Is a debate against the way users of public relations pay for external PR agency services likely to erupt within the Australian PR industry? That’s a question in-house PR Managers and PR agencies should asking given the revolt that seems to be emerging in the local legal profession about charging systems.
Judging by the space given to this topic recently by The Australian (and by other legal media over recent times), the legal professional is strongly against billing by the hour and advocating more fixed fees.
Furthermore it seems from media reports that law firms and their clients seem united on the fact that billing is one of the big areas of friction between them that detracts from, and undermines, the quality of service and the work done.
I will be surprised if the legal battle over charging doesn’t spill over into the PR sector. Potentially, I believe this issue is more meaningful, and contentious, than the effort by PR agencies to start charging for their intellectual property when pitching for new business which I commented on recently.
While there are clearly differences in the nature of the extent, scale and type of work done between the legal profession and PR, their core billing methodologies are both based on the hourly rate.
After 30 years running a PR agency I would be very surprised if a survey of Australian PR agencies and their clients wouldn’t bring to the surface concerns about how external PR services are charged. In my experience, billing and perceptions of value-for-money are never far from the surface in all agency-client relationships.
The latest survey figures I saw from the PRIA’s Registered Consultants Group indicated that Australian PR agencies claimed that the majority (about 60%) of their clients were being billed on a project basis (which I assume to be principally hourly based) with 40% being billed by way of retainer.
Here’s my perspective on how both sides view the issues:
The users of PR services – the client:
• Retainers have become a less favoured method of remuneration – unless there is a major outsourcing of PR. In my experience most PR Managers (and more importantly their superiors) don’t think they get value-for-money. They think there’s no guarantee of delivery and performance from the PR agency to match the retainer. And they think they are beholden to an ongoing contract.
• Project fees or hourly rates are increasingly preferred because the client feels they have more control and flexibility. It’s perceived to put the client in the driver’s seat.
The provider of PR services – the PR agencies:
• Retainers provide certainty of income and cash flow, and allow staff hours to be allocated to the client. Often a retainer is not as profitable for the agency, but the certainties that come with it make it attractive.
• Project fees or hourly rates have, from my observation, become more prevalent in recent years. This is partially because PR often works for different parts of a business (i.e. finance with IPO’s, corporate with crises, and marketing with product launches) which naturally lends itself to self-contained – and often one-off- projects. They have also been favoured by many PR agencies, facing more competition and lower margins, prefer to try and recover the actual hours spent on behalf of a client.
Interestingly, what this indicates is that while law and PR follow the same billing principles the trend in PR appears to have been the opposite to law i.e. away from retainers towards hourly rates and project fees.
In this regard The Australian had an interesting story on the Perth law firm Lavan Legal which has really cast tradition aside by abolishing the standard billing system that requires lawyers to account for every six minute period throughout their working day. Who would have thought this would transpire?
Some of the issues regarding the delivery of PR include that by nature PR is less definitive than the law, more creativity and less process is involved and, given the degree of contact and liaison needed with influencers and third parties, accurately estimating the amount of time involved is often fraught with difficulty.
Having said that I can’t help but go back to an earlier observation – too many PR Managers simply don’t manage their PR agencies well enough. If PR Manager’s want better outcomes from their budgets it should start with a clear brief and definition of the project that the PR agency is engaged to handle.
Furthermore, PR Manager’s have to begin to more effectively manage the progress of projects and campaigns as they evolve, and the activity of the PR agency, rather than simply waiting to the end only to find that the PR agency has overspent by 20 percent.
However, notwithstanding the need for more disciplined management by PR Managers, the bottom line is that if those working within the corporate environment are revolting against the billable hour when buying legal services, what chances are there that their PR or Corporate Affairs colleagues down the corridor won’t catch the same disease and be forced to justify their actions?
It seems to me that at the very least this outbreak of war amongst the legal fraternity will result in both PR Managers and PR agencies facing increased scrutiny around charging and budgets in the near future.
Both should start doing their homework now. PR people – both in-house and in agencies – need to take-on-board some of the arguments being made by the buyers of legal services. To me it begs the question as to whether the way the legal discussion is going PR is likely to head back towards the retainer and fixed fee. That would be ironic!
Note: I’ve written on the subject of PR client-agency relationships and fees previously in PR Influences.
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