Ted Pincus, founder of Financial Relations Board and a partner in StevensGouldPincus, said the 50 PR firms that declined to report 2008 revenue and staff counts for the O’Dwyer rankings violated a basic principle of financial reporting—consistency.

The current economic downturn is an “acid test of whether people can sustain not only their solvency but their principles when the chips are down,” he said in a commentary for odwyerpr.com.

By Ted Pincus

They say that every industry, sometime, faces a watershed moment that separates the men from the boys. This time is ours.

The PR industry has spent a half century on the pulpit preaching one emphatic mantra to clients everywhere — public and private corporations, non-profits, government agencies.

That mantra is simply that nothing is as important in reputation-building as credibility, and the only path to lasting credibility is truth, openness and transparency. Owning PR agencies during that half century, is there any one of us who doesn’t recall the tough crusade we waged?

The boardroom debates with clients we endured? And the inner gratification we felt when a client not only acted on our recommendation and came out of his bunker but went on to benefit long term?

Did we not all learn the veracity of the lesson we were teaching—and see living proof that rain-or-shine transparency paid handsome dividends in keeping the confidence of customers, employees, shareholders and Wall Street?

If you learned, lived and preached those sermons as I did, how could you not be appalled by the paranoid mentality that has swept over a substantial segment of the PR agency field in knee-jerk reaction to the economic meltdown of the past six months?

Witness so many agencies who spent enormous promotional sums and prodigious energy in seeking the spotlight during the bright, glorious climate of the past six years since the 2002 dip, and the entire decade of the 90’s before that.

They could not have been more aggressive, open and informative in trumpeting the impressive fee volume increases and amazing success stories. Everyone, it seemed , was a momentum player. And as long as the momentum continued, their entire practice was an open book—audited statements and all.

Agencies Ran for Cover

But this year, in many cases, the holy teachings were  shelved as agencies ran for cover. Even though some experienced only a drizzle, not a monsoon, they suddenly were beset with lockjaw.

The most dramatic manifestation of clamming up: this week’s report by Jack ODwyer that, while 23 of the 25 largest independent agencies on his roster reported faithfully — whether good numbers or bad for '08 — a remarkable total of 48 other agencies refused to disclose their latest numbers and effectively dropped out of his rankings.

He ended up with 157 ranked agencies, including new ones, down sharply from 190 last year.

Nobody ever relishes talking publicly about bad news. In my lifetime, I can’t remember a single client who enjoyed releasing a decline in volume and earnings.

And yet a growing number over the years saw the efficacy of consistency in reporting, and even bit the bullet and volunteered to forecast weak results ahead.

And if you needed proof that this was the best policy, you could look no further than a 2007 study by Accenture that documented the evidence that all-weather transparency by public companies paid a solid return in long term street support.

As an analyst or money manager, you tended to sponsor those companies that placed sustainable credibility above temporary embarrassment.

They were never in the closet.

The climate of 2009 is one that none of us—even us Great Depression babies—ever faced before. The end game of this recession—and its impact on the communications field—is unfathomable. It’s a test of everyone charged with managing a business.

But part of that challenge is the acid test of whether people can sustain not only their solvency but their principles when the chips are down.

It’s seeing if integrity can win out over hypocrisy.

Maybe it’s no accident that the most successful independent agencies on the O'Dwyer roster were — with only two exceptions — the ones that led the way in keeping their doors open.

* * *

Ted Pincus is a managing partner of Stevens Gould Pincus, merger and management consulting firm; a finance professor at DePaul; the business columnist of the Chicago Sun Times; and the former owner/CEO of The Financial Relations Board.

Aida Mayo, president, MAYO Communications, Los Angeles (3/24):
Good point. You can't tell the book by the cover. And when the PR firms drop out, there must be something really going on behind the scenes. These are the firms to be watching or reporting in 2009. Thanks for sharing the above.

Ron Levy (3/26):
Ted Pincus is one of the greatest-ever corporate PR executives but in fairness to the excellent PR firms that declined to report 2008 revenue and staff counts, the truth is that just as you and I have no obligation to announce how much we earned last year, PR firms have no obligation to announce billings and staff size.

Look at some reasons not to do it.

1. It can be bad for clients. A hostile committee counsel, or a rival in a public policy fight, or an opposing lawyer on the courthouse steps may say in effect: "Look how many millions are paid to the PR firm these people use, and look how many employees the PR firm has, and why can't this company just tell the truth instead of using a multi-million dollar PR firm with so many spinners?"

2. It can be bad for new business. A rival PR firm may boast of faster growth, and of ten PR firms only one may have the most growth last year. But a firm that grew 20% last year may be no better nor as good as a firm that grew 5%. A client is better off if the PR firm cares mainly about excellence in client results, not excellence in new business so as to look good on lists.

3. It can be bad for recruiting. Like a prospective account, an attractive employment candidate may gravitate to the PR firm that grew the most last year. So if your PR firm wants to focus on client results more than showing growth in billings and staff, you may not want to disrobe informationally more than the law requires.

4. It can be bad for getting rid of a lousy account. If a key exec at a client turns out to be dishonest or pushes your firm to be dishonest--or reveals really detestable attitudes toward women, blacks, Jews or gays--you can feel more comfortable about resigning the account, which may not even be profitable, if your "thanks but goodbye" won't result in a publicly disclosed loss of billings and staff that could make your PR firm look bad although you are better off and can can do better work without the dear departed pain in your aspirations.

There's a LOT more but the main fact is that just as there are advantages to disclosing billings and staff size, there are also advantages is keeping private facts private.

We have no obligation to wear see-through clothing, noir to have open house in our homes or offices, nor are we less admirable or effective if we don't disclose our billings and staffing.