For those of you who don't YouTube, here is a closed caption script:
What if you went to a fast food drive through, ordered one of those value meals, drove around to the window, and then got nothing but an empty sack because, "...well they tried real hard to make food for you, but just couldn't..., but it will still be $4.00 please... ?"
That would be a crummy way to run a fast food place, but it’s exactly the way most Public Relations firms work. At most PR firms this (pointing to watch) is the most important part of their business. This (the watch) is how they measure success. The amount of time, billable time, they spend working on an account. What if they don't get their client any media coverage? Doesn't matter, they get paid the same either way.
Big Full Bag of Burgers and Fries or Empty Sack of Air? The price is the same.
At INK, this is the most important part of our business (newspaper). This is how we measure success. Coordinating actual media placements for our clients, and getting paid more when we get them and less when we don't.
It's called Pay for Performance Public Relations and when budgets are tight, and everyone is looking for a solid return on investment, paying for real results, makes a lot of sense.
Pay for results. You expect it from your Burger Joint maybe you should expect it from your PR firm too.
Not in all cases. Not if we in the profession and those that employ us, would ever unshackle ourselves from the concept of the billable hourly rate.
Ostensibly hourly rates are bestowed by the rank and expertise of the various account team members and translated onto daily and weekly timesheets, which translate into a cumulative monthly total of billable hours which, if God is heaven and the stars are aligned, translate almost exactly every month to the maximum budgeted dollar figure retainer agreed to by the client. Amazing…whomever within the agency first estimated the retainer based on all these various billable hourly rates must have been a math genius.
Not so ostensibly, or at least openly discussed, is the billable hourly rate “game” conducted in virtually every PR firm. The game starts at the top and falls heaviest on those on the bottom. For it is they that pay the most severe price when it fails…which it most certainly will in tight economic times. Based on that maximum monthly retainer figure which absolutely must be met, agency management demands downward that hours be recorded each and every week (if not daily in some firms) at the necessary rates to maintain this revenue stream. The game comes in the recording of the time actually spent “doing client business”, including writing timesheets…and is often the most creative thing one does weekly. Compounding the problem is the fact that these same firms have bloated their overhead and payroll with non-productive elements that become non-essential in tight times…facilities and trendy office space, specialty consulting practices, etc…that demands an equal increase in those same hourly rates.
Of course lost in all of this, is actually servicing the client in a reasonable efficient and measurable way. But exactly when did efficient, measurable client service translate to between $150 and $300 an hour?
Thus as times get tougher, management demands a higher and higher percentage of billable hours at rates that the clients’ budgets can no longer sustain. Add to this the fact that this monthly budget or retainer is shrinking. The paradoxical result is clients terminate the PR firm because they can no longer afford them; and the PR firm begins laying off employees…usually those at the low-end of the hourly scale…the ones actually doing much the work at an affordable rate.
Here’s a simple, elegant solution to keep good people employed…dramatically lower the hourly fees, or even better, eliminate hourly fees altogether. Charge clients fairly for actual PR services completed…actual media placements, and projects completed. Incorporate a bonus structure for meeting budgets and deadlines or levels of coverage. What a revolutionary idea…charging clients for actual work completed and not for creative time-sheeting. The result will not necessarily keep everyone from losing their job…just the good ones.
*(For the sake of full disclosure, my firm and myself personally, have not billed our clients by the hour in seventeen years…through three recessions…but what do we know.)
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As the economy worsens and it begins to affect each of us personally, we begin the very human process of finger pointing and blame gaming. Lately the focus of some of that blame has been leveled at our own profession…public relations. Guess who’s to blame for the recession? It rhymes with ‘shublic belations’
I’ve had a few good rants myself on the subject. But to be fair, my criticisms have not been at the profession overall, but at certain practices and firms that seem determined to black all of our eyes. And there lies a bigger problem for some of us that practice PR a little differently…that is, smartly, honestly and fairly.
In the meantime, headlines continue to be made by not only the extravagant hiring of PR firms, like AIG running amuck, to the City of Chicago’s recent firing of PR firms.
Let’s be clear…PR did not cause this recession and PR is not extending it. And here’s an even bigger blow to the PR blogosphere…we’re important, but not that important in the grand scheme of world geopolitics and geo-economics to be having a significant impact one way or another. That is not to say, we’re not an easy target. We are. And that’s our own fault. PR’s job and those of us who have been proud to practice it for a living over the years, is to facilitate information, to assist in communicating, and at times to educate…and in so doing, to often influence those to whom we’re communicating. We’re our clients’ storytellers when they have things of significance to tell. But we should never be their shills nor their “spinmeisters” and we should never ever become the story itself. And most importantly, when a client asks us to tell a story that in the best case is of little or no news value or worst case, is disingenuous or misleading, we should be honest and give them the best of professional advice…no.
But the most egregious of PR practices and the single greatest target of criticism during an economic downturn is the size of many of the large firms’ fees and the lack of accountability in how the traditional PR world is compensated. Inflated hourly fees for highly subjective and non-tangible results deserve the criticism…and I personally hope the outrage continues.
We as a country and as an economy will weather this crisis, bad as it is and bad as it may yet become. And while keeping our individual and professional roles in some humble and realistic perspective, we as PR practitioners can help and make a difference. How…by demanding that PR go beyond the image of high priced counselors to a more equitable compensation system based on fair pay for tangible performance.
AIG, the insurance giant with the largest hand out (literally and figuratively) has decided that it simply must have additional help in spinning it’s story to an even greater number of audiences, and of course, in so doing, spend even more of our tax dollars. AIG’s actions remind me of the old adage about the lone man in a lifeboat that assumed the more people he added, the better it would float.
And what’s even more depressing is that with all these supposed heavy hitters with the astronomical hourly fees in the AIG line up, one good media trainer can’t be found to provide some sage advice and counsel to their client’s CEO before making an appearance on the Today Show? I know that Tom Cruse might disagree, but Matt Lauer isn’t exactly Mike Wallace. Some where, some how, buried within Kekst & Co., Hill and Knowlton, or Burson-Marsteller is a media specialist at a zillion dollars an hour to rehearse CEO Liddy to ward off those tricky Lauer zingers. AIG CEO draws mixed review on Today. Of course, an even more important question might be, why the Today Show?
My preference; to have Liddy’s butt grilled by Congress as to why AIG is spending hundreds of thousands of dollars on PR firms’ hourly fees to make excuses rather than humbly and diligently fix the problem.
As a point of full disclosure and a nod to the late Senator Bensten, I know Kekst & Co and Burson-Marsteller, I’ve worked with and for both, and they’re friends of mine…or at least the founders. Both however, along with Hill and Knowlton, the other PR counsels of record, and an enormous internal PR group, should not be above the criticism from the rest of us in the PR profession any more than AIG should be exempt from the wrath of Congress or the tax payers for wasting extremely valuable dollars to benefit the elite few over the many. Yes, AIG, could use and needs professional PR assistance…obviously. But exactly how many very expensive “suits” does it take to give a few solid pieces of common sense advice, to write a non-nonsense annual report, to tell this client to be humble, work hard, react truthfully and openly when asked, but keep a low profile and until you’ve earned back the public’s trust?
The answer evidently is the same number as it takes some to change a light bulb...
One truth is not so self-evident…all PR firms are not created equal.
This certainly goes for those of us in the profession dedicated to the proposition that charging by the hour might be appropriate for a hot masseuse, but probably not for public relations…and absolutely not for media relations. It seems the economic disaster has once again turned attention within our profession toward something “unique,” something “new,” something almost “revolutionary”…pay-for-performance PR. Once more, a compensation model that has been practiced successfully for almost two decades is being trotted out of the shadows into the bright sunlight by our own trade media as either the “answer” to reduced marketing budgets at best…or as a viable test at worst for companies willing to experiment. How To Get Good PR Without the Big Retainers
This happens every few years when the traditional big hourly retainer PR firms and their clients begin to feel the economic squeeze of constricting budgets, or heaven forbid, a pang of guilt. Ok…the guilt thing is way overrated.
And with this renewed focus on pay-for-performance PR, comes the usual confusion as to what it is, who does it, and most importantly how do you go about selecting a firm should you decide it’s your path. Here are some thoughts from those two decades…
Pay-for-performance PR goes by many names….”pay-for-results,” ”incentive-based compensation,” “contingency-based,” and the most unglamorous, “pay-for-play”…but all are intended to describe PR firms that utilize a compensation system where the majority of their charges are based upon successful media placements or completion of actual designated services, i.e., speaking engagement, etc….and not by hourly fees or large retainers based on such fees. Some may offer some combination of hourly fees and/or retainers depending on the PR services being requested. However almost always the media outreach portion is performance based. One of the most common misunderstandings about pay-for-performance PR is that it is some how “cheaper” than under a traditional compensation model. Not necessarily. Over the long run of several months or years, a client may pay close to the same number of dollars, but the difference will be that each one of them will be attributable to a specific tangible result…not wasted effort.
And in spite of the old-fashioned basic fairness of this compensation structure, only a few PR firms practice it on a regular basis…and only a very few have practiced it successfully over a long period of time for all of their clients. Some large traditional PR firms have experimented with “pay-for-performance” for short periods or have tried to pass off the hourly/retainer model under its guise but seldom with any long-term success. The most common reason for failure lies in the fact that it is the antithesis of an ingrained compensation culture based on charging for the abstract “consulting” and “effort” rather than for a tangible something.
So, if there is only a small percentage of PR firms practicing legitimate pay-for-performance PR, how do you know which will best serve your needs as a client. Here are several pointers…
* Do a search for “Pay-for-Performance PR” on the Internet and review their web sites. Then contact the principle of the firm directly, discuss your particular PR needs, and their experience with similar challenges.
* Do not hire a PR firm strictly online no matter what inducements may be offered. You can’t go “cheap” by filling out detailed PR or media needs online and expect any real level of successful service. Successful PR placements are the result of a collaborative process between the client and the agency…not a questionnaire.
* If still interested, ask for a detailed written statement of the PR firm’s compensation structure and how their fees are determined. It is fair and appropriate to discuss budget and estimated potential charges at this point, but understand that under pay-for-performance compensation, the good news is that budget ceilings may not always be achieved.
* Be leery of bundled pricing. Ask to see what’s in the “bundle” and that you’re paying for what meets your needs, not the agency’s.
* Make sure that compensation is based on real “performance” based on the successful publication, broadcast, or posting of your story…not just the “setting up of an interview opportunity at a specified date and time.” Make your agency deliver the actual placement…along with its invoice.
* And always make sure you’re willing to work with the agency as a team whichever PR firm you select…i.e., check the chemistry, not just their experience. As mentioned previously, successful PR is a collaborative process based on trust, responsiveness, and teamwork. And oh…patience.
