For PR Firms, "Lost Week" Then Quick Recovery
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Holmes Report

For PR Firms, "Lost Week" Then Quick Recovery

Public relations firms took a major hit in the week following the terrorist attacks, but most report that business has already bounced back to pre-September 11 levels.

Paul Holmes

NEW YORK, October 15—Public relations firms took a major hit in the week following the terrorist attacks on the World Trade Center and the Pentagon, with many employees unable to get to work in New York and Washington and many clients putting programs on hold, but most report that business has already bounced back to pre-September 11 levels.
At Hill & Knowlton, one of the world’s largest PR firms, the hit from the terrorist attacks was “hellacious,” says U.S. president Tom Hoog.
“The New York and Washington offices were evacuated several times,” says Hoog. “People just were not there, and when people were there some of them had a hard time focusing. Clients, meanwhile, were totally focused on the effects of the tragedy on their business. Public relations was not at the top of the agenda for anyone.”
So far five days, revenues were down dramatically. That may not sound like a lot, but for a firm like Hill & Knowlton, which reported revenues of more than $300 million last year, five days at 50 percent capacity could cost between $2 million and $3 million. However, Hoog says numbers for the remainder of the month were in line with budgets.
“Any further downturn is going to be more a function of the economy in general than a function of September 11,” he says.
John Graham, chairman of Fleishman-Hillard, reports a similar experience. “We saw a hesitancy among clients when it came to making decisions,” he says. “But by the end of the month we were seeing clients begin to make decisions. We saw the same thing during the Gulf War. When there’s uncertainty about international affairs, there’s uncertainty in the corporate world too.”
The impact was little different at small and midsize firms. In the short-term, the attacks led to an immediate reevaluation of most client programming, including reassessment of strategies, says Dorothy Crenshaw, principal at New York’s Stanton Crenshaw Communications. In some cases, program elements were replaced with new, more relevant ones.
Some specific areas were clearly more severely impacted than others.
“The short-term effect on the PR business can be felt in many quarters,” says Richard Barry, president of Chicago’s Public Communications. “Since the attack on America we’ve had several professional association clients cancel meetings which in turn were their large revenue producers. And some of our local clients, such as museums, zoos  and other popular destinations, have trimmed their programs slightly because of the projected revenue loss of fewer visitors.
“On the other hand, for the longer term, we’re seeing our basic clients, the pharmaceutical manufacturers, major professional health care associations, non-profit institutions, even professional sports and entertainment organizations, maintaining their programs and in turn our relationships with them.”
Some agency presidents say the attack may even have stimulated some activity.
Says Cathy Ackermann, president of Tennessee’s Ackermann Public Relations, While I think September 11 definitely added to the general air of caution business-wise, I do not think it has had that much impact on the PR business beyond what the recession had already done to us.” Ackermann says her firm picked up more new business in September and early October than in any 30-day period in a long time. “I almost think that the feeling of patriotism and resolve that pervaded the country following this disaster gave many businesses a sense of determination and caused them to get off the dime, once the initial shock of it all began to wear off a little.”
Meanwhile, any long-term impact from the terrorist attacks is likely to be felt more keenly in the consumer-marketing arena than in the corporate realm, agency principals say.
“The hardest hit market segments are financial, insurance industry, travel and destination clients,” says Barry. “Consumer products, consumer affairs, public education on attack related issues—air quality, biotechnology, for example—will remain high priorities as will crisis communications programs and assignments for clients which have a pro active rather than a reactive stance.”
Crenshaw, meanwhile, is seeing an increase in activity on the corporate side, in the financial services and information sector due to market volatility, and in healthcare, while high-tech is soft. The firm is also seeing more activity in employee communications, executive visibility, and research and strategy, and less in special event marketing and promotion.
At H&K, Hoog says senior executives are trying to figure out how the attacks will impact various public relations disciplines.
“It raises some interesting questions,” he says. “Is corporate reputation more or less important? Is employee communications more or less important? Is philanthropy more or less important? How should we be counseling our clients on those areas? In the marketing arena, is sports marketing going to be more important? In times of trouble, will sports become the most important escape for people, and will that create new opportunities? We don’t have the answers, but these are questions we have to ask if we are going to counsel our clients effectively.”
Crenshaw, meanwhile, believes one long-term consequence of the attacks will be “a reassessment of the value and relevance of public relations—but that this is not necessarily a bad thing.  We’re seeing much greater emphasis on corporate reputation, and by association the positioning, corporate marketing and stakeholder relations skills that drive it.”
She is also seeing a redefinition of leadership. “The post-terrorist age represents a new type of crisis that needs to be managed and wherein a ‘new’ type of leadership will be valued. The ability to communicate effectively and consistently, to calm, to inspire, and to show leadership is at the core of the ‘new’ leadership model, and we as communications experts have a role to play here.”
Others are optimistic that the crisis will enable some firms to distinguish themselves from their peers, by providing clients with the strategic counsel they need right now.
“Over time, though, we believe those firms who tie their work directly to bottom line results
will do well in any scenario,” says Bob Matha, president of Chicago’’s Matha MacDonald, which specializes in employee communications. “If a recession takes hold, companies will be pressed to find new ways to improve performance. If a firm can help them do that, there should be plenty of work.”
That’s why most observers are optimistic that the industry can bounce back. Fleishman’s John Graham, for example, believes the momentum the industry picked up over the past five to ten years will not be lost. “I think that’s about the role of public relations being better recognized than it was in the past,” he says. “We are still seeing a lot of new business opportunities, because companies understand they need public relations.”
That doesn’t necessarily mean a recovery is just around the corner, however.
“The one thing I’ve learned is to expect the unexpected, so it’s hard to prognosticate,” Crenshaw says. “But I expect 2002 to be a fairly solid year unless the economy worsens. True, the new business pipeline is a great deal emptier than it used to be, but those clients who are calling are far more serious and substantial than last year. Clients will seek ways of protecting and enhancing their corporate and brand reputations and will be looking for strategies that convey their messages effectively and position them as relevant, values-driven, and responsible.”
“Notwithstanding further attacks, we’re cautiously optimistic that as we move into the new year that the U.S. will recover,” says Barry. “But who knows? We need to watch, wait, plan for the worst but hope for the best. In the meantime, we're very grateful for the loyalty and support of our clients who are honoring our contracts, maintaining their programs and listening to our ideas.”
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