One of the most difficult things that I have had to do is to do a budget. And yet as a public relations (PR) consultant, I find myself cracking my head as to how much a programme or campaign should cost. I agree with those that say that determining a budget for PR is more about risk analysis and managing expectations than it is about financial modelling.
public relations with Lenox Mhlanga
The way PR practitioners think about resource allocation to their department or consultancy is different from how executive teams determine how to share finite resources. From experience, I have never had a situation where I believed the executive did get it.
“Executive teams processing PR budget requests need to think carefully through their organisation’s need for the broad benefits of an engaged and empowered PR and communications function,” advises Graeme Harris, vice-president public relations at Manulife.
At the very beginning, one has to look at the strategic objectives of the organisation and consider the role of PR in achieving those objectives. In other words, PR should be aligned to strategic goals. All objectives are financially bound within the budget, since this is the pot where your PR dollars are found.
The problem starts where the PR function is not involved in the strategic planning process in the first place. I have said before that this stems from a lack of appreciation of the strategic nature of the communication function.
While determining the exact allocation to PR can be a tricky business, it is a fact that PR has been notoriously difficult to measure. I dealt with this tetchy subject last time. Determining the financial value of a well-informed team or good media coverage is difficult.
“It is the effective management of negative, reputation-damaging situations that prove the value of PR, and wins over the C-Suite,” Harris says. The C-Suite being the executive team.
“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.”
My experience has taught me that there is no relationship between the state of the economy and the importance of PR. Even in time of plenty, PR always got the short end of the stick. Unless there was a cocktail or such like shindig that made the top management look good to clients.
“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,” says Terry Flynn, assistant professor of communications management at McMaster University.
“Organisational budgeting is all a matter of choice: it’s a matter of competing interests within the organisation for those finite resources,” says 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 programme?”
I could not agree with him more. I found myself winning friends in the organisation when I demonstrated the effectiveness of pro-active PR strategies set against costly fire-fighting tactics. The fact that such methods seemed to cost next to nothing to implement gave the wrong impression that PR did not require a robust budget allocation in the first place.
The importance of PR is better determined when reputation is at stake. This is bound to have a negative impact on strategic objectives.
The following questions should shed light on this critical aspect. 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 CEO resurfaces?
Experts advise that 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 specialised 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.”
So when deciding on resource allocation, a PR budget is a strategic decision that will differ for each organisation, 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. Budget for PR even if the function does not exist because you don’t know when you will need externally sourced counsel.
Next week we examine the dynamics of budget allocation between PR and marketing, how measurement has a budgetary impact on PR activities and why an investment in multimedia activities makes not only sense, but cents.
Lenox Mhlanga is a communication specialist with experience working for The World Bank Group. He is an associate consultant with Magna Carta Reputation Management Consultants and a part-time PR lecturer at the National University of Science and Technology. He can be contacted at e-mail: email@example.com or Cell: 0772 400 656.