It's no secret that recessions, big old nasty deep ones like what we've just been through, are particularly hard on public relations budgets, which in turn is bad for the hundreds of PR firms in receipt of the shrinking largeness of those budgets. That in turn sends thousands of PR folks (often the young, good ones, unfortunately) out on the street looking for new employment. But does it really have to?
Not in all cases. Not if we in the profession and those who employ us would ever unshackle ourselves from the concept of the billable hourly rate.
Ostensibly hourly rates are bestowed by the rank and expertise of the various account team members and translated onto daily and weekly timesheets, which translate into a cumulative monthly total of billable hours, which, if God is in heaven and the stars are aligned, translate almost exactly every month to the maximum budgeted retainer agreed to by the client. Amazing. Whomever within the agency first estimated the retainer based on all these various billable hourly rates must have been a math genius.
Not so ostensibly, or at least openly discussed, is the billable hourly rate “game” conducted in virtually every PR firm. The game starts at the top and falls heaviest on those on the bottom. For it is they who pay the most severe price when it fails, which it most certainly will in tight economic times. Based on that maximum monthly retainer figure that absolutely must be met, agency management demands downward that hours be recorded each and every week (if not daily in some firms) at the necessary rates to maintain this revenue stream. The game comes in the recording of the time actually spent “doing client business,” including writing timesheets and is often the most creative thing one does weekly. Compounding the problem is the fact that these same firms have bloated their overhead and payroll with non-productive elements that become non-essential in tight times, such as facilities and trendy office space, specialty consulting practices, etc. That demands an equal increase in those same hourly rates.
Of course, lost in all of this is actually servicing the client in a reasonable, efficient, and measurable way. But exactly when did efficient, measurable client service translate to between $100 and $400 an hour?
Thus, as times get tougher, management demands a higher and higher percentage of billable hours at rates that clients' budgets can no longer sustain. Add to this the fact that this monthly budget or retainer is shrinking. The paradoxical result is clients terminate the PR firm because they can no longer afford them; and the PR firm begins laying off employees, usually those at the low-end of the hourly scale -- the ones actually doing much of the work at an affordable rate.
Here's a simple, elegant solution to keep good people employed: dramatically lower the hourly fees, or even better, eliminate hourly fees altogether. Charge clients fairly for actual PR services completed such as actual media placements, or projects completed. Incorporate a bonus structure for meeting budgets and deadlines or levels of coverage. What a revolutionary idea -- charging clients for actual work completed and not for creative “time-sheeting.”
The result will not necessarily keep everyone in PR from losing their job, but maybe just the good ones.
Richard Grove is CEO of Ink. He has more than four decades of experience in the media industry.