Your questions are great ones, indeed. The CEO is very willing to accept the presence of a whopping Goodwill entry on the balance sheet and knows intuitively what that figure represents. Well, can we articulate what proportion of that figure can be attributed to reputational PR matters? As the guardians of that equity, we no doubt could articulate how the Goodwill entry relates to overall value, right? It’s frequently a multiplier of actual tangible equity, no?

If there is no Goodwill entry, could we ask, as you say, what dollar figure the CEO would apply to that entry if it existed?

Or am I now befuddled and rambling…?

Let me try another approach keeping in mind your (and of course Kristen’s) considerations:

°analysts, the board and financial markets today value your company somewhere between, say, 80 and 120…;
°we estimate today your pr activities contribute to that value some 20%…;
°all other things being equal, we believe it realistic to say that the program we presented today will be superior by 10%. Which means that if you decide for our program and the final result will be 10% more than 20% (i.e. 22%) we will all be happy.
If it is more than that, you give us a bonus equal to 20% of the above 10% increase, and if it is less than that then you may withdraw proportionally from our fees.

In saying this, you will of course remark, I have invented the attributed company value, the value of pr, the hunch that it is possible to measure ups and downs in a one year (rather than a 2 or 3 years as Paolo had suggested) frame.
But is this really so?

If you think about this carefully the whole argument is in the context of a conventionalist approach (I am sure there is more scientific term, but can’t find it now).

There is, after all, no logical reason why
*2+2=4;
*ten inches is that long…;
*that p&g develops 1000 grp’s
are more material statements than 10 stakeholders saying that, from 1 to 10, their trust in you is an average of 6 and that each one of those 6 points, integrated with other relationship indicators, is equal to x% of corporate value….

The only pbstacle is that while most actors in the world would agree that 2+2 is 4 and that 10 inches are that long or that grp’s are so calculated, the same cannot be said on the latter.

So, once more, it boils down to making sure that the actors involved (in this case, the Ceo, the internal PR structure, the Consultancy team, the auditors) all convene to agree on the overall and specific objectives, resources and time committed and, most importantly, on the indicators adopted to evaluate results.

Are we getting any closer, or have I lost my mind?

In my experience, ROI is a relatively simple concept driven by how much money is derived for a given investment. The difficulty comes when an organization is doing and experiencing many things — within and outside of marketing and communication — which can affect the business performance of the organization. However, sophisticated statistical models are being used more and more commonly to derive the ROI of PR on brand and corporate performance. And when these methods are applied, PR performs very well, consistently delivering the best ROI of any marketing or communication channel. Even when competing internal and external activities happen concurrently, the models can uncover the absolute and the relative contribution.

The models require a lot of performance data to create proper context…the difficulty posed by the CEO’s request is in forecasting a number in advance with no context. However, having participated in 40 or 50 similar studies, PR’s ROI ranges from $4.00 to $43.00 on the dollar which is by far the best on average (mass market advertising returns $1.20 on the dollar; price promotions actually LOSE $.25 on the dollar and trade marketing generates about $2.00 on the dollar). These numbers hold true across many industries and it should be of some comfort the CEO.

The cost for modeling is in the low six-figure range but when one considers that a company in an “avoidable crisis” can easily lose half its market capitalization (look at Ford and Fireston, for example), the level of investment is very small when compared to the many billioins of dollars and millions of people who may be affected.

Providing an answer to the CEO’s question would be difficult for anyone without direct experience in this area but I’ll bet even the CEO couldn’t answer the same question were it applied to the returns from legal, HR, advertising or other areas where the level of expenditure is many times greater than the one being considered for PR.

Probably a simple “safe” answer would be to go for a couple of case studies. Client XYZ turnover increased 15% with our PR program…