Show me Numbers

I was talking to one of our team the other day about music and the Boomtown Rats classic song from 1979 came up. The scary thing was the person concerned had never heard of it. I played her the song – still no recognition.

And that got me thinking. Here is a song from my childhood, that I love by the way, and here is this 24 year old to whom it means nothing and to be fair why should it? She wasn’t even born until years after it came out. But what else has this child of the Eighties missed out on that it looks like she is about to experience?

Recession.

The last recession effectively ended 16 years ago when she was eight years old. She wasn’t even born when the previous one ended in the early 80’s. But to be fair this doesn’t just apply to a 24 year old. If you were born in the year IDLM was released and are therefore 29 now you would have only been 13 when the last recession ended. You may have some appreciation of that period – maybe your Mum or Dad lost their job or your house was repossessed, but I suspect a very high proportion of people in their 20’s can’t really recall what life was like living and working during an economic downturn.

So what has all this got to do with the PR Industry you ask? Well I don’t have the exact figures but I would hazard a guess that the proportion of staff working in the PR Industry who are 29 or less will be somewhere around the 60-70% mark. If my guess is right then that’s the vast majority of people working in an industry who have never known what it is like to work in a recession.

How will they respond? Positively because they won’t be laden down with feelings of inevitability? Or negatively if they don’t recognise the need to up your game big style during times like these?

Only time will tell, but in the meantime let us “console” ourselves with a truly great piece of music (even if the story behind it is clearly not a pleasant one). Particularly anyone for whom it is new.

Today’s announcement of £37bn of investment in British banks was accompanied by words from Gordon Brown at his press conference about rewarding “hard work, effort and enterprise” rather than “irresponsibility and risk taking”.

This is a sentiment I agree with wholeheartedly but one I find very strange coming from the government who only a year ago scrapped Taper Relief, effectively increasing the CGT rate for hard working and enterprising small business owners by 80% from 10% to 18%. Given the number of SME’s in the PR industry this is particularly pertinent to this sector.

At the same time they reduced the rate on speculative asset transactions e.g. share sales and buy-to-let from a maximum rate of 40% to the same new rate of 18%. The overall benefit to the Treasury? A reported “massive” £350m - small beer these days!

The government subsequently made a small gesture to the SME community by introducing entrepreneur relief on the first £1m of gains by owner managers - arguably peanuts in the scheme of things.

So at a time when the country needs, as the PM rightly points out, “hard work, effort and enterprise”, they have created a tax environment that draws no distinction between this and “irresponsibility and risk taking” in asset markets. Unless this decision is reversed in the pre-budget report I find I cannot take these messages seriously.

Very late in the day I know, but for anyone who might still be interested I will be speaking about all things online at the Media Trust PR Strategy and Planning training event, this Thursday 25th September at BBC Broadcasting House.  The Media Trust works with not for profit organisations to support them in their promotional and community engagement activities. Other speakers include Cinzia Marrocco, Head of Communications for Sense, Gerry Hopkinson, Co-founder of Unity PR and Mary Baker, Director of Porter Novelli. The event is being chaired by Gill Dandy, Chair of the CIPR Fifth Estate group. Anybody interested in last minute attendance can find more details and booking information here.

Following on from my post on Monday about the PR Week Top 150 I thought it might also be interesting to analyse the rankings from an ownership rather than a brand perspective.  As I previously stated the largest player in the Top 150, if ownership is taken account of, is WPP with £81m combined fee income across its brands. Based on a little bit of analysis I think the Top 15 allowing for ownership and partial ownership would look something like this. (Hope I have these right anyone who wants to point out an error please do so).

1. WPP - £81m (Hill and Knowlton, Finsbury, Burston Marsteller, Cohn and Wolfe, Buchanan, Ogilvy, GCI, Clarion)
2. Omnicom - £62m (Ketchum, Fleishman Hillard, Porter Novelli, Gavin Anderson, Pleon, Fishburn Hedges*)
3. Huntsworth - £57m (Citigate, Trimedia, The Red Consultancy, Grayling, Huntsworth Health, Haslimann Taylor)
4. Bell Potinger - £53m (part of Chime Communications**)
5. Brunswick - £44m
6. Financial Dynamics - £42m (part of FTI Consulting)
7. Interpublic - £36m (Weber Shandwick, Golin Harris)
8. Publicis Groupe - £28m (Freud Communications, MS&L)
9. Edelman - £21m
10. Havas - £21m (Maitland, Euro RSCG, Cake)
11. Next Fifteen - £19m (Lexis, Bite, Text 100, Inferno)
12. College Hill - £13m
13. M Communications - £10m
14. The Photon Group -  £10m (Hotwire, Frank PR)
15. Lansons Communications - £9m

* Fishburn Hedges is owned via BBDO Worldwide
** WPP holds a 21.8% stake in Chime Communications
Analysis based on company websites and/or publicly available annual reports.

Between them these 15 account for £505m or approximately 65% of the total fee income of the Top 150 of £781m. As you can see of the Top 10 only Brunswick and Edelman are not part of a wider group.

So why the title of the post? I suspect you have already worked this out, but if you haven’t it is because if each parent above were treated as an individual entry then the number of entries on the rankings would fall by 25. This revised listing would then fit the Pareto principle a lot more closely.

As a chartered accountant who has previously spent nine years working for PricewaterhouseCoopers I thought I would do some analysis comparing the accountancy and PR industries. The results are a bit one sided.

PR Industry

The total fee income of the PR Week Top 150 2008 is £781m. Within the Top 150 the single largest brand is the Bell Pottinger Group with fee income of £52m. However this is slightly misleading as the league table shows other brands that have common parent ownership separately. If common ownership is taken into account then the WPP plc brands (Hill and Knowlton, Finsbury, Burston Marsteller, Cohn and Wolfe, Buchanan, Ogilvy, GCI, Clarion) would represent the largest single entity with a combined fee income of £81m. Average fee income per head across the Top 150 is approximately £96,000 per employee.

Accountancy industry

All of the Big Four Accountancy firms – PwC, Deloitte, E&Y and KPMG – have individual UK fee income that dwarfs the entire Top 150.

PwC (2007) - £1,872m
Deloitte (2008) - £1,725m
KPMG (2007) - £1,396m
E&Y (2007) - £1,226m

Total £6,219m – eight times greater than the Top 150.

Their fee income per head is also substantially better ranging from £127,000 per employee (PwC) to £152,000 (Deloitte).

But perhaps more surprising is to consider some of the mid sized accountancy firms. The figures for just three of the larger mid sized firms – Baker Tilly, BDO Stoy Hayward and Grant Thornton – combined actually exceed the Top 150 as well.

BDO (2007) - £300m
Grant Thornton (2007) - £298m
Baker Tilly - £204m

Total £802m

The average fee income per head of these three firms combined is exactly the same as the Top 150 at £96,000 per employee.

Analysis

Two results immediately jump out. Firstly UK plc obviously invests a much greater amount in the accountancy profession compared to the PR industry with the expenditure on financial advice representing many multiples of that invested in PR.

Secondly that individual brands are still seen as key in the PR industry. By contrast accountancy firms are happy to operate as what effectively amounts to hundreds of small businesses under an umbrella brand.
 
The first will be due to many reasons, not least the legal and regulatory need for financial advice in many situations. However that still exists to some extent with regards to communications as well, particularly in connection with public company investor relations and M&A transactions. It is also likely to be due to the measurable nature of financial advice. If I save you £1m tax or sell your company for a £1m more you can immediately see and value the impact. That age old problem of PR and measurement raising its head again. After a few years working in the PR industry here is one accountant who has no doubts about the value that good communications can add. Anyone who does should perhaps give some thought to whether Northern Rock’s demise was financial or communications led. With the benefit of hindsight which of these two areas of deficit really destroyed the trust in the brand?

I’m not sure I have an answer to the second observation of brand maintenance. Both types of firms have individual directors/partners in whom goodwill is invested and both provide added value advice. However over the years the Big Four in particular have merged/taken over other firms and have eliminated brands from their identities. Had they not done so Deloitte would by now be called Deloitte, Plender, Griffiths, Haskins, Sells, Touche, Ross, Bailey, Smart, Niven and Tohmatsu. Which would be a bit of a mouthful to say the least :) Why is the retention of identities seen as so key by the PR industry?