eye_on_pr 40 state of the state of PR 2-27-03 PRSA-LA EVENT

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Nationally recognized and award-winning writer George McQuade reports on the PR industry. We also feature guest writers. If you'd like to share your media experience please let us know, or feel free to comment.

February 27, 2003 PR

By George S. Mc Quade III

The State of the State of the PR Industry for 2003


Top PR firm managers share economic forecasts and trends

A panel of some of the nation's most influential leaders in the Public Relations industry shared their observations and forecasts of the industry recently (2/27/03) at a PRSA-LA sponsored event at Bel-Age Hotel, Hollywood, CA The panelist included: Doug Dowie, senior V.P. and Senior Partner-GM, Fleishman-Hillard; Sean Fitzgerald, partner and director, Ketchum PR; Bonnie Goodman, executive vice president and general manager of Hill & Knowlton, Los Angeles; Judy Johnson, executive vice president and managing director of the Los Angeles office of Golin/Harris International; Joseph Kessler, president, Weber Shandwick California; Patricia Pérez, partner, Valencia, Pérez & Echeveste, Inc. and Jerry Swerling, director of Public Relations Studies and Senior Lecturer, USC Annenberg School of Journalism, and principal of his own firm.

"Most of us are successful," said Fleishman-Hillard's Doug Dowie "I just returned from a General Managers meeting, where we talked about the state of the industry in San Antonio, TX," said Doug Dowie, senior V.P. and Senior Partner-GM, Fleishman-Hillard, was a managing editor of the Los Angeles Daily News and Bureau Chief for UPI prior to join F-H 12 years ago. "The state of the business is clearly not as good as it was two years ago. None of us are growing, especially the larger agencies, which had been used to phenomenal growth of the last 20 years. Most of us are successful by a new way of measuring success. We are profitable, but maintaining those profits have become more difficult, because if you can't maintain those profits through growing revenues at phenomenal rates, you control those profits by controlling those expenses. The job market has been more difficult, than it was two years ago when people were offered bags of money just to come work for us." Obviously those days are over.

"Let's have this damn war and get it over with it," says F-H's Dowie

"There is a certain paralysis on the part of our clients and our potential clients. As you look into the future no one knows what is in store for us, and as the most senior people in our company that's exactly what were hearing from them. Since no one knows where we're going there is a certain paralysis in terms of budgets and programs moving forward. Some budgets are going up while some are going down and the mix of business is changing. It is still far more lucrative than journalism and it is far more challenging and exciting and energizing. I have found that the people that I work with as an executive at a public relations firm are as interesting and fun to be with than anything I ever did in journalism. I will be happier when we get past this. The analysis of most respected is 'let's have this damn war and get it over with it, because we expect there is going to be a fantastic recovery when we get there, and the sooner we get there the better off most of us are going to be.'"

Doug Dowie, F-H GM

"We are hiring at Fleishman-Hillard," says General Manager Doug Dowie

"When the high-tech market exploded, we have found other areas of which to grow and we are quite successful in those area. So the hires that we do now are very, very strategic. We have in many areas replaced the tech business with the life-sciences business. Public affairs have been very good to Fleishman-Hillard, which is the largest in the world. We've always been proud of being independent for decades and are now very proud of the fact that we do a lot of acquisitions. Over last several years we have acquired about 30 firms in a variety of different disciplines.

"There is a lot of Anti-Americanism globally," says Weber Shandwick's Kessler

"As an industry, we must resist the temptation to sell our services cheap just because the pressure is on," said President Joseph Kessler, Weber Shandwick California. "We have to increase the value of our services. Probably the single most corrosive factor in our industry, and everyone around this table is guilty of it, is when we have an opportunity to secure a client relationship, start lowering prices. That's the worst thing we could possibly do, because it devalues us, and doesn't make our services less expensive.

The second most important factor Kessler says is Globalness. "I woke up in Mexico City and had a conference call with Singapore, and my days are increasingly like that. Cost and efficiency is part of that. Cohesiveness is also critical, because companies are looking to drive a singular message in various markets around the world. Most of our growth over the last year was existing clients, which were growing and consolidating with us in markets around the world. My two days in Mexico, and not in Egypt, there is an intense anti-Americanism that is really taking place around the world right now. It will have an impact on how were advising our clients," he said.

Joseph Kessler
Weber-Shandwick CA

"Technology public relations is not dead," says Weber Shandwick

"Over a 10-year basis, we have an entire category, which is the largest in the world, are technology companies and most of which are brands that did not exist 10 years ago. And these are some of the most challenging brands to work with. We going to see the Microsoft's, Cisco's and the Oracles of the world are still going to be the driving force of change more than the GE's or General Motors in the economy of public relations," explained Kessler, who also announced that "Future Brands," one of the InterPublic holdings, is now going to be reporting in to Weber Shandwick, which he says is a signal to the industry the industry is changing dramatically, where one of the largest branding company is reporting to a strategic public relations firm."

Bonnie Goodman, H&K

Hill & Knowlton's Bonnie Goodman says "there are a few myths about PR"

"The number one myth: There's no work out there," said Bonnie Goodman, executive vice president and general manager of Hill & Knowlton, Los Angeles. "We see it the other way. While agency work is not recession-proof, but we have faired better than our advertising partners have. Areas I'm seeing growth in include: consumer goods, package goods, financial services, and homeland security you hear so much about." "There are lots of opportunities for agencies and PR Pros to get in and help rebuild business. Fro example: the work we've done for the new management at Enron." Goodman said.

"I refused to forecast the PR industry," says Ketchum's Sean Fitzgerald

"I will avoid passing any blame for our industry's current challenges on the economy downturn, the war in Iraq, Korea, the federal and state budget crisis, code green, yellow, orange or red, distrust of the Corporate America, the devaluating of the dollar, the inflating stock market, inflating fuel prices or Michael Jackson, " said Sean Fitzgerald, partner and director, Ketchum PR. "The current climate distracted many of us from mentoring others," says Fitzgerald

Sean Fitzgerald, Ketchum

"We should be focusing on four key points to ensure that our profession and our careers and maybe even our world change for the better" says Fitzgerald

1. "All of us professionals need to remind ourselves that no one, not a single person in any organization is better position than any us to provide our leadership with a total view of the landscape. And we need to act accordingly. We need to position ourselves as the best barometer of customer and constituent concern and as an early warning system for impending problems.

2. Arthur Paig believed that public relations about 90 percent doing and 10 percent talking about it. That was 60 years ago. What the hell have we done in that time to completely destroy that ratio?" We continue to let others define what we do. We continue to advocate policy development on one hand and marketing responsibilities on the other to individuals and disciplines, who either scream louder than us or package themselves better. Agencies were also advocating budgets to these professions. look what happened when lawyers led the crisis campaigns initially for the Enron, Arthur Andersen, WorldCom, Martha Stewart, Bridgestone, and Firestone. This is a time when everyone is running scared, except maybe bankruptcy attorneys and security analysts. It is a perfect time to remind our leadership of the full extent of our capabilities and the benefit of relying upon people, who not only listen to what's happening, but interpret and use that information to define policy and reputation. We need this time to remind management of our value and redefine our position within the organizational hierarchy.

3. Arthur Paig also believed that public relations is the art of developing understanding and communicating character both corporate and individual. 60 years ago he advocated that honesty and transparency in communications is what works with the various publics we serve.Our greatest opportunity rests with reviving that essence of our profession. We need to use recent corporate and government communications debacles as living examples of what happens when spin supersedes the truth. And we must say no to those who believe otherwise.

4. We to make sure we do not neglect those who are new to our profession, or just beginning their careers. Circumstances and the current climate distracted many of us from this critical activity. We need to find time to include them in relevant conversation. We need to take the time to mentor and coach. We need to create and encourage an ongoing training program. We need to identify opportunities for their career development and not just focus on our own career development.

"It was a year of corporate and institutional crisis," says Golin-Harris' Judy Johnson

"The headlines were filled with Enron, WorldCom and the Roman Catholic Church, and it was also the year of the individual crisis such as Martha Stewart and the whole debacle with Jack Welsh," Judy Johnson, executive vice president and managing director of the Los Angeles office of Golin/Harris International. "Consumers mistrust business leaders. If you look at any of the studies the mistrust numbers are at an all time high, and as PR pros it should be our role to move the needle in a different direction. If you look at the headlines today and tomorrow, we are clearly in an economy of economic instability. You look at United Airlines, Kmart and other big brands of bankruptcies they would have never anticipated this 25 years ago," said Johnson.

Judy Johnson, Golin-Harris

"The whole fear of Homeland Security will be an issue this year," says G-H's Johnson

"The goal of PR is to build trust with the key constituents of our clients and or the brands of those clients make," said Johnson. "I think this has never been a stronger time than now for all of us practioners to look at the role that we can help create in building trust. There is nothing for a consumer or constituent with a brand or product if there isn't trust."

"2002 PR trends will work in 2003, too," says G-H's Johnson

"Campaigns from an integrated point of view that broke the mold," said Johnson. "Minnie Cooper was an excellent example. You should look for creating a category, not just for the product themselves, but look for relevance and contact in terms of straight news value." Johnson cited a case study of Florida Citrus where Golin-Harris educated the consumer about the nutrition value of juice, which created a lot of awareness and garnered much publicity and media interest.

"Gorilla outreach has a lot of value in an era of reaching younger people, who don't read the daily newspaper, magazines or watch TV," said Johnson. "There is a lot of product placement blurring, the sponsorship in public relations that a lot of PR Practitioners have leveraged. We need to really look at the employee of a company under its management as an extension of or a direct correlation of what that brand stands for. Jet Blue (Long Beach), did a fine example of that last year. If we are still the age of specialists, specialties, I think a lot of clients still want to know that the person working on their business or that team really understands and is very disciplined and focused on their knowledge of that business. At the same time hundreds of large company mergers and consolidations like IBM and HP brought the number of PR firms to three or five.

PRSA-LA event at Bel-Age Hotel

"The tactics and strategies don't work anymore," says Golin-Harris' Judy Johnson

They're still looking for the global reach with one message and set of resources. As an agency head and practioner, it is our job continually at all levels of the agency, to really prove the value proposition of why a agency makes sense and really providing maximum value in being costs conscious and really being accountable in securing the results for our clients.

Accountability has to be at all levels, whether is finance, executive, to the PR department or firm we need to be accountable for what it is we say we're doing for the money we are spending. At Golin-Harris we always believe that the higher up the authority chain we can work the relationship, the more meaningful the results will be, the work will be and more effective we can be. We constantly need to look for ways to develop new communications programs, because a lot of the tactics and strategies that have worked in the past, when you look at the habits of the American population, they don't work anymore. We need to look at what people want in 2003 out of the companies they buy products from and do services with. Honesty, integrity, accountability, 0transparency, two-way communications, products that really fill real and perceived needs and to not have scandals out in the public."

Patricia Pérez, VPE

"There are a couple of realities we need to face," said VPE's Patricia Pérez

"Major firms are breaking off their multicultural capabilities," said Patricia Pérez, partner, Valencia, Pérez & Echeveste, Inc. (VPE), who said the days of having big firms knocking on your door are gone. "The economy is dictating such that some companies are looking at the cost effectiveness of having smaller firms. Also interesting is we're hearing about the PR and GR (growth ratio) and how there is a greater emphasis in terms of accountability and measurement for results of public relations agencies. Of course with the war looming upon us, if that does happen, it is going to be a whole different ballgame when it comes to specifically all of the consumer goods, the marketing for corporations, because marketing will need to change. The economy and the war will do that. We now going to be stumbling all over each other for once again the corporate responsibility, the social marketing, the warm and fuzzy Americanism and spirit campaigns that are not so heavy bottom line driven. But it is just that the economy, the economic crisis that we're facing and the war looming will completely change the way we market ourselves when we market our clients.

"Budgets are increasing for social marketing, health products, technologies, the financial services and consumer goods The other interesting factor that will impact all of us is the not only the multicultural nature of everything we are suppose to do now, but we're talking about the general market. And I hope you're talking about Latinos in California. Besides the emerging majorities, we have the growing cross-cultural polarization of our markets. Now we have Latinos, who have more in common with whites than we do with recent arrival immigrants. We have more in common with other markets than within our own racial group. We see that already with all of the teenagers in public schools. We see Latino kids Identifying more with African Americans than they do with Spanish dominant Latinos. We're going to see now a greater emphasis in true multicultural marketing and making it more effective for trying and us to find more effective means to identify the market. There is going to be greater cross-fertilization, and of course California is the breeding ground for that. While we're still singing the blues, the social marketing, the health products, all of the technologies, the financial services and consumer goods have been fantastic for us. We're seeing increased budgets in all of those sectors.

University of Southern California USC Anneberg School for Communication releases findings of 102 page GAP Study at PRSA-LA event in Hollywood that turns a few heads

Jerry Swerling, director of Public Relations Studies and Senior Lecturer, USC Annenberg School of Journalism announced some startling findings of a newly created Center for Practical Applied Research that would help all PR Pros in the country do their jobs better every day. Swerling unveiled the results of a study at the PRSA-LA "State of the State of PR Industry" workshop at the Bel-Age Hotel, Hollywood, CA, February 27, 2003. Swerling, Ian Mitroff, Ph.D. and Jennifer Floto, MA, USC Anneberg School authored Generally Accepted Practices (GAP) Study for Communication.

Jerry Swerling, USC

In May/June 2002 a 25-question survey was mailed to about 4,000 PR pros in publicity and privately held organizations throughout the U.S. Only 640 or eight percent returned the survey of questions. For more on the study go to: http://www.usc.edu/schools/annenberg/sprc/gap/GAP_Study.pdf

Goals of the study:

To determine gaps in professional knowledge, gaps in understanding and gaps in information.
To determine how organizations perceive the value of, use and organize their in-house PR departments; and, how they work with external public relations agencies.
Ascertain current General Accepted practices, and explore "Best practices" for PR.
The Most significant findings of the study:

1. The more a public relations function is designed, practiced and evaluated in close alignment with an organization's strategic business goals, the greater its support form top management in terms of budget size, and the great the its perceived contribution to the organization's success.

2. Among those companies that are recognized as being among America's best, as evidence by their inclusion in Fortune Magazine's list of Most Admired Companies:

PR reports to the Executive office and not marketing
A larger percentage of gross revenues is dedicated to PR (i.e. they have higher PR and Growth ratios (GR)
PR has greater support from senior management
The use of PR agencies (especially on an "agency of record" basis) is even more universal than among corporate America in general; · The companies perceive themselves as being more ethical, proactive and anticipatory, and
The higher the Return on Assets (ROA).

3. In difficult economic times, companies that believe in and support PR often invest in it even more;

4. In organizations where there is a high level of support for PR from senior management, PR reports directly to the Executive Office.

5. "Influence on Corporate Reputation" is the most frequently used method to evaluate the effectiveness of PR

6. Those methods of evaluation that have the greatest potential impact on corporate success are ranked at the bottom of the list of evaluative tools in terms of their current use.

7. In organizations where PR is viewed as making a contribution to strategic planning, there is a higher perceived value of PR's contribution to the organization as a whole.

8. Respondents believe that, in the view of Senior management, PR makes significantly less of a contribution to their company's success than Finance, Marketing, Strategic Planning and IT

9. PR, HR, and Legal finish in a virtual dead heat in terms of their perceived contribution to an organization's success; Security is a distant last.

"So finally, we caught up with the damn lawyers, and we're right in there with HR. And security, which was surprising, was a distance last in a post 9-11 world. I'm surprised that security finished as low as it did. On evaluations, we found this a little disturbing. Looking at evaluation tools people used. The most often metric that people cited was 'influence on corporate reputation.' Now does anyone really out there have a valid means to measure the impact of PR and corporate reputation? I don't think so. It is kind of a contradiction here. We've got this way of measuring what we do or what we aspire to, but there isn't any actual way to measure it."

Jerry Swerlig unveils USC study results

In Short, the study shows there are two contradictory, and simultaneously held, views:

1. If PR is viewed as making a significant contribution to the strategic objectives of an organization, then PR is held in relatively high regard by senior management, and by PR practitioners themselves;

2. On the other hand, PR has a lower perception of its own contribution to the success of an organization than other corporate functions, and this perception if generally shared by top management.

Swerling said, "If the PR profession is to continue to advance, it has to demonstrate to top management, in measurable, quantifiable ways, that the strategic objectives of an organization cannot be obtained without it. Strong, strategically oriented PR functions are indispensable. They are not optional. PR has to take the lead in melding the various business functions into an integrated whole to building and defend the reorganization's most important asset: its reputation. Most important of all, PR has to raise its level of self-esteem. It has to believe in itself.

"We started this about a year ago, originally set up to be a Center for Practical Applied Research that would help all of us do our job every day. It's no secret that most of the research that done in academia and communications and public relations tends to be a little bit subtle, irrelevant. What we're trying to do is to develop a research agenda that will be unlike anything else in the country. It will be something that You (PR Pro) can use in improving your practices or corporate operations. In effect, we want to be the think tank for the profession. We have already made progress at that. We've already enlisted a number of corporate clients such as AT&T, Avery Dennison, Council of PR Firms, Weber-Shandwich Worldwide, Home Depot, General Motors and other well known organizations," Swerling said.

### 3/1/03

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