Public relations agency leaders around the world are optimistic about the future of the business, but recognize several obstacles to continued growth, most notably the difficulty of attracting top young talent to the profession.
The Holmes Group gathered data from more than 300 public relations firms around the world as part of its first ever global rankings project—a list of the world’s leading agencies ranked by fee income that will published in two weeks time—and found high levels of confidence in the future of the business across all regions.
When asked to agree with the statement that they were optimistic about the future of growth of the public relations industry in their own market, respondents from the developing market of Eastern Europe were the most positive (8.40 on a scale of one to 10), followed by those in western continental Europe (8.31). There were high degrees of optimism in the U.K. (8.16) ands the U.S. (8.13) also and even in the Asia-Pacific region—the least optimistic—there was a positive sentiment (8.03).
“This survey, which gathers views from leading PR agencies in more than 30 countries, suggests that most of the industry’s leaders have a bullish view on the future,” says Paul Holmes, editor of The Holmes Report and CEO of the The Holmes Group. “But it comes as no surprise that their number one concern is the ability to attract top talent.
“It’s a concern the industry needs to take seriously. Good firms are built on good people, and good people are currently in shorter supply than good clients. That’s something we need to address if we are to fulfill the potential of the industry.”
Obstacles to Growth
Agency principals around the world were united in their agreement about the biggest obstacle to future growth: the difficulty of attracting the best people.
Their concern was evident in their responses to two questions. The first asked whether they agreed that there was a plentiful supply of intelligent, well-educated talent in their market, and elicited the lowest scores among 10 questions designed to assess attitudes toward public relations and potential challenges facing agency managers.
The second asked them to identify the largest obstacle to growth and invited them to select from a list of 17 factors: the difficulty of recruiting top talent was selected by more than two-thirds (67.8 percent) of respondents globally (respondents were able to choose up to three factors) and was seen as the number one problem in all five regions of the world.
Globally, the other major obstacles—all of which trailed far below the talent issues—were short-term thinking on the part of client companies (21.2 percent), the difficulty of retaining top talent (18.7 percent), lack of client understanding about the potential role of public relations (18.2 percent), difficulty in measuring the impact of PR activity (17.7 percent), and lack of funding (17.2 percent).
Factors with only minimal impact on the future growth of the industry included the management of public relations at a junior level within client companies (13.3 percent), competition from other PR firms (12.8 percent), the lack of professional development (9.9 percent), competition from other marketing disciplines (8.9 percent), economic factors (7.9 percent), clients who prefer to handle PR in-house (6.9 percent), the pressure for profits (5.4 percent), lack of industry leadership (4.4 percent), corruption in the media (3.0 percent), competition from non-traditional sources (2.5 percent), and media hostility toward the PR industry (0.5 percent).
“It’s clear that agencies are more concerned about internal issues—particularly those revolving around people—than they are about external challenges such as competition from other marketing disciplines or even other professional services, such as management consultants,” says Holmes. “People issues are paramount, but the industry also needs to do a much better job of educating clients about the long-term benefits of investing in public relations.”
There were significant regional differences, with a lack of client understanding featuring prominently in the developing markets of Eastern Europe and Asia-Pacific but barely registering in the more developed areas of the world.
In North America, for example, respondents ranked the difficulty of retaining talent, measurement, competition from other PR firms and lack of funding for PR as the biggest issues. Staff retention was also the second biggest issue in the U.K., followed by short-term thinking on the part of clients, the delegation of responsibility for PR to junior executives and measurement.
In continental Europe, short-term thinking was the second biggest concern, followed by lack of client understanding, professional development, and competition from other marketing disciplines. Lack of client understanding was the number two issue in Eastern Europe (followed by competition from other marketing disciplines, lack of funds, and measurement) and in Asia (followed by short-term thinking, professional development, and the delegation of responsibility to junior levels).
The survey also suggested largely positive attitudes toward public relations among key stakeholders in senior management—although agency principals still believe that marketers under-value the role PR can play in building brands.
There was widespread agreement that client CEOs are taking corporate reputation seriously (7.61 globally on a scale of one to 10), that companies are taking corporate social responsibility more seriously (7.17), that clients are willing to turn to public relations firms for non-traditional services such as digital communications, advertising and word-of-mouth (6.69), and that companies understand the need to balance the demands of shareholders with the interests of other stakeholders (6.48).
But when agency principals were asked whether marketers were increasing their spending on PR relative to other marketing disciplines, they were far less impressed. The average level of agreement around the world was a mere 5.61.
“We have seen a number of studies in the U.S. in the recent years that look at the marketing mix and conclude that PR is still under-funded,” says Holmes. “The return on investment for public relations spending is typically better for PR than it is for advertising, for example. But we are still not seeing that reflected in the reallocation of significant funds to PR programming, although there are signs of a shift in the more sophisticated PR markets.”
Respondents in North America were significantly more optimistic (6.24) than those in the U.K. (5.88), continental Europe (5.35), and the Asia-Pacific region (5.17) and the positively despondent agency leaders in Eastern Europe (3.33)—and the fact that the most developed regions are also seeing the most improvement is surely grounds for optimism in the emerging markets.
`North American respondents also saw CEOs taking corporate reputation more seriously (7.98) than their counterparts in the U.K. (7.91), the Asia-Pacific region (7.28), continental Europe (7.21) and Eastern Europe (7.13). Similarly, and interestingly given the general impression of American capitalism as less progressive, they also were more likely to agree that companies took social responsibility more seriously (7.50) and that companies were prepared to balance the needs of shareholders with those of other stakeholders (6.70).
Despite the frequent complaints about the relationship between public relations professionals and the media, most PR professionals seem relatively content with that relationship. And despite complaints about media corruption—ranging from the increased blurring of the line between editorial and advertising in the U.S. to the continued practice of pay-for-play in the emerging markets—there were few complaints about media corruption.
Both media cynicism about public relations and media corruption ranked among the least troubling issues when respondents were asked about obstacles to growth (17th and 15th out of 17 factors globally). Even in Eastern Europe, media corruption was mentioned by only two respondents, while in Asia-Pacific it was mentioned by only one.
And there was widespread agreement when respondents were asked whether the media in their markets operated with integrity and impartiality. Agreement was strongest in North America (7.15), followed by continental Europe (7.06), the U.K. (6.56), Eastern Europe (6.20) and Asia-Pacific (5.89).
Similarly, most PR people feel that the media respect the role public relations plays in the information process. Again, agreement was strongest in North America (7.18), followed by continental Europe (6.73), the U.K. (6.69), Eastern Europe 6.53) and Asia (6.17).
“On the whole,” says Holmes, “it looks as though the relationship between PR and the media is a healthy one. At the same time, there are some troubling issues in both the developed and the developing world, and while some PR people might welcome the short-term efficacy of blurring lines between editorial and advertising—which can create opportunities—they should worry about its long-term corrosive effect on the credibility that PR delivers.”
Sectors and Industries
Around the world, public relations agency principals anticipate greater growth in corporate reputation management than in any other discipline. Principals were invited to select up to three practice areas—from a list of nine—where they anticipated the greatest growth over the coming years, and almost two-third (62.6 percent) selected corporate reputation, followed by digital communications (43.8 percent), marketing communications (34.5 percent) and corporate social responsibility (27.1 percent).
Fewer saw growth in public affairs (17.7 percent) or financial communications (14.8 percent), perhaps because many firms do not have practice areas focused on those disciplines.
There were again some regional differences. While corporate reputation ranked number one in all regions, digital communications was seen as the second biggest area of growth opportunity in the developed markets of North America, the U.K. and continental Europe, while CSR and marketing communications tied for second place in Eastern Europe and marketing communications was the second biggest area of potential growth in Asia. Similarly, word-of-mouth ranked as one of the top five areas of opportunity in North America and the U.K., but barely registered among firms in Eastern Europe and the Asia-Pacific.
“There are growth opportunities in both traditional and non-traditional practice areas,” Holmes says. “While companies are investing more in managing their corporate reputations, and some are beginning to see the wisdom of increased marketing spend, there are also huge opportunities in new areas such as digital communication and word-of-mouth—if PR can demonstrate that it understands how to leverage the impact of channels such as the blogosphere.
“However, it is clear that these new areas are seen as more influential in the more sophisticated Anglo-Saxon markets.”
When it comes to industry sectors, meanwhile, both healthcare and technology were seen as providing strong opportunities in the future. Asked to pick up to three sectors from a list of eight, 23.6 percent of respondents identified healthcare and 21.4 percent identified technology—although there was optimism about consumer products (18.4 percent) and financial services (14.5 percent). The slowest growth is expected to come from public sector clients (4.8 percent of respondents) and non-profits (2.3 percent).
In this case, there was even more variation from region to region. Healthcare ranked number one in North America, followed by technology, while the position of the two industries was reversed in the U.K. Healthcare was also number one in western Europe, followed by consumer products, which was the number one growth sector in Eastern Europe, ahead of healthcare and financial services. Financial services, meanwhile, ranked as the number one growth sector in the Asia-Pacific region, ahead of healthcare and technology, which tied for second.