Budgets may be increasing, but there are signs that UK plc is beginning
to take public relations more seriously as a business discipline.
Some of the harsh lessons meted out by the media on the unwary last year
may have pushed communications further up boardroom agendas, but the
pockets of newly communications-aware CEOs do not appear any deeper.
For, although an increasing number of heads of PR now have the ear of
the company chief executive or chairmen, company heads have yet to put
their money where their mouths are and the pressure on costs remains as
strong as ever.
In fact, a surprising 20 per cent of respondents to the 1996 PR Week In-
House Survey reported a drop in their in-house budgets. Around 14 per
cent of respondents including Britannia Airways, ICI, First Leisure
Corporation, Rh™ne Poulenc and the Royal Mail trod water without
increases in budgets, even to take account of inflation from 1995
Among the 42 per cent of companies that did report increases, the growth
in budgets were not spectacular. Only a very small number of companies
were able to report a rise in fee income above 10 per cent, the majority
of budget increases ranging between 2.8 per cent and 6.9 per cent.
The most significant increases in 1996 budgets took place at the lower
end of the budget spectrum among health authorities and trade
associations. The move towards the creation of two-tier unitary
authorities has prompted a significant increase in the allocation of
local government budgets to public relations, with a corresponding rise
in public service PR budgets -Metro (West Yorkshire Passenger Transport
Executive) for example increased its in-house budget from pounds 73,518
to pounds 114,008 and external budget from pounds 25,000 to pounds
40,000 in the last year.
Professional services companies have also been increasing, or in many
cases, starting up their own PR activities - management consultants Bain
and Co, who brought in a dedicated PR manager in 1994, has now increased
its PR budget from pounds 500,000 to pounds 700,000. Other big spenders
included telecommunications operators such as multi-franchise cable
company Eurobell which almost doubled its PR budget last year.
Traditionally seen as a subsidiary of the marketing department, in-house
PR operations are gaining ground within the management structure. Only
23.6 of the respondents said that their department was budgeted as part
of the marketing department. Thirty-two per cent of respondents operate
with an autonomous PR budget, 19 per cent operate out of corporate
and/or public affairs resources, while 13 per cent of in-house PR
operations are funded directly from a central, chief executive’s or
managing director’s budget. Just under half of heads of PR who responded
to the survey now report directly to the chairman or chief executive
officer. Twelve per cent work closely with the managing director with
only 10 respondents reporting to the marketing director or manager.
Of in-house resources the greatest proportion is devoted to corporate PR
with consumer public relations running a close second. Business-to-
business takes up around 14 per cent of budgets and staff time, and
lobbying and public affairs an average of 13 per cent, with only 4.3 per
cent and 4.9 per cent of resources allocated to financial PR and
investor relations respectively.
In terms of day-to-day practicalities, staff costs account for over a
third of in-house PR budgets, the other main drain on in-house costs
being general management, and print and production costs. Design also
takes up five per cent of the annual budget - one of the major costs of
the year being the production and management of a company’s annual
Sponsorship has become an increasingly important factor in the PR
equation, taking up around five per cent of the average in-house budget.
However, staff training still ranks quite low on the in-house agenda
with only 1.7 per cent spent on staff development - below the level of
spending on corporate hospitality.
Of the 106 organisations who responded to the survey, 48 per cent use an
external consultancy, with an average allocation of six per cent of the
in-house budgets going to outside agencies. The task of hiring and
firing consultancies is usually carried out by the PR manager or the
PR/corporate affairs director. Only five respondents said that outside
agencies were hired by the marketing director, underlining the
increasing autonomy of the PR function.
Media relations is quoted by 29 per cent of respondents as the main
activity undertaken by outside consultancies, followed by strategic
consultancy, cited by 17 per cent of in-house departments. Fifteen per
cent of departments use outside agencies for literature production,
eight per cent for financial relations, 5.6 per cent for internal
communications and crisis management, and 4.7 per cent for lobbying and
In terms of liaison between in-house departments and outside
consultancies, in-house practitioners place the greatest value on the
objective strategic outlook of an outside consultancy. When it comes to
choosing an agency a company will be looking for good strategic
consultancy and sector knowledge and creativity. Ironically, quality of
media contacts rates further down the scale and only scant attention is
paid to broadcast media, with only four respondents quoting radio and TV
media knowledge as requirement for an outside consultancy. However,
speed of response was quoted an important prerequisite.
There is a fair amount of disillusionment among in-house PR people about
working with outside agencies, with failure to deliver quoted as the
number one gripe about consultancies. Twenty-five respondents also
complained about a lack of knowledge on the part of the agency about the
client’s business. Other major gripes included lack of evaluation of
work and a disproportionate amount of time spent on the account by
junior account handlers. So, it is hardly surprising that agency
turnover is quite high, with 46 per cent of companies changing their
agencies every one to two years, and 29 per cent only keeping their
agencies for between six months and a year.