SIC 8743
PUBLIC RELATIONS SERVICES



This category covers establishments primarily engaged in the preparation of materials, written or spoken, that are designed to influence the general public or other groups in promoting the interests of their clients.

NAICS Code(s)

541820 (Public Relations Services)

Industry Snapshot

The primary focus of the public relations industry is to project a favorable impression of a person, product, company, or organization and to win public confidence and approval. As a result, public relations involves communication with a variety of individuals and organizations, as well as the general public. Independent professionals, specialized companies, or in-house public relations departments carry out public relations services.

The 1990s proved to be a lucrative decade for the public relations industry, which experienced a notable 250 percent in revenues growth between 1990 and 2000. In the year 2000 alone, sales grew 32.9 percent, an industry record for annual growth, in the United States. This surge was fueled in large part by the rise of the technology sector, which grew to account for 41.0 percent of industry revenues in 2000. The U.S. public relations industry was valued at $4.2 billion in 2000.

When the technology industry crashed in 2001, and the U.S. economy weakened, businesses in nearly every sector began to tighten public relations budgets. As a result, industry revenues fell 2.65 percent in 2001. To offset the impact of this downturn, many public relations firms began to lay off employees. Eager to find new sources of revenue, some larger firms began to compete for smaller accounts. In addition, some companies reduced their rates, which increased competitiveness, but also undercut profitability.

Organization and Structure

About 98 percent of public relations firms were set up as taxed-based entities, with the remainder organized under the not-for-profit distinction. Giant advertising agencies, which have incorporated public relations functions into their consumer services, owned many of the larger public relations (PR) firms. In order to achieve an international presence, these multiple firms formed a network of independent companies, creating a trend within the public relations industry.

The majority of public relations firms made their headquarters in or around major metropolitan areas. International operations expanded more rapidly than domestic, with new markets in Eastern Europe and the Commonwealth of Independent States (former Soviet Union) proving to be very promising.

Certain basic activities common to all public relations efforts included the development of sound policies in the public interest, the implementation of a public relations campaign recognizing the importance of public goodwill, and the establishment and maintenance of the organization's integrity.

With the current trends toward global marketing and frequent changes in communication technology, the accreditation of public relations experts took on greater importance. Universities offering post-graduate degrees in public relations provided courses on topics including the nature of human communication and the role of the media in public relations. Programs like those offered through Boston University and the University of Miami also provided areas of specialization in the fields of corporate, government, and non-profit sectors.

Background and Development

The public relations industry was once synonymous with publicity, and for many years that was its chief mission. Many analysts claimed that the profession grew directly out of the boom-and-bust periods of the 1920s and 1930s. Indeed, during the Great Depression the public began to regard private industry as a failure and turned to big government for salvation. Due to these pressures, major business interests turned to public communication. The first public relations people were top newspaper journalists, practiced in the art of reporting and writing.

Due to the increased government regulation of business during the New Deal, the public relations industry grew following World War II. Additional factors affecting its growth included the growth of organized labor, the generally higher level of public education, and the recognition by all institutions of their dependence upon public approval. Until the 1950s, public relations was a business of generalists. The range of problems handled generally related to publicity, crisis management, financial public relations, speech writing, and community relations.

The Washington-based Public Affairs Council, established in 1954, focused its original mission to stimulate and train business executives to become active and effective in politics. At roughly the same time, companies such as Ford, General Electric, and Johnson and Johnson established political education and good citizen programs to get their own executives involved. The Public Affairs Council eventually became the professional association for corporate public officers.

By the end of the 1950s, a handful of companies had established public affairs departments. Their major priorities were to formalize the firms' federal government relations and to encourage executives to participate in political activities. The 1960s were experimental years of growth for public affairs. The Public Affairs Council estimated that during that decade, upwards of 500,000 business managers and executives attended formalized political education courses.

Toward the end of the 1960s, an outbreak of riots in some large cities triggered the development of urban affairs and social responsibility units in many firms. A concerned business community undertook new philanthropic and community initiatives organized under the directive of the corporate public affairs department. By the 1970s, these programs expanded to include job training for the disadvantaged, housing, transportation, law and order, health, education, and economic development initiatives. The Public Affairs Council doubled its membership during this time, and it was estimated that between 800 and 1,000 national companies had organized public relations departments.

Some critics regarded business responses to these social ills as cosmetic. For example, a large number of programs were undertaken to educate the public about how the economic system worked and its contribution to social well-being. Some companies undertook expensive advocacy-advertising programs to carry the business story to the public. Still others hoped that sponsorship of high-quality television programs, increased charitable contributions, and similar good works could replenish goodwill. Many of these efforts continue to the present day, but they are not regarded as a quick fix for perceptions of the citizens or the elected officials.

The growth of public affairs departments reflected business' recognition that managing business-society relations was a permanent task. Companies recognized that public relations strategy had to go beyond image building, political action, or social responsibility to be effective. A new term, "issues management," grew out of these needs and began to describe the public relations efforts of corporate entities in the late 1970s.

The election of Ronald Reagan in 1980 molded public relations programs for the next decade. Aspects of the political environment under Reagan included a reduced role of government in public life, substantial cutbacks in federal funding of social programs at the local level, and reform and relaxation of business regulation. Cutbacks in spending and reduced regulatory activity at the federal level required companies to pay more attention to state government relations activities. Even more challenging to companies was the growing pressure for business to assume the financial burden for the cost of social programs once paid for by the federal government.

By the early 1990s, workers in public relations specialized in many different areas, such as labor relations, financial relations, health care, and product publicity. Although the scope of its function broadened, the field of public relations became more specialized to accommodate the complex issues involved in an effective public relations campaign. The profession evolved from a "fire fighting" to a "fire prevention" role in the conduct of everyday corporate business.

The Internet. The public relations industry sustained a dramatic impact with the introduction of the Internet. In 1993, ProfNet, a collaboration of public information officers providing journalists with access to expert sources, was launched. Its members included colleges, corporations, nonprofit organizations, and law firms. ProfNet also included an online catalog of 2,000 leading experts across all disciplines.

As the use of the Internet continued to grow, the transition to interactive communications required a change in thinking and created new opportunities for building relationships between organizations and their public. The Internet could deliver messages combining various methods of communication: text, audio, graphics, still pictures, animation, and full-motion video. The challenge for the public relations professional was to use this tool to the organization's advantage, allowing for more one-to-one communication while maintaining the credibility and trust essential for the organization's well-being

The Internet also drove the increasing globalization of the marketplace. In 1999, the United States held an overwhelming lead in Internet users, with more than 110 million, which was nearly 43 percent of the total 259 million worldwide Internet users. By 2002, the United States was projected to have one-third of worldwide Internet users, declining to 27 percent by the end of 2005. The most notable impact on the public relations industry by the growth of the Internet was in the re-evaluating of the traditional marketplace. Conventional boundaries defining not only economic but geographic roles were being redefined with the increasingly expanding global market.

Public relations programs could constantly monitor the Internet in order to identify ways to communicate with targeted audiences through this new medium. Companies using the Internet could take advantage of the oneto-one marketing opportunities presented by the Internet to reach opinion leaders in industry. Extending the organizations' presence to the World Wide Web and commercial online services transcended traditional public relations. These communications efforts could combine the best of traditional PR—strategic consulting, marketing support, media relations, public affairs, crisis management, investor relations, even special events—with the vast reach of the Internet.

The recession of the early 1990s had a negative effect on public relations firms and corporate communication professionals. The industry experienced a 26 percent jump in employment between 1980 and 1990, but this subsequently declined. For example, Hill and Knowlton Inc., one of the larger public relations firms, cut its work force by 25 percent in 1991, based on an 11.8 percent decline in billings.

In the 1980s, public relations agencies averaged 20 employees per $1 million in business, but that figure fell to 12 employees per million in the 1990s. The downsizing that occurred in the public relations industry required firms to outsource many tasks to independent public relations professionals. Firms realized savings on overhead, payroll taxes, and benefits under this arrangement.

A survey conducted by the Public Relations Society of America showed no growth in jobs in 1991 for the public relations industry as a whole, but many professionals in the field expected future industry growth. Specifically, 39 percent of public relations professionals surveyed expected their firms to expand in the next several years, while 45 percent predicted no change in employment, and only 5 percent anticipated additional downsizing. These numbers looked even better for the nonprofit sector, where expectations for staff expansion were 17 percent, compared to expectations of downsizing of 12 percent. Corporate public relations departments expected to experience downsizing as the reengineering process continued for American corporations. Sectors such as legal, health care, and environmental public relations were expected to achieve strong growth during the late 1990s.

By 1998, with the recession a distant memory and the economy booming, public relations services thrived. All of the top 10 agencies experienced growth.

Current Conditions

After experiencing record revenue growth of 32.9 percent in 2000, the $4.2 billion public relations industry saw its revenues decline 2.7 percent in 2001. The reason for such an abrupt decline was multifaceted. The industry's significant growth in the later half of the 1990s had been fueled in large part by the technology industry's meteoric rise. In fact, by 2000, more than 40 percent of the industry's revenues were attributable to the technology industry; as result, when the technology industry crashed, the public relations industry was particularly vulnerable to the downturn. At the same time, the general economic weakness in the United States was also prompting firms in other industries to tighten their belts, a process that quite often involved reducing their public relations budgets. According to Impulse Research, PR budgets dropped an average of 21 percent in 2001, from $4.8 million to $3.8 million.

According to an April 2002 article by the Council of Public Relations Firms, the economic downturn had a profound effect on public relations firms. "The biggest firms are laying off employees, slashing their prices for the first time in five years and chasing small accounts that they wouldn't have bothered with in the late 1990s boom." One industry giant, Burson-Marsteller, laid off 15 percent of its workforce in 2001. Another large pubic relations firm, Edelman, trimmed its ranks by 10 percent after sales dropped 5 percent that year. Porter/Novelli saw its revenues dip 13 percent and initiated its first staff reduction program in nearly a decade.

Industry Leaders

Burson-Marsteller, Hill and Knowlton, and Porter/Novelli were the big three in the public relations industry as of 2002. Burson-Marsteller, a company founded in 1953, employed 1,600 professionals in over 30 countries. Sales for 2002 were $175 million. Clients included multi-national corporations, business organizations and professional associations, as well as governmental bodies and not-for-profit agencies. These have included Sun, Apple, TRW, Scott Paper, Sunbeam, BellSouth, Ford Motor Co., Westinghouse, and the U.S. Olympic Committee.

Hill and Knowlton was a member of the WPP Group integrated communications services family and operated globally with 65 offices in 35 countries. Having gained a reputation for exceptional service, Hill and Knowlton continued to enjoy continued growth, as sales increased 7.4 percent to $325 million in 2001. The company employed 1,117 professionals around the world. The company had a strong European presence with a London office overseeing all administrative aspects for the firm. European income contributed 40 percent of worldwide business.

Porter/Novelli, which operated roughly 100 offices in 55 countries around the world, saw tremendous growth in the mid-1990s, partly due to acquisitions of such firms as Brodeur & Partners and Copithorne & Bellows. However, total sales for the company dropped 13 percent in 2001. The firm specializes in two growing marketplaces: health care and technology. Clients have included BASF Corporation, National Broiler Council, and the Kids ThinkLink.

Other industry leaders include Shandwick International and Edelman. Peter Gummer founded Shandwick International in London, England, in 1974. In 1985 the company was listed on the London Stock Exchange and began expanding worldwide, mostly by acquiring other geographically dispersed public relations firms that complemented Shandwick in terms of culture, services offered, and location. In the late 1990s, Shandwick International boasted over 100 offices worldwide while employing over 1,700 public relations professionals. Shandwick International was itself acquired by The Interpublic Group of Companies Inc. (IPG) in October 1998.

Founded in 1952, Edelman is a New York-based, privately held corporation with 32 offices in 20 countries. In 2001, the company was the largest independent public relations firm in the United States, with $223 million in annual fees and more than 2,000 staff members. About 65 percent of the firm's worldwide billings came from its U.S. operations, with 25 percent coming from Europe and 10 percent from elsewhere. Of the firm's 38 offices, 9 were located in the United States. Recognized as a technology leader, Edelman was the first of the major agencies to have its own home page.

Workforce

The majority of occupations in the public relations field fall into the support category. General managers and top executives account for less than 10.0 percent, followed by secretaries at 6.8 percent, related workers not elsewhere classified at 4.5 percent, and general office clerks at 3.1 percent. The average entry-level salary in public relations for a person with a baccalaureate degree is approximately $18,000-$22,000, while those with additional education or experience, as well as graduating members of the Public Relations Student Society of America, can qualify for higher salaries.

An account executive of a consulting firm can earn upwards of $35,000, as can a person with a comparable responsibility in a company's public relations department. A public relations director for a small- to medium-sized organization might earn $35,000-$40,000, while the range for the large corporation is approximately $40,000-$60,000. A salary survey performed by the Public Relations Society of America placed the median annual figure for public relations professionals at $46,204.

America and the World

Public relations services took on a global perspective in the late 1990s, and many corporations included public relations as part of their international marketing communications mix. This resulted in many larger firms establishing branch offices and affiliates in foreign countries. Independent firms formed exchanges with other firms in locations around the world, and countries took a fresh look at public relations in positioning themselves for future economic growth. Care was also taken to provide news distribution service and media relations in a format that was readily usable by using the native languages of the region.

Further Reading

BSMG Worldwide. "Clients and Services, 1999." BSMG Homepage, 1999. Available from http://www.bsmg.com .

——. "Company Profile, 1999." BSMG Homepage, 1999. Available from http://www.bsmg.com .

——. "Our World, 1999." BSMG Homepage, 1999. Available from http://www.bsmg.com .

Burson-Martsteller. "Perception Management." Burson-Martstellar Homepage, 1999. Available from http://www.bm.com .

Council of Public Relations Firms. 2001 Annual Report, 2002. Available from http://www.prfirms.org .

——. Buying PR Firms Backfires for the Advertising Industry. 9 April 2002. Available from http://www.prfirms.org .

Edelman Public Relations Worldwide. "Global Strength." Edelman Public Relations Worldwide Homepage, 1999. Available from http://www.edelman.com .

——. "North America," Edelman Public Relations Worldwide Homepage, 1999. Available from http://www.edelman.com .

Fleishman-Hillard. "About FH." Fleishman-Hillard Homepage, 1999. Available from http://www.fleishman.com .

Hill and Knowlton. "Corporate Overview—Our Company." Hill and Knowlton Homepage, 1999. Available from http://www.hillandknowlton.com .

——. "Solutions-Technology." Hill and Knowlton Homepage, 1999. Available from http://www.hillandknowlton.com .



User Contributions:

Comment about this article, ask questions, or add new information about this topic: