How Much Should an Organization Spend on PR?

This post originally appeared on Newswire.ca

If only there was a tidy formula to help companies decide how much to spend on public relations. “Unfortunately, there is no such algorithm,” said Terry Flynn, assistant professor of communications management at McMaster University, Department of Communication Studies and Multimedia.

Determining a budget for PR is more about risk analysis and managing expectations than it is about financial modeling. Executive teams processing PR budget requests need to think carefully through their organization’s need for the broad benefits of an engaged and empowered PR and Communications function.

Aligning PR to Strategic Goals

As with all important decisions, this one starts with a solid strategic document. All activities of a firm, whether it is a one person shop or a 10,000 employee behemoth, are typically addressed in such a document. Looking at the strategic objectives of the organization, consider the role of PR in achieving those objectives.

“If objectives are truly strategic, they should all be financially bound within the budget,” advised Flynn. This is the source of your PR dollars, but determining the exact allocation can be a tricky business.

PR has been notoriously difficult to measure and budget requests may be built around rather soft proof points. Determining the financial value of a well-informed team or a good media list is difficult.

“Thirty years in the business has taught me that a positive story in the media elicits a ‘but what have you done for me lately?’ response from the C-Suite. Its table stakes; do what they pay you to do, and expectations rise,” advised Graeme Harris, VP Public Relations, Manulife. “It is the effective management of negative, reputation-damaging situations that prove the value of PR, and wins over the C-Suite.”

“Every area will consider itself to be under tight budget constraints,” said Flynn. “But if PR is tied to strategic objectives, and if you can show a return on relationships, reputation and engagement, at the percentage you said, then the conversations get easier.”

Many senior management teams in Canada are working through the challenge of budgeting in an economic downturn, seeking to trim costs across the organization.

“There is no correlation between the economy and the importance of PR, just as there is no correlation between the economy and the importance of other functions,” pointed out Harris. “It would be wrong-headed to think that PR can somehow alleviate the issues created by a slumping economy, however in many ways, PR can be a fixed cost and therefore it can be more cost-efficient than other means of promoting your company in tough economic times.”

“Organizational budgeting is all a matter of choice: it’s a matter of competing interests within the organization for those finite resources,” said Flynn. “Because PR and communications are corporate functions — and not creating revenues directly — you have to look at it from the point of view of: what’s the cost of not having a public relations program?”

PR and Marketing – closer than ever, but still not the same

Keep in mind while making these decisions that marketing and PR are not the same. Although the disciplines are integrating in many areas, including content marketing and social media, “PR should be a defined, separate function from marketing and should be uniquely and properly resourced,” Flynn advised.

“Experience and research tells us that these voices both need to be present,” said Flynn. Marketing and branding content has a customer-centric focus, successful in establishing a transactional relationship with the customer. PR and Communications, on the other hand, reaches additional audiences both inside and out. How you communicate with employees, for example, is different from communicating with reporters, investors or customers.

Areas where marketers are best to step back are media relations and any form of crisis communications. While marketing tools such as web templates or emailing platforms are useful in achieving end communication goals, it is the PR and Communications team that is trained for and excels at leading corporate messaging development and sharing strategies.

The cost of knowing vs. not knowing

If an organization is uncertain as to the importance of PR and Communications, it may be time to consider the value of reputational status on strategic objectives. Would sales improve if the company’s product line was given favourable reviews by the press? Would investment increase if a company’s environmental improvements were more broadly known? Would we lose our market stronghold if that long-resolved rumour about our industry resurfaces?

If reputation management aligns with strategic objectives, the next step is to consider the value of maintaining current market perception or of improving market perception vs. doing nothing. You could place some general estimates around revenue losses or legal fees, and you could include the cost of bringing in a specialized agency to rescue the situation as it happens.

“To my mind, PR is a reputation function. It should be tasked with protecting, and enhancing your company’s reputation in the media,” said Harris. “If this is the role of the department, an enlightened company will understand that the resources required are a good investment.”

But true insight into reputational metrics and their impact on strategic objectives comes from ongoing measurement, usually based on a continuous program of research and review. This means that in an ideal world, a healthy part of your PR budget would be allocated to measurement. Yes, you need to invest now to truly know how much to invest next year.

“PR measurement, while flawed, is still important because it ascribes a value to the PR activities in a way that a business can understand. I would say that the accuracy of PR measurement is not far from what is used to measure the impact of advertising,” said Harris.

The cost of measurement can differ across organization types and industry types. For some, a research company offering complete ‘reputation score card’ services would be an essential expense, while another company could get away with DIY surveys off the website.

All companies should have tools that assist with media and social media monitoring, and the price range of these tools differs according to quality and features.

“The increase of digital measurement can also supplement PR measurement, particularly if you see click activity on ads on stories delivered by PR. It’s also important to measure PR social activity; for example, when your story is covered by the media and they promote it on social media — it’s a PR win and should be measured as such,” said Harris.

Consider measurement an essential part of the PR budget you’re assessing. It will be the proof point for all budgetary discussions moving forward.

The myriad monies involved in PR

“It is not difficult to defend your PR budget if you continually demonstrate that you are actively looking for ways to reduce costs, integrate costs with other activities, or use a zero-based budgeting approach for example, where all PR activities are funded by the business on a case-by-case basis,” suggested Harris.

In addition to media monitoring and measurement, PR and Communcations teams also need budget to fulfill content distribution requirements, whether newswire costs or social media platform subscriptions. Increasingly, PR is adding paid media into the communications mix, thus requiring budget for promoted posts on Facebook, LinkedIn or sponsored Tweets and similar tactics across platforms. It may also prove beneficial to create and place sponsored content, a form of advertising that is often a shared responsibility of the PR and marketing teams due to the messaging contained within.

Funds should be allocated for multimedia support. Often PR can use visual assets created for marketing purposes, but they may also need to hire their own photographers or videographers to supply non-branded, media-ready assets to newsrooms. And speaking of newsrooms, PR teams need subscriptions to the magazines and newspapers they pitch. Often the online and printed versions differ.

Who, and how many, will do what?

Ideally you would find out the intent and desire of the senior leadership team in terms of the communications function before designing or financing your PR department. Many organizations have empowered and capable Executive Assistant layers who take over the planning of holiday parties, Town Halls and other internal events, sponsored events or even executive speaking opportunities. Some organizations have a talented Products Marketing team capable of writing announcement materials, customer communication and sales presentation decks. In the absence of this support, these tasks often fall to PR and Communications departments.

Making a call on the number of staff can be policy-driven as much as a budget decision. “How many people you need depends on the activity of the function,” said Flynn. “There’s no magic or central theorem to number of staff.”

The size of a company, the scope of its strategic objectives, the nature of its media relations and communications activity and its integration with marketing are all factors to consider.

In Canada, there seem to be fewer full-time employees (FTEs) than at a similar company in the United States, Flynn noted. “We’re doing more with less, but also, we have less population,” he said. “It doesn’t mean the function is less valued; it means we’ve found different ways of achieving the goals.”

Maple Leaf Foods, for example, during its listeriosis crisis, had three PR people inside the company who did an incredible job saving the company’s reputation, said Flynn. The company also hired outside communications help. “It all depends on the capacity of the people who are on that team.”

“If the PR department is also responsible for issues management and crisis communications, then the business should be eager to ensure that you have the resources you need,” said Harris.

Some companies keep a small in-house team to manage “usual” work, with an agency on stand-by to pitch in on special circumstances such as restructurings, acquisitions, product launches or crises, when communications demands can be overwhelming. Other companies build robust departments capable of handling any assignment without external assistance. Still others may outsource the entire function, keeping just one person inside to help manage the agency relationship.

The functions served by communications staff are varied, and that also needs to be taken into account when deciding on the size of your team.

For instance, if you have tasked your team with both internal and external communications, you will likely need someone overseeing the whole department, as well as at least one person responsible for internal and at least one for external. You may also add someone for social, or for working on marketing integration projects. Staff budgets are also dependent upon on the level of expertise you require and the salary range in your area; salaries are highly dependent on location.

While PR professionals are in general, generalists, don’t be tempted to pile too many diverse areas of responsibility onto a single person or a small team. Just because they can do everything doesn’t mean they should do everything. PR is by nature a high-burnout role, and you don’t want to lose integral staff over the cost of an additional team member.

What should you spend on PR?

A PR and Communications budget is a strategic decision that differs for each organization, but it is an important function that is critical for all. The consequences of an underfunded PR budget are unexpected costs in other areas, including lost revenue, staff turnover, legal fees or crisis communications consulting.