IN-HOUSE SURVEY: Business as usual - Despite the downturn and uncertainty in the industry, there is an undercurrent of quiet confidence in what the future holds for those working in-house

It's business as usual for in-house PR professionals, according to

the 2001 PRWeek In-house Survey, but there is a distinct lack of

certainty about what the year ahead will bring as economic conditions

tend towards recession.



The results of this survey are based on a postal questionnaire sent to

PRWeek readers who work in-house. PRWeek designed and printed the

questionnaire, based on previous years' versions.



In total, 180 replied between 14 September and 5 October 2001, a

response rate of about nine per cent.



The majority of respondents to the survey did not expect their budgets

to go either up or down over the coming year, with 64 per cent saying

that they expected costs to stay the same. Less than one per cent said

they thought their internal costs would go down, while just under 20 per

cent expected them to go up. As far as external costs are concerned, 57

per cent expected them to stay the same, while two per cent thought they

would decrease and 13 per cent said they would rise.



Overall, the figures show that fewer PROs expected their costs to go up

- with most expecting them to stay the same. But even for the most

positive and negative respondents, the difference in budgets isn't

anything too remarkable. On average, across both sectors, if budgets are

going up, they will only do so by three per cent; if they're expected to

drop, it's only by 1.5 per cent.



It is possible, though, to see that the private sector is feeling less

confident than its public sector colleagues about the money that will be

made available to spend on PR in the coming year. Are we then looking at

a stagnant market on the verge of recession? Or are we looking at client

companies taking a 'wait and see' stance, where it is not yet known how

budgets will be affected in the coming year?



Ian Wright, Diageo director of corporate communications, and president

of the IPR, which has a large number of in-house staff, agrees there is

an element of uncertainty among his colleagues in the sector: 'People

genuinely don't know what's going to happen. I think the next few months

are going to be approached with caution. We've seen consultancies

shedding people and I'd be surprised if there's not at least a fairly

static period in in-house hiring.'



Wright points out that the in-house sector is in stronger shape now than

it was during the last recession: 'In the early 90s, in-house was not as

developed as it is now, particularly internal communications. It will be

interesting to see how people do invest over the next few months, as it

will be a good indicator of the maturity of the industry.'



This year, PRWeek broke the respondents down into turnover bands and

assessed how budgets had changed between 2000 and 2001. For the majority

of companies and organisations that took part in this survey, whatever

their size, internal and external budgets have either stayed the same or

risen slightly in the past year. Budgets did not necessarily increase in

proportion to the size of the organisation, however, although this is

likely to be down to an anomaly of the sample.



Respondents with turnover of up to £5m said internal costs had

risen from an average of £269,000 to £271,000, while

external costs had risen from an average of £179,000 to £210,000. For organisations with a turnover of £40m to £50m,

internal costs had risen from an average £483,000 to £617,000 between 2000 and 2001, while external costs had gone up from an

average of £193,000 to £245,000 over the same period.



For the most part, the amount spent by the PR department on outsourcing

is still considerably less than internal costs.



The number of people in in-house teams was fairly steady between 2000

and 2001, while 24 per cent increased in size, and only three per cent

decreased. Overall, the size of in-house PR departments seemed to even

out between 2000 and 2001.



The number of departments with only one or two employees went down from

44 per cent to 29 per cent, while the number with three to five

employees rose from 29 per cent to 37 per cent.



Similarly, 17 per cent of in-house PR divisions had six to ten people,

compared to 13 per cent the year before, and a further eight per cent

said they had 11 to 20 employees, compared to four per cent in 2000.



This even spread of employee numbers is more marked in private sector

companies, where only 26 per cent are part of teams of one or two, and

43 per cent are now in a team of three to five, compared to 28 per cent

the previous year. However, there was a slight downward shift for the

few companies with very big in-house departments. Those employing 21 to

30 staff went down from 4.3 to 2.9 per cent, and the number of

departments with more than 30 PR staff dropped from 7.5 to 6.8 per

cent.



It is a different picture in the public sector, where there was more

steadiness in the size of smaller teams, but where the number of

organisations employing 21 to 30 staff went up from 1.5 per cent to 2.6

per cent. Meanwhile those with teams of more than 30 rose from 4.5 per

cent to 5.3 per cent.



Whatever the size of the team, PR is generally being taken seriously at

board level. Overall, almost 40 per cent of PROs said the PR function

was represented on the board or on senior management teams in local

government. This was split between 32 per cent of private sector

boardrooms and almost 50 per cent of public sector organisations.



British Nuclear Fuels group director of corporate affairs Philip

Dewhurst says this is even more important during tough times: 'It's

important for chairman and CEOs to feel that they have the best

day-to-day information. Big companies that are suffering need good

quality in-house advice. The in-house sector will remain in good shape

as long as key individuals have credibility in the boardroom.'



Unsurprisingly, the biggest chunk of in-house PR resources goes on media

relations, which claims 32 per cent overall. Corporate PR and internal

communications each use up around 13 per cent of the available resources

overall, with consumer PR following on 11 per cent. Online development

eats up only 4.5 per cent of resources.



Wright says: 'If companies are sensible they will continue to put money

behind their brands. In this kind of atmosphere it's also crucial that

they don't cut back on internal communications, or communicating with

shareholders.'



When the results are split into the private and public sectors the

picture is not too different, although it's worth noting that the public

sector uses a bigger portion of resources for media relations (36 per

cent) compared to private companies (28 per cent). There is another gap

between private sector spend on business-to-business PR (10.4 per cent)

and that spent by the public sector on the same area (2.3 per cent).

Perhaps surprisingly, online development is less important to the

private sector than public organisations.



Media relations is by far the service in-house clients outsource most,

with 56 per cent saying this is a service they require of their PR

consultancies.



This rises to 64 per cent for the private sector, but drops to 42 per

cent for the public sector.



Encouragingly, strategic advice is the next most required function, with

42 per cent overall (47 per cent of the private sector and 32 per cent

of the public sector) saying this was what they needed from their

outside suppliers, showing that the stature of PR consultancies is

growing.



In-house clients still have plenty of complaints about consultancies,

though, with the biggest gripes being over promising (50 per cent) and

not the linked sin of delivering (43 per cent).



Almost half of the respondents, 46 per cent, said they spent less than

ten per cent of their budgets on external consultancies. A further 30

per cent overall said they spent between ten and 25 per cent of their

budgets on consultancies; 12 per cent said 25 to 50 per cent of their

budgets went on consultancy budgets, while a significant ten per cent

are spending more than half their budgets on outside expertise.



As far as evaluation is concerned, 93 per cent of respondents rely

overwhelmingly on media content analysis and press cuttings. While a

worrying 43 per cent, the next highest figure, say they use anecdotal

evidence or gut feeling as a means of evaluation. Only seven per cent

link PR with concrete business evidence of its success such as an

increased share prices or sales numbers on the climb.



Credible forms of evaluation could still then be considered a problem

area, and are perhaps linked to the fact that less than 50 per cent of

boardrooms contain a director who can provide direct communications

advice and experience. In this light the findings of the Turnbull Report

into corporate governance would appear to be even more important. In

stating that companies should provide an annual review of their

reputation, as they do with their finances, Turnbull states on the

record something that the PR industry has long been arguing for. But,

can in-house PROs play a role in driving it through? According to Tony

Stephens, Rentokil Initial general manager corporate affairs, the answer

is a resounding yes. 'Something like this should not be left to outside

consultancies. In-house staff really need to grab hold of this as they

are in a far better position to understand their business than anyone

else.'



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