasingly transparent environment, organizations of all types need to communicate effectively or see their relationships with their key audiences wither away. This seems to be true even when—or perhaps especially when—times are tough. Engaging with your stakeholders in cost effective ways is no longer an optional practice; it’s essential.”


Surprisingly, 18 percent of the responding organizations indicated that their PR/Communication budgets actually increased from 2008 to 2009, by an average of 14.2 percent. But since the original budgets for this fiscal year were established,  responding organizations have experienced, on average, budget reductions of 3.9 percent.


Half (51 percent) of responding organizations indicated their 2009 PR/communication budgets were smaller than what they actually spent in fiscal 2008, by an average of 19 percent.


Although 31 percent indicated that their FY 2009 budgets were similar to those of the prior year, this too must be seen in the context of year-to-date budget cuts averaging 3.9 percent. Also, “flat” budgets pale in comparison with the fairly substantial annual increases most PR/communication departments enjoyed over the previous 4-6 year period, as revealed by prior USC SCPRC studies.


While 63 percent indicated that their staffs did not change in size in 2008, 22 percent downsized their PR/communication staff s by about one-fifth (22 percent) last year. Another 15 percent (all of which have PR/communication staffs of 1 – 17 full time people) reported staff growth.  


As a group, the pool of organizations that participated in the study experienced no net change in PR/communication staffing in 2008, with staff reductions in some organizations being offset by no changes and/or new positions in others.


For the current (2009) fiscal year, 73 percent anticipate no changes in staffing levels while 7 percent anticipate growth, of about 15 percent on average.  A fifth (20 percent) anticipate that staff reductions, averaging to 27 percent, will occur at some point during the year.  


But compensation in 2008 was greatly affected by the recession. Nearly two-fifths (39 percent) of participating organizations froze the salaries paid to PR/communication staff, while 7 percent reduced employee compensation. 

For 2009, 56 percent anticipate compensation freezes, while 21 percent believe they will have to reduce compensation by an average of 11.7 percent.  


Of the 58 percent of responding organizations who reported working with one or more outside agencies, 69 percent indicated that they have already reduced, or plan to reduce, the fees paid to those agencies.  Those that have already reduced agency compensation have done so by an average of 28 percent, while those anticipating cuts expect them to amount to an average of 22 percent. 


These figures, in combination with the data on the staffing situation, strongly suggest that these organizations are addressing budget cuts by reducing fees paid to their agencies and/or limiting or reducing what they pay their employees, with internal staff reductions seen as a last resort. 


Finally, although respondents of all types indicated that they have been adversely affected by the downturn, those in the corporate sector have suffered more than governmental and nonprofit organizations. The latter experienced somewhat less adversity in 2008, but definitely anticipate budget and personnel cuts in 2009.

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