OP-ED: The Council is a voice for PR, with or without rankings

Each year, PR firms submit financial information so that they may be "ranked" among their competitors. It is a way to benchmark change and track trends; firms also enjoy the competitive nature of the rankings. This information has been published in trade publications for years, and is not dissimilar to the information provided by other service firms.

Each year, PR firms submit financial information so that they may be "ranked" among their competitors. It is a way to benchmark change and track trends; firms also enjoy the competitive nature of the rankings. This information has been published in trade publications for years, and is not dissimilar to the information provided by other service firms.

For the past three years, this ranking data has been issued by the Council of Public Relations Firms. The primary reason the Council began collecting financial information was to produce one set of consistent numbers (previously, different lists contained disparate information). The revenue information requested, but not required, by the Council was to conform to Generally Accepted Accounting Principles (GAAP). Revenues are defined as follows: "The sum of professional fees for public relations counseling, revenues from related qualifying services, media commissions from corporate and issues advertising up to 10% of total firm revenues, and mark-up from collateral activities such as printing." However, pro forma numbers were published; that means, for example, firms might have included more revenue from an acquisition than allowable by GAAP. This year, the Council also required that a CPA letter accompany the financial information submitted by each firm. In early March, five of the major communications holding companies announced that none of their individual operating companies could publicly release revenue numbers for publication. The rationale for this decision was based on their legal counsels' interpretation of the Sarbanes-Oxley Act and the SEC Regulation G ruling. Critics have claimed that the holding companies are using these regulations to hide poor 2002 revenues. That does not seem practical or realistic. Visibility on the revenue tables, which are used by clients, is important - especially now. Rather, the holding companies were not in a position to reconcile the non-GAAP information of the individual operating companies with the over- all GAAP-compliant financial statements they issued to stockholders. If, for example, the revenues of PR firms did not add up to the overall GAAP number reported by the holding company, investors could be confused; or worse, take legal action. So the unintended consequence of the new regulations is that in the case of the holding companies, there is less transparency. Individual operating companies may provide financial information to clients as part of a new-business presentation; they may also announce individual new-business wins. Going forward, it is not clear whether the holding companies will seek a way to comply with these regulations so that information may be released. Time will tell. The Council was founded in 1998 to be a voice for the industry. One of the responsibilities taken on by the Council was to collect and disseminate the industry ranking information. It was not the reason the Council was created. It was, however, a move to standardize the information released about the impact of the PR business. The Council recognizes the promotional significance of the rankings as a marketing tool, and the importance of one set of consistent numbers. It received financial information for the 2002 rankings from over 200 PR firms who wish to be ranked. Without the revenue of firms that make up nearly 60% of the US' PR-industry revenue, the Council cannot meet the objective of reporting with credibility the state of the business. (Nine of last year's top-10 PR firms and 17 of the top 25 have been prohibited by their parent companies from submitting individual revenue information.) Therefore, the Council cannot release a legitimate "ranking." Our website will provide an alphabetical list with 2002 revenue contrasted with 2001 for as many firms as possible. That list will be available at prfirms.org in late April. We will update the "Find-A-Firm" section of the site with this and other information about member firms, and will also promote "Find-A-Firm" to potential clients to assist them when looking for a firm. All of 2002 revenue information provided to the Council will be released to the media. It is a competitive advantage for those firms who have submitted information to get visibility, and we support exposure for these firms. Size is one way to evaluate the industry. It's self-serving, but what's wrong with self-promotion? In fact, the PR industry is looking to gain more visibility. If it's not possible to restore the revenue tables as we know them (and even if we return to rankings next year), maybe the industry needs to consider a new way to analyze itself - perhaps an independent, industry-wide, "most admired" assessment of firms focused on the tangible and intangible assets against which corporations are measured.
  • Kathy Cripps is president of the Council of PR Firms.

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