PR firms should focus on winning over cash
© Greg Nash

Public relations companies throughout the world represent corporate, nonprofit, and individual clients by telling their stories to different audiences. For decades, the industry has innovated in almost every manner except in the way they structure client contracts. In this area, they ignore innovation in how to effectively represent their clients in favor of old-school models that don’t mesh with modern campaigns.

The traditional business practices of public relations firms are structured primarily around open-ended retainers and billable hours. These payment models incentivize ineffectiveness, lead to high client turnover and, I would argue, are fundamentally unethical.

It is important for businesses to have an “agency of record.” For these types of engagements – general public relations work on an ongoing basis where there is an understanding that the firm is simply available on standby for “whatever comes up” – open-ended retainers and billable hours are certainly reasonable and appropriate.

This contract structure, however, becomes problematic when a client needs something specific and measurable accomplished.

Clients who entrust crisis and public opinion campaigns to public relations agencies should be wary of doing so under the same terms as traditional ongoing representation contracts. When these campaigns are structured based on billable hours and open-ended monthly retainers, it incentivizes the firms engaged to delay the achievement of the campaign objectives as long as possible to maximize their profit. In other words, the longer it takes to win, the more money the firm will make, whether they achieve the client’s objectives in the end or not.

PR firms regularly prolong their efforts in order to maximize the income they can receive from a client in need. To compound this issue, clients are frequently willing to pay premiums for crisis work, further incentivizing firms to ignore the urgency that the issue presents to the client in exchange for a lucrative contract.

As a result of this reverse-incentive structure, the tactics used by firms often reflect a desire to show quantitative results, rather than qualitative success. Firms will, for example, frequently suggest that clients run “digital grassroots campaigns” which may tout a large number of letters sent to Members of Congress, or thousands of social media engagements. Such tactics are meant to create false confidence for the client that these firms are actually doing something, without regard for how or whether those tactics are actually advancing the campaign towards a win.

There is no problem with public relations firms making money. They are, after all, for-profit companies. But firms that hope to retain lucrative clients for the long haul, rather than churning through contracts after extracting maximum short-term profits without demonstrating real results, would be wise to employ a more ethical business model.

An ethical client relations contract should, as its foundation, incentivize winning over losing. An ethical engagement for a crisis campaign should be structured such that if the client wins, the firm wins (and gets paid). The ethical business model incentivizes efficiency in the use of resources and the choice of tactics that advance the campaign, rather than creating a false impression of success.

This type of business model is gaining traction among boutique advocacy firms, but has yet to be adopted by larger companies. Those firms are seeing historically high client churn rates due to their focus on work product rather than real results and clients are increasingly choosing these new, more aggressive competitors. They understand that the firm with a clear financial incentive to win will work harder and smarter than the one that gets paid regardless of whether they achieve the client’s goals.

When clients begin to demand contracts that pay firms to win, instead of to work, they will begin to see a change in the results of their campaigns. And we will begin to see a change in the operations, staffing and tactics of our nation’s large public relations agencies. It is time that we change the ethics of influence.

Wise is the Managing Partner of Wise Public Affairs, a strategic advocacy firm that focuses on the use of third party organizations to influence public policy. Follow him on Twitter @BrianJWise


 

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