Difficulties in budgeting public-relations work

Public-relations work deals so largely with intangibles that the extent to which a public-relations executive can forecast costs is much more limited than in the fields of production, advertising or sales. Nevertheless, for managerial purposes, it is important that a public-relations budget be set up for each year or half-year, and that, at least to a reasonable extent, the public-relations department operate within the limitations of this budget. Consequently, before the head of the public-relations department sits down with the finance committee of the company's board of directors to explain his figures, he will be wise if he clarifies just what he hopes that the company's public-relations dollars will do.

If the public-relations executive starts with end-results, that is, if he undertakes to look ahead six months or a year and say that, by the end of such a time, his department will have attained certain objectives which will be worth so many dollars, he will find himself in a jungle through which reason cannot cut a path. For how is it possible for him to prophesy that, if his public-relations work improves the company's relations with the trade, for instance, the benefits will be worth some definite amount that can be stated in the corporation's balance sheet. Similarly, the public-relations executive will find himself hopelessly lost if he undertakes to apportion to public-relations work some ratio or proportion of the enterprise's sales.

The new concept of advertising costs

Time was when a percentage of sales served as the almost universal yardstick of doling out funds to be spent in advertising. In many instances, when advertising was young, a percentage of sales, either past or contemplated, served as the only guide for advertising allocation. Although in certain lines, percentages of sales still serve that purpose, the concept, today, in the more enlightened areas of managerial thinking, is gaining acceptance that advertising, instead of being an expense, is an investment — an assignment of funds to accomplish an assigned purpose.

If an enterprise proposes to build a new power plant, the management would not think of allotting for this additional capital investment some percentage or ratio of last year's sales or some percentage of what the enterprise hopes to sell in the coming year. Rather, the management's procedure is to determine, first, what additional capacity of power is needed. To be sure, this figure may be arrived at by examining what, in terms of prospective sales volume, the plant will need to turn out. From that point on, however, the prime consideration is not prospective sales but the facilities, in the form of steel and concrete and brick and machinery, which the production of the needed additional power will require.

Just as this new power plant thus becomes a project by itself, and becomes a task, so in advertising, today, the questions to be answered are these: What are the tasks to be accomplished? What will these tasks cost? Will the accomplishment of these tasks bring worthwhile results?

Tasks in public-relations work

In view of the foregoing considerations, a public-relations executive, when he sits down with his company's finance committee to discuss his public-relations budget, should make it clear that he is talking not about percentage of sales, but about public-relations projects —public-relations tasks which, in the enterprise's interest, the company has determined to be necessary. He should point out the fact that these tasks have been described in detail in a previously submitted report on the proposed public-relations program, a report which the finance committee has seen and approved.

The head of the public-relations department should then say to the committee something to this effect: "As you go over the figures, you will see that some of the projects and needs are relatively simple and that the amounts budgeted for them are relatively small. Others may look simple, but seem to cost quite a lot. In general, we need to bear in mind that the amount required for any one of the tasks depends not only upon the extent of the job, but also upon the time in which it needs to be done. Thus, a task that needs to be done in a hurry may require twice as much manpower as does one on which we can take our time."

The public-relations executive may then conclude his prefatory remarks to the committee by saying: "We are glad that our company follows a policy of budgeting its public-relations investment, because this means that our company recognizes the principle that public-relations work is, and of a right ought to be, a continuing process." He will then follow with a discussion of the various items of costs which appear in his public-relations budget. The amount of money which he estimates will be needed to meet the cost of each item will depend upon the scope of the public-relations program approved by the specific company for which he works.

Overhead as an item in a public-relations budget

Public-relations work is carried on by a department which occupies space on which an enterprise pays taxes, or rent, and certain maintenance expenses, such as the cost of light, heat and various other "internal" services. This overhead expense is a legitimate charge against public-relations work, and should be provided for in the public-relations budget. The exact amount needed to meet this item is fairly easily ascertained.

Cost of salaries

The amount needed for this item will depend on the size of the public-relations department and the heights of its salary levels. In some organizations, the supervision of public-relations work is assigned to some executive, such as, for example, a vice president, who devotes to this work only a part of his time. In such a circumstance, his time is proportioned, and only that part of it which is devoted to public-relations work is included in the public-relations budget.

"Outside" fees

As stated in the preceding chapter, fees to be paid to "outside" public-relations counsel are likely to consist of a monthly or yearly retainer, plus production costs on materials, and "out-of-pocket" expense that counsel incurs in serving the company. Also included under this item of "outside" fees are the fees to be paid for polls and surveys in so far as they can be estimated in advance. Other estimates given here are the fees to be paid to specializing publicity concerns and to "outside" advisers of a number of kinds whom the company might retain to improve its radio techniques, or its relations with labor, or to improve the quality and possibly to lower the costs of the company's "literature."

Equipment

Under the item of equipment, an estimate is made of the amount of money which is likely to be needed to provide for the replacement of and the depreciation on the furniture and office equipment used by the public-relations department.

Stationery and supplies

Here, an estimate is given of the probable cost of such supplies as the following: letterheads, engraved cards for the public-relations department's personnel, special forms that the department may employ for its releases and editorial memoranda, rubber cement, pencils, ink, typewriter ribbons, and "copy" paper.

Messenger service

The estimated amount of money which is put down under this heading is to provide for messenger delivery of releases, photographs and other publicity material to editors. Such messenger service is likely to cost a typical public-relations department a sizable sum.

Mimeographing and multigraphing

Whether a public-relations department does its own mimeographing and multigraphing, or has it done on the "outside," the department will be charged with the cost of such work, so provision must be made for it in the public-relations budget.

Postage

Postage on one news release, sent first class to 1,800 newspapers, costs $54. If a public-relations program calls for any considerable number of mailings, an ample amount of money must be provided for under this item.

Mailing lists

If a public-relations department buys lists of names for circularizing purposes from mailing-list houses, it pays for them at the rate of so much a name. If such lists are compiled in the department itself, a cost is involved in the amount of time spent. Consequently, in either case, a fund must be set up in the budget to cover the cost of acquiring mailing lists. A public-relations department will need lists of the names of newspapers. In addition, it is likely to need lists of the names of trade papers, farm papers, technical journals, and possibly religious publications. It may also need lists of the names of important persons, in government, in the professions, in lodges and societies and clubs. In addition to the cost of acquiring mailing lists, there is also a cost in keeping the mailing lists up to date. Whether a public-relations department does its own checking and revising, or whether it is done by the mailing-list houses from which the lists are brought, provision must also be made for the cost involved in this work.

Addressing and mailing

Addressing and mailing may be done in the public-relations department or it may be "farmed out." In either case, there is a cost which must be estimated and included in the public-relations budget.

Clippings

Clipping bureaus will clip newspapers and, to some extent, magazines, on any subject in which a public-relations department may be interested. For instance, a department may ask a clipping bureau to clip all items referring to the company or its products. Clipping expenses may run high, and sufficient allowance should be made for this possibility in estimating the cost of this item for budgetary purposes. Clipping bureaus usually charge a minimum of so much per month—say $10 —for which they will furnish up to 100 clippings, with any above that number billed at 100 per clipping. Similar to clipping bureaus in purpose, there is an organization which listens to radio and television programs and will provide transcripts of broadcasts which may be of interest to a public-relations department.

There are clipping bureaus which will accept limited orders, that is, will not clip all references to a company or product but only those of the kind a company wishes to receive. For instance, the limitation may be on a territorial basis. Frequently, a public-relations department does not want to see the hundreds of routine financial notices which appear when a big company declares a dividend, or issues a quarterly statement, and the department limits its clippings order accordingly. Clippings under such limited orders, however, are charged for at a higher rate.

Clippings are valued by a public-relations department as an evidence of the manner in which its publicity work is succeeding. Clippings are also valued as a source of information for public-relations programs. For instance, The Aluminum Company of America may wish to have any printed reference to aluminum clipped for the purpose of hearing about new uses for the metal, or for various other reasons. A railroad may want to clip any reference to the railroad so as to keep informed about the development of any local situations along the line, such as criticisms of service or equipment, which may require handling by its public-relations department before the small flame becomes a conflagration which will present difficulties of a serious nature.

Publications

Under this heading, an estimate is made in the public-relations budget of the amount of money needed to cover the cost of producing the company's employees' magazines, its "external" house organ, and such other publications as the company issues regularly.

Printing

Here, provision is made for meeting the cost of special-purpose printed pieces, such as brochures, booklets, posters, and envelope enclosures. If a public-relations department issues a mat service to newspapers, as many such departments do, the cost of mats may be included under this item of printing.

Entertainment

Entertainment is an important function of a public-relations department, and is used for a wide range of purposes. An estimate of the cost of entertainment may include provision for what might be called the casual and personal entertainment of individuals, at, say, an informal luncheon. It may also include the investment involved in a full-dress press conference at a club or in a suite at a hotel.

Special events

To prevent the entertainment item from seeming disproportionate in cost, an extra fund may be set up to provide for special events of any magnitude, such as, for example, an essay contest sponsored by the company and open to high school or college students, a seminar to which economists or educators are to be invited, a special presentation by the company before a convention, or an "open-house" program.

Provision under the heading of special events may also be made for exhibits at county fairs or industrial expositions. Likewise, provision may be made for the preparation and production of special-purpose display material for use on other occasions and before other kinds of gatherings. If a public-relations program includes a series of meetings for the company's own sales personnel, or for the company's wholesalers and retailers in key trading areas, the estimated costs involved may be set down in this section of the public-relations budget, unless these projects are charged to the sales department as they well might be.

Motion pictures

A public-relations program may provide for the preparation and distribution of motion pictures. In such an event, the public-relations budget must contain an estimated figure of the cost of such a project. Since, in the making of films, an "outside" specialist nearly always has to be employed, a fairly accurate estimate of the cost that will be involved can be obtained from such a specialist in advance.

In connection with the film's distribution, the public-relations department may be able to employ the company's own personnel, such as, for example, the sales department's field representatives. Nevertheless, distribution of the film in such a manner will involve a cost which must be provided for in the public-relations budget, unless the film is sales-promotional and can be charged to the sales department. The public-relations department may decide, however, to distribute and present its film through booking agencies for industrial movies. In that event, there will be no problem in estimating the cost, since the figure, can be obtained in advance from the agencies in terms of audiences to be reached.

Slide films

Less expensive to make than the motion picture, and far easier to exhibit, the slide film, with or without an accompanying commentary, is an excellent, special-purpose tool available to a public-relations department. In budgeting the cost of a slide-film project, a definite figure can be obtained from the specialist who will have to be employed to provide the slide film.

Travel

To enable members of a public-relations department to attend meetings and to travel about on other public-relations errands, it is necessary to set up a fund in the public-relations budget to meet the cost of railroad and airline and perhaps steamship transportation, as well as other contingencies.

For instance, a public-relations department may arrange for the president of the company to address a convention of the American Bankers Association in San Francisco. The cost of such a trip will include expenditures for such items as the president's transportation, his hotel accommodations, his entertainment outlay, publicity measures, and possibly the ghost-writing of his address. Such a trip might be charged against the president's expense account. If, however, the company's comptroller views the undertaking as purely a public-relations policy, then the cost of the trip will be charged against the public-relations department. Consequently, the public-relations budget must make provision for extraordinary expenditures such as this.

Memberships

It is customary for the workers in a public-relations department to join public-relations and publicity societies and clubs for the purpose of making themselves better practitioners and of advancing their profession. It is quite proper for their dues in these organizations to be paid by the public-relations department, and an amount should be budgeted for this purpose.

Furthermore, a company may belong to and pay dues to such organizations as the United States Chamber of Commerce, the National Association of Manufacturers, and perhaps several other associations within its own industrial orbit. In addition, certain of the company's executives may hold memberships in organizations like the Sales Executives Club of New York, the National Industrial Advertisers Association, the Association of National Advertisers, and some of the "service" clubs, such as Rotary and Kiwanis. Although these memberships may be held by executives as individuals, in many cases, the dues are likely to come out of the company's treasury.

In setting up the public-relations budget, an investigation should be made as to which of these assorted memberships are regarded by the management as being "affected" with a public-relations interest. It may be found that some of these memberships have nothing to do with public relations at all, and hence are not a proper public-relations charge. Others, the public-relations department may need to cover in its budget.

Telephone

In budgeting telephone expenses, provision should be made for flexibility. It often happens that one worker or another in a public-relations department will find it expedient to talk over the long-distance telephone and to talk at length. It also frequently happens that public-relations workers find use for so-called "conference service." This is a hook-up by which one person in Boston, another person in Chicago and a third person in Los Angeles are all connected at once.

Miscellaneous charges in the public-relations budget

Since unforeseen contingencies are certain to arise, funds should be provided for them in a public-relations budget under an item entitled "Miscellaneous." The amount of money provided should be sufficient to include also certain expenditures which can be properly charged against public-relations work as a whole, but which defy precise classification.

The amount budgeted for miscellaneous charges, however, should be kept as small as possible or otherwise it may indicate to the finance committee that the budget has not been carefully drawn up. Another reason why it should be kept small is that it may tempt the public-relations department to make unnecessary expenditures, a procedure which would be detrimental to the successful financial management of the business as a whole. In budgeting the proper amount for miscellaneous expenses, experience is particularly helpful. If a careful and detailed record of such charges has been kept over the preceding year, it should provide a basis for a fairly accurate estimate for the ensuing year.

The public-relations budget as a whole should indicate to some extent the amount of money it will cost a company to carry out a proposed public-relations program. But the cost as estimated in the budget is less important than that the program proves to be successful in making the enterprise a more profitable business and a more effective and more respected instrumentality in the service of mankind.

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