The Real Economics of the Public Relations Profession

12 years, 1 month ago

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nappropriate methodologies for measuring the economic scale of public relations have hugely underestimated its contribution, argues Toni Muzi Falconi.



Efforts in evaluation of our economic impact have so far analysed public relations as an industry, where demand – believed to be mostly originated by the private sector – meets the offer of services provided by agencies, consultancies and solo operators.

Little, if any, attention has focussed on the economic impact of the profession as such and this would need to include public relations performed in all three sectors of the economy: private, public and social. As a matter of fact, in most countries the public sector accounts for more than 50% of estimated active public relations practitioners; while the social sector, albeit the smallest, is experiencing the quickest growth.

If we interpret the economic impact of the profession as the “induced economic output” of the its operators’ activities, rather than just the income annually exchanged between buyers and sellers of services, we arrive at figures which are substantially different from those we have to this day passively accepted as reliable and which adopt criteria normally used for the advertising industry: the researcher creates a representative basket of organizations; inquires on the size of their annual allocated budgets; compares these to the year before; extrapolates the resulting figures to a valid universe of organizations; and comes up with a figure, purporting to show the economic impact of public relations in a specific country or territory.

In short, public relations is treated as a capital intensive activity.

Labour intensive

Considering the different processes which affect the two professions it appears clear that, while both obviously require financial resources, public relations is much more labour intensive. Increasing the effect of public relations very much depends on the number of qualified professionals involved in a specific activity, while a similar magnification of advertising impact may be accomplished by further financial investment in media space and/or time. This appears to me to be a sufficient reason to say that public relations is a labour intensive activity, like accounting or legal or medical.

From this perspective, to estimate the economic impact of the public relations profession one would therefore need to:

• Identify the number of professionals involved.
• Estimate their gross annual cost to the organizations they work for, or on whose behalf they supply counsel and services.
• Adopt an economic multiplier which accounts for the increased added value delivered by those professionals, as it would seem senseless for an organization to invest resources in activities whose final value is considered equal to or lower than their gross costs.

What is the purpose of all this? And why is it so relevant for the public relations profession to change the self-perception of its economic impact on society?

Four perspectives

The arguments can be presented from four perspectives:

First, as Harold Burson recently noted, “The broad umbrella of PR is being equated with the discipline of support to marketing.” It is certainly relevant for public relations professionals to be fully aware (and also be prepared with convincing arguments to make their stakeholders as fully aware) that their own professional activity is distinct from advertising and marketing. The reality that public relations is more labour intensive while advertising is more capital intensive provides a strong argument for a content with significant and relevant differentiation.

Second, we have passively accepted over the years the traditionally elaborated estimates of our economic impact on society and the differences from advertising seem to be way out of proportion. Indeed, they seriously misrepresent public relations as a tiny addendum to the overall marketing and advertising budget of the organization, while anyone working in our field can testify differently, if not to the contrary.

Third, many new entrants into the profession today come from specialized studies in colleges and universities where public relations is taught as a unique discipline. The body of knowledge which public relations has developed and accumulated over the last 20 to 50 years, albeit much in need of reinforcement, is solid enough to establish this notion of a profession on its own. It just does not seem reasonable to continue to stimulate these new professionals to think as if they were destined only be a sideshow in the advertising/marketing areas of organizations.

Fourth and finally, this confirms and reinforces that public relations is not merely, nor even mostly, a private sector and/or outsourced consultancy or service based profession. It is important for public relations people worldwide to be fully aware of this, as the largest investors in the world today are more likely to be the US government, the UN, the European Union or the World Bank, rather than the ExxonMobils, the Shells, the Procter & Gambles or the General Electrics.


An example

In 2001 the Italian Government implemented a census to elaborate how many public relations professionals operated within the country’s Public Sector, and came up with an overall figure of 40,000. This included employees who at the time operated in, or for, the central and local public administrations’:

• offices of relationships with publics
• offices of relationships with media
• and offices of the leadership spokespersons.

(the three functions recognized by the Italian state as subject to the provisions of the law 150/2000 on public communication).

The Italian public relations association (Ferpi) used this base figure to estimate how many professionals operated in the private and social sectors of the Italian economy, and came up with a figure of another 30,000 (25,000 in the private sector and 5,000 in the social sector). The sum of all numbers indicate that in 2001, there were 70,000 public relations professionals.

In recent years, this number has significantly grown and is now estimated to be in the 100,000 range, i.e., one in every 650 inhabitants.

In Italy, the average annual gross cost per professional to the organization is possibly 40,000 euros. By applying a min 1.5 to max 3.0 added value multiplier (which is usually adopted by labour intensive professions) the annual economic impact of the public relations profession in 2007 in Italy ranges from 6 to 12 billion euros, a considerably different figure from the 2.3 billion euros attributed by market research companies adopting traditional capital intensive criteria.

 


 

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The Author

Toni Muzi Falconi

Toni Muzi Falconi, Lumsa University, Rome; New York University, New York City; Senior Counsel, Methodos, Milano

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