News: House rules

nullBudgets may be increasing, but there are signs that UK plc is beginning News: to take public relations more seriously as a business discipline.

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, Rhâ„¢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.

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