Anna Ruth Williams
Between 1990 and 2000, the world’s 10 biggest PR firms’ fee income ballooned from $910 million to $2.5 billion. Beautiful office suites were constructed. Small and mid-sized firms were sold for cold, hard cash — and lots of it.
Fast forward to 2016 when Omnicom’s PR segment recorded annual organic growth of 2.8 percent. The holding company wasn’t alone. The PR firms within Interpublic Group’s Constituency Management Group posted organic growth in the mid-single-digit range throughout 2016. Meanwhile, Publicis in 2016 reported a net loss of $564 million.
Even the largest PR firm in the world is feeling this pain: PRWeek reported that Edelman had its lowest growth in seven years in 2016, with organic revenue up just 1.7 percent. President and CEO Richard Edelman portrayed 2016 as a “transition year” — but is it really? Did our industry just have one funky year? Apparently not. In Q2 of this year, the big five holding companies collectively recorded organic growth of 0.7 percent — compared to 4 percent growth every quarter in 2014 and 2015.
This progressive decline should raise a red flag for agency executives across the world. Global PR industry growth slowed five percent in 2015, and Gould Partners says annual agency operating profits have consistently fallen, dropping from about 19 percent in 2011 to about 15 percent today.
I’m not the only person in the industry trying to understand how a 120-year old industry has gotten in this position during an economic upturn. Myself, along with a rising crop of young, first-time agency owners, are testing new strategies in an effort to regain profitability. The following new-era ideas are rooted in one simple belief — that clients, people and profits are all inextricably intertwined.
Invest in your people
I’m a pastor’s kid, so I first learned about business by watching tithing trends. If my dad spent extra time tending to a family in his flock one week, there was usually an upturn in pew attendance and the offering plate on Sunday. This was the first of many valuable entrepreneurship lessons I learned: if you put your people first, you’ll be a healthier, more successful organization.
Years later, I realized this mentality wasn’t always embraced in the private sector, even in my beloved PR. For example, professional development is abysmal. The SoDA Report says the number of agencies “not providing any training to their staff almost tripled in 2016, growing from five percent to 14 percent.”
Our industry is forced to change every day. With every newsroom layoff and Facebook algorithm change, we must adapt. Agencies that don’t put their people’s growth first will keep losing client revenue because results will suffer.
Moreover, Gallup found that 87 percent of Millennials rate “professional or career growth and development opportunities” as important to them in a job. I believe so strongly in this that in 2016, ARPR shredded industry trends by investing an average of $3,200 and 40 hours of professional development in each employee. The result? Ninety-four percent employee retention and the majority of clients increasing contract sizes with us.
Perks don’t kill profits
PR consistently ranks as one of the top 10 most stressful professions; and according to PRWeek’s 2017 Salary Survey, practitioners say this stress increases slightly year-over-year. Appeasing clients, wooing journalists and staying on top of the 15th million Google product update isn’t a cake walk. To motivate, inspire and retain today’s workforce against this backdrop, PR employers are beginning to offer non-traditional perks. Whether it’s wearing jeans to work, offering unlimited vacation or providing standing desks — added benefits are often nominal line items in an annual budget that offer big benefits.
For example, 85 percent of the PR workforce is female, yet a majority of agencies don’t offer flexible schedules to accommodate working mothers (it’s no wonder only 60 percent of women make it to management level). For comparison, look at outdoor clothing giant Patagonia which offers parents on-site childcare, school buses, two-months paid paternal leave and more. As a result, they’ve retained 100 percent of moms and estimate this investment has balanced out to a mere 0.05 percent of revenue.
While Millennials prefer benefits like team socials and free snacks, perks such as flexible schedules and commission potential are important to Gen X, since many of them are caring for their children and/or aging parents. Retaining all levels of talent is critical to preserving our industry’s reputation and individual agency/client satisfaction, which equates directly to profits.
Start spending on technology
Speaking of return on investment, look no further than the screen you’re reading this on. PR firms only spend 1.9 percent of their annual revenue on technology, versus the 5.2 percent spent by other industries. Many agencies still use antiquated hardware and clunky software programs; however, modern devices and cloud-based programs can dramatically increase productivity and efficiency. Here are a couple very basic examples:
• If your accounts receivable person is going to the bank to make physical deposits twice a week, you’re losing six hours of productivity per month, plus mileage costs. However, if you invest in a portable bank check scanner (~$50/month to lease), it allows checks to be scanned and deposited in seconds.
• Desk handsets cost about $100/each and land line contracts can cost up to $1,000 per extension. Today’s cloud-based phone providers are only a couple hundred bucks per month, offer better functionalities, and roll directly to your employee’s cell phones. This saves valuable hardware and service costs, while also eliminating that giant clunker taking up space on workstations.
The savings an agency can experience by modernizing technology can free up even more budget for what’s most important — tech that helps workers meet today’s client expectations. The emergence of omnichannel everything, marketing automation and big data require agencies to become more technologically adept. Calling journalists from a landline and giving clients archaic impressions doesn’t cut the mustard today. PR agencies should invest in modern hardware, databases, social media tools and analytics platforms to more deeply deliver measureable ROI, which correlates to client retention and upsells.
Profitability in a new era
Can our industry experience another heyday period? Absolutely. But the future of PR hinges on our ability to evolve business models, budgets and thought processes. I’m confident that if we harness the power of our people and tools, we can all work together to create lucrative businesses for both us and our clients.
Anna Ruth Williams is CEO and Founder of ARPR in Atlanta.