About the economic impact of the public relations profession on society: the need for a different perspective, as public relations is a labour and not a capital intensive activity…

Until today most efforts in evaluating and measuring the economic impact of public relations in a given country have analysed public relations as an industry where demand and offer are mostly, if not solely, observed in the private sector, and have not looked at public relations as a profession increasingly performed in the public and social sectors of society.

Also, the criteria used for these evaluations mostly consider public relations as advertising. Basically, the researcher creates a (more or less) representative basket of organizations; inquires the size of their annual allocated budgets compared to the year before; extrapolates these figures projecting them to a (more or less) valid universe of organizations; and finally comes up with a figure considered a valid indicator of the economic impact of public relations on a specific country.

In short, public relations and advertising are considered as if they were both capital intensive activities, in that their economic impact equals the sum of budgets allocated to sustain activities considered, respectively, as public relations or advertising.

I wish to challenge this parallelism, and to claim that public relations is different from advertising because it is a labour, rather than a capital intensive profession, and it is not an industry, but a profession.

The implication is that, while it may be viable to analyse the advertising economic impact by summing the total of financial resources invested by organizations to acquire media space in various outlets, this is not a valid criteria to analyse the economic impact of public relations, since a great majority (and in many cases all) of economic resources invested by organizations in those activities are represented by the gross costs to the organization of the professionals directly or indirectly involved.

From this perspective, to estimate the economic impact of the public relations profession in a given area, country or region, one would therefore need to:


°identify the number of professionals involved,


°estimate their gross annual cost to the organizations,


°adopt a multiplier integrating increased productivity which organizations rightly consider produced by those professionals…as it would seem senseless for an organization to invest resources in activities whose final value is considered equal to their gross costs.

Consequently:

a-
To identify the number of professionals involved in public relations activities in a given country, one must establish what organizations intend as public relations activities.
For this purpose, my proposal is that public relations activities are all those performed by an organization which involve creating, consolidating, improving and managing conscious and planned relationships with an organization’s influential publics: i.e. those publics whose decisions, behaviours, opinions and attitudes produce consequences on the organization and who, in turn, are impacted by the consequences of the same organization’s decisions, behaviours, opinions and attitudes.
Of course, one may decide to adopt tighter or looser definitions of what constitutes a public relations activity for an organization, and therefore come up with different numbers of professionals involved… but the process remains the same.
The United States Census Bureau, for example, considers as public relations professionals those who are primarily engaged in the preparation of materials, written or spoken, designed to promote the interests of their employer/clients by attempting to influence the general public or other groups.
Fair enough… and under this definition, the Bureau indicates in its 1999 figures a total of 217 thousand professionals of which 68 thousand are managers, earning an average of 47 thousand dollars per annum, and 149 thousand are specialists earning an average of 34 thousand dollars per annum.
If instead one applied the definition I propose -which is wider reaching, more extensive and likely to be closer to today’s reality- and also considering the rapid growth of the profession in these last 7 years, the overall figure would probably triple to some 600 thousand (say 200 thousand managers and 400 thousand specialists) , i.e. almost one every six hundred Americans is involved in public relations activities as a profession.

b-
To estimate the gross annual cost of a public relations professional to an organization in a given country, there are sufficient official and reliable economic figures that may be adopted.
It is clear that these costs will differ according to the level of seniority, expertise and responsibilities of each professional in the organization; as well as to the specific country in which such activity is performed.
Again, if we take the USA case, considering the dynamics of the market in these last seven years, it is probably fair to say that the average gross cost of a manager to the organization is in the 100 thousand dollars per annum area, while for the specialists that figure is probably around 70 thousand dollars per annum. The total annual cost to organizations of their public relations activities today would then be in the area of 48 billion dollars (200.000 x 100.000+400.000×70.0000).

c-
Finally, to identify a useful and reasonable multiplier the added value produced by the professional, economists of other labour intensive professions (i.e. accounting or law or medicine) agree that the multiplier should vary between 1.5 and 3… according to the value (also somewhat reflected in the annual gross cost of each professional) attributed by the organization the professional.
In other words, the start-up professional whose task it is to recall journalists to inquire if they have received a press release will probably have a gross cost to the organization of, say, 40 thousand dollars a year and his total economic impact will probably not exceed 60 thousand (x1.5), while the director of communication of a huge corporation will probably cost her/his organization in excess of a million dollars a year and his total economic impact will certainly be at least of 3 million dollars a year (x3).

This criteria, highly debatable of course, also takes into account the traditional fee billing procedures which for many years were (and, in part, are still being) used by consulting companies in public relations, which normally consider that a consultant’s gross cost to her/his agency should be, wherever possible and in the best of instances, multiplied and billed to a client by three. This will therefore include the consultant’s cost (one third), the general expenses of the organization connected to the her/his day-to-day activity (a second third), and the third third allows for the amortization of investments plus gorss margins to the organization.

So if we return to the USA case and multiply by an average of 2.5 the 48 billion dollar the per annum gross cost of public relations managers and specialists to organizations, we could say that the annual economic impact of the public relations professional in the USA is equal to 120 billion dollars.

Let me stop here for the time being and let me hear from you.
Objections? Counterarguments? Relevance of the arguments?

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