INTERNATIONAL NEWS: Managing a PR agency during uncertain times

Over the past decade, the public relations industry has grown more than 220%, capped by record-breaking growth in 2000. However, an uncertain economy and the impact of September 11 caused 2001 to be the most challenging year for the PR business since the early 1990s. Clients slashed already decreasing marketing budgets, communications programs were cancelled midstream, and PR firms were forced to cut costs, reorganize, and lay off more than 20% of the industry's most important asset - its people.

Over the past decade, the public relations industry has grown more than 220%, capped by record-breaking growth in 2000. However, an uncertain economy and the impact of September 11 caused 2001 to be the most challenging year for the PR business since the early 1990s. Clients slashed already decreasing marketing budgets, communications programs were cancelled midstream, and PR firms were forced to cut costs, reorganize, and lay off more than 20% of the industry's most important asset - its people.

The good news? PR agency leaders have learned invaluable lessons about how to manage their businesses through troubled economic waters.

Throughout the year, the Council of Public Relations Firms, under the guidance of its Agency Management Committee, implemented programs to help PR firm CEOs manage expectations, profits, and productivity. Quarterly "quick surveys

gauged agency performance, tracked growth projections, and highlighted best practices for billing rates, severance packages, and alternative compensation models. A more comprehensive review of operating ratios - the 2001 Business Practices Benchmarking Report - was published in September, providing more than 49 different management statistics, including average client profits, total compensation as a percent of revenue, and occupancy costs.

As the economy shows signs of recovery, agencies are continuing to reorganize and reposition themselves for a stronger future. A recent "quick survey

revealed that 55% of PR firms met first quarter expectations, and another 45% are projecting 2002 to be a growth year. The Council remains cautious, estimating a moderate 4%-7% growth.

What's the Council doing to help ensure its members' success? The Agency Management Committee has outlined an aggressive agenda for 2002, including:

- The May 13th issue of PRWeek will feature the results of the Council of Public Relations Firms' 2001 Industry Documentation and Rankings, providing valuable insight into agency performance as an industry, as well as by industry sector, specialty, and market.

- Chief economist, Jaime de Pinies, has been retained by the Council to provide an historical perspective of the impact GDP (gross domestic product) growth has on the PR industry and its various business units. The report will compare PR agency performance against that of the advertising industry, provide an outlook for future growth, and recommend industry sectors and specialties that may provide the greatest success.

- In June, the Council will host a workshop for PR firm CEOs, providing a fresh perspective on selling techniques for professional services firms.

This workshop, featuring a highly regarded author and speaker on effective sales techniques, will provide actionable steps to attract new clients, turn your staff into client developers, and modify traditional marketing and sales thinking. Council members, as always, may participate at no cost.

- Typically, more than 5% of PR agency revenues are dedicated to technology expenditures. To better understand the technologies currently being used within agencies, the Agency Management Committee will partner with the CIO and CFO Roundtables to conduct a comprehensive review of technology expenditures. The study will examine back office, client service, research, communications, and time management technologies to determine best practices and identify cost-saving opportunities.

Kenneth Makovsky, Chairman of Makovsky & Company, is the 2000-2002 Chairman of the Council of Public Relations Firms' Agency Management Committee. For more information about the Agency Management Committee and its programs, or to find out how your agency can join the Council of Public Relations Firms, call toll-free 1-877-PRFIRMS (877-773-4767) or visit www.prfirms.org.

- This column is contributed and paid for by The Council of PR Firms.

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