Fees Up, Industry's Role Expanding Says GAP Study
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Fees Up, Industry's Role Expanding Says GAP Study

Last year saw increased in public relations budgets and an expansion of the role of PR in companies of all sizes, as the public relations profession began to bounce back from the recent recession, according to GAP III.

Paul Holmes

Last year saw increased in public relations budgets and an expansion of the role of PR in companies of all sizes, as the public relations profession began to bounce back from the recent recession, according to GAP III, the third annual Public Relations Generally Accepted Practices Study, published by the University of Southern California’s Annenberg Strategic Public Relations Center and sponsored by the Council of Public Relations Firms.

“While one year doesn’t make a trend, our findings indicate that PR is not only doing very well as compared with past years, it may actually be entering a new era of vibrancy and maturity,” says Jerry Swerling, director of the Strategic PR Center and principal investigator on the Generally study. “In nearly all types of organizations surveyed, public relations budgets increased, additional staff were hired, and PR’s role expanded.

“But the most stunning finding of GAP III is this: according to hundreds of senior-level PR people, their CEOs now believe that PR is the number one contributor to organizational success, ahead of such functions as marketing, finance, legal, sales, and others. By comparison, PR was ranked number six out of eight functions in both 2003 and 2002.”

On a scale of 1 (“does not contribute”) to 7 (“contributes significantly”), PR scored 5.51 in 2004 versus 5.09 in 2003 and 5.20 in 2002. PR’s rise was accompanied by either stagnation or declines in the rankings of the other eight functions. 

Similarly, management support for PR increased in every revenue category in 2004 versus 2003.  The rise was most striking in the case of Fortune 500 companies; 6.12 in 2004 versus 5.71 in 2003. The cumulative score of 5.72 was well above the 5.23 recorded in 2003, but below the 5.9 average in 2002.

Swerling says the increase, which he believes may be attributable to “the transparent communications intensive environment in which we now find ourselves,” is an especially strong indicator that PR might have achieved a new level of both accomplishment and self respect.

A total of 347 senior-level practitioners from companies, government agencies, and non-profit organizations responded to the study.

In the 2003 GAP Study, the authors reported that—like many sectors of the economy—the PR industry had suffered through a significant downturn resulting from economic uncertainties, concern over terrorism, and the war in Iraq. SPRC researchers now believe that the subsequent improvement in the business environment, coupled with the increasingly important role of sophisticated communications strategies in the new era of transparency, may serve as a springboard into a period of added growth and importance for the profession.

“The dichotomy we saw in GAP II seems to have been resolved,” says Dr. Ian Mitroff, associate director of the Strategic PR Center. “At that time the profession seemed to simultaneously hold two contradictory views of itself. The first view was that if PR is seen to be making a significant contribution to organizational success, rather than just producing tactical outputs, then it would be more strongly supported by senior management.

“The second view, which stood as a potential barrier to the accomplishment of the first, was that senior management has a built in bias that causes them to see PR as contributing less to organizational success than most other functions. What GAP III tells us is that those two views may have reached compatibility. PR is seen as making a more significant contribution than other functions, is being better supported as a result, and has a much stronger self-perception.”

Among the key findings of GAP III:

• Among all types of organizations surveyed, PR budgets rose by an average of 3 percent in 2004 versus 2003, with much larger increases in some categories. Additionally, companies that reported increased budgets in 2004 expected another budget increase in 2005.
• Other than the largest (Fortune 500) category of companies, every  category of company remained the same or increased PR staff size from 2003 to 2004.
• Management support for PR increased in every revenue category in 2004 versus 2003. 
• Regarding the extent to which PR’s recommendations are taken seriously by senior management, the average score (on a 1-7 scale) rose significantly among all revenue categories. 
• PR and reputational considerations are factored into strategic and operational decision making and planning in their organizations.
• More often than not, PR now typically reports to the “C-Suite” in organizations of all types.
• Among Fortune 500 GAP III respondents, the PR/GR Ratio (amount spent on PR compared to gross revenues) was $643/$1 million; among the Fortune 501 – 1000 it was $544; and among the Fortune 1001 – 2000 it was $928.

There was good news for PR firms too. GAP III data indicates that 2004 was a stabilizing year for the agencies. While the percentage of larger organizations working with agencies either remained flat or grew slightly, it declined among smaller organizations. However, clients generally allocated greater percentages of their total PR budgets to agencies. These facts, combined with the finding that the “agency of record” relationship model continued to decline in popularity, suggest that increasing numbers of clients are using a model in which they distribute a larger number of dollars, among a smaller number of agencies, rather than any single agency.

And while clients continue to value, more than any other attribute, the “extra arms and legs” agencies provide, there appears to be a trend toward increased reliance on their more intellectual and strategic assets.

But when asked to express their greatest concern about working with agencies, “cost” continued to be the most commonly cited factor.

PR evaluation made little progress, however, and CEOs want more. As was the case in GAPs I and II, “influence on corporate reputation” remained the most commonly cited metric, despite the lack of a generally accepted methodology for measuring such influence. However, when asked about the extent to which their CEOs believed that adequate PR evaluation methods currently exist, respondents were decidedly negative.

Respondents also indicated that the various communications-related functions within their organizations are better integrated and coordinated than before. This suggests that PR is playing a broader organizational role and the benefits of a more coordinated approach are becoming better understood.

The study also continued to identify significant differences between the America’s Most Admired Corporations and their less-admired competitors:

• Their PR budgets are bigger. The average “Most Admired” PR budget was $9.2 million, versus $3.8 million for all others.
• They saw themselves as being more “proactive” and “democratic” than all others.
• PR reported to the executive office 50 percent of the time among the “Most Admired,” as opposed to 53 percent among all others.
• The “Most Admired” have much larger PR staffs. For example, among Fortune 2000 companies, their average staff numbers 44.2 people, versus 22.4 for others.
• In addition to having bigger internal staffs, the “Most Admired” also make greater use of outside PR agencies. 81 percent of them use outside agencies, as compared with 71 percent for all other Fortune 2000 companies.
• The “Most Admired” also spent more on PR measurement and evaluation (as a percentage of their total PR budgets) than did non-“Most Admireds.” “Influence on corporate reputation” remained the most commonly cited metric. 

As was the case in both the GAP I and GAP II studies, those “hard” measures potentially offering the greatest degree of support from senior management (“contribution to sales,” “contribution to profitability,” “contribution to market share,” etc.) were at the bottom of the rankings for MACs and non-MACs alike. 

“We sponsored the GAP study because it’s essential that the profession monitors and tracks its own growth, and the GAP Study is one of the best ways to do that,” says Kathy Cripps, president of the Council of Public Relations Firms. “More specifically, we want to benchmark the trends among,, internal PR functions and their PR agencies, and track the overall contributions of public relations within organizations. From a bottom line standpoint, the GAP data should be useful for our members  and  their clients.”


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