Last month the Council of Public Relations Firms released the first phase of the industry's revenue documentation, the listing of the largest 25 firms. This month the Council
will complete its listing and analysis of 316 firms. The total revenues of that first group of leading firms grew organically by 24 percent and by 31 percent when acquisitions
are factored in. These 2000 results culminate a decade of 250 percent growth, capped by a doubling of the industry over the past three years.
While this is good news for those in the business of public relations, it is also a reflection of the success of their clients. For public relations budgets to increase at
those rates, corporate PR officers are assuming increasing amounts of responsibility and taking on more strategic roles at the top levels of their companies. The challenge now is
to exercise that expanded responsibility in developing and executing strategies to help their companies through the difficulties of the current downturn. The demand for crisis
counseling, investor relations and employee communications is increasing as American companies try to maintain the support of key stakeholders as they restructure and retrench.
Pressures on marketing and sales budgets will require those who manage marketing public relations departments to demonstrate the economic advantages of maintaining and increasing
PR budgets to compensate for advertising cutbacks.
Agencies need to help clients make the case for both marketing and corporate public relations in both good and bad times. That's why the Council of Public Relations Firms,
representative of 125 of America's leading firms, has undertaken a major research initiative to build a model for predicting and measuring the business outcomes of PR programs and
for demonstrating the return on investment in corporate communications. The Council is working with five leading corporations to develop those models, based on their current
public relations programs. The dramatic growth of the industry has provided the resources and the credibility to make the strategic business case for public relations to business
leaders.
Leaders of public relations firms look to the Council for insights themselves, particularly for help in navigating the unfamiliar waters of an economic slowdown. Many public
relations firm executives have only experienced double-digit growth in their management careers. In 2000, 57 firms had growth of over 50 percent. Those executives need to make
dramatic adjustments in their management strategies, and often in their leadership styles. Their challenge is to ensure they do not sacrifice all their gains in quality of staff
and client service standards as they make needed staffing changes.
Executives in larger firms face enormous management challenges. The scale and magnitude of those challenges is far greater than their predecessors ever had to confront.
During the recession of 1991, the entire ranked US public relations industry was smaller than the total revenues of the top three firms today.
The top 25 firms, representing only eight percent of the total number of firms in this year's ranking, represent over 75 percent of the entire industry's revenues. Of those 25
US mega-firms, all but five are subsidiaries of larger communications holding companies. Most were purchased over the past 15 years and today are valuable members of their parent
companies. Those holding companies provide their public relations firms with capital to improve technology, establish training programs and expand into new geographical and
specialty markets. That expansion through merger and acquisition has been responsible for 15 to 35 percent of the growth of larger public relations firms, adding global offices
and specialties like technology communications, investor relations and public affairs. During 2000, most of the M&A activity has been driven by European firms purchasing
footholds in the US market.
The consolidation through M&A has also been responsible for the disappearance of many independent brands of public relations agencies. Meanwhile, however, new firms
constantly appear; many of them are founded by executives who leave the larger firms. Those entrepreneurs often strike out in emerging service areas and become a major source of
innovation for the public relations industry. Their firms are usually the fastest growing also. In 2000, 57 firms grew by more than 50 percent over the previous year; only five
of those hyper-growth firms were in the Top 25.
So the dynamism in today's public relations industry results from a symbiotic combination of the larger agencies and entrepreneurial firms. The former uses the stock and
capital of their holding company parents to purchase specialty services and capture clients overlooked by the larger firms in the busy market of the past few years. While M&A
activity continues, with several purchases in early 2001, it's too early to tell whether new entrepreneurs will continue to start firms in today's economy.
It is certain that public relations remains as vibrant and valuable as ever in today's economy. With the exception of the hardest hit high tech specialists, most agencies are
still projecting 8 to 15 percent growth for 2001. To help those firms and their clients navigate the uncertain economic waters this year, the Council will take snapshots of
industry revenues and other indicators on a quarterly basis.
Jack Bergen is President of the Council of Public Relations Firms. Reach him at 877/PRFIRMS, or [email protected]