PR Depts Chop Agency Fees, Salaries before Internal Staff

February 27, 2009

This article is included in these additional categories:

Agency Business | PR

The recession’s impact on the PR/communication functions of US organizations has been modest to date and has resulted in lower budgets, salary freezes and cuts in agency fees, but only limited internal staff reductions, according to a study conducted by the USC Annenberg Strategic Communication and Public Relations Center (SCPRC).

The study (pdf) finds that 40% of respondents say their budget has decreased in the last fiscal year as compared with their original budget, and the original FY 2009 communication budgets of the nearly 200 organizations that participated in the survey were, on average, 7.4% lower than what the organizations actually spent on that function in FY 2008.


Thus far in 2009, surveyed organizations have further reduced their spending by an average of 3.9% relative to their planned budgets for this fiscal year.

To address these budget reductions, communications organizations have, until now, largely avoided dramatic cuts in internal communication staffs, preferring instead to slash compensation to their external agencies and/or take action to freeze or reduce compensation paid to their own staffs, the research found.

“Overall the news appears to be somewhat heartening for the profession,” said Jerry Swerling, director of the SCPRC. “While the recession has certainly hurt, and there will undoubtedly be more pain in the future, respondents have experienced significant but not debilitating budget cuts and have been able to prevent, at least through today, widespread layoffs. This is a significant change from the historical pattern, which saw precipitous cuts, and sometimes near total elimination of PR/communication, in difficult economic times.”

Swerling believes that the reason for this change is the growing recognition among organizations that engaging with stakeholders in today’s hyper-informational, increasingly transparent environment is now essential, especially in a downturn, and PR and communications are among the best, cost-effective ways to do it.

Budget Changes

Some 18% of respondents indicated that their PR/communication budgets actually increased from FY 2008 to FY 2009, by an average of 14.2%, the survey found. However, SCPRC said this finding must be seen in context of current budgets: Since the original budgets for this fiscal year were established, responding organizations have experienced, on average, budget reductions of 3.9%.

Half (51%) of respondents say their FY 2009 PR/communication budgets are smaller than what they actually spent in fiscal 2008, by an average of 19%.

Although 31% indicate that their FY 2009 budgets were similar to those of the prior year, this too must be seen in the context of year-to-date budget cuts averaging 3.9%, SCPRC said, noting that flat budgets pale in comparison with the fairly substantial annual increases most PR/communication departments enjoyed over the previous four-to-six year period, as revealed by prior USC SCPRC studies.

Changes in Staff Size

While 63% indicated that their staffs did not change in size in 2008, 22% downsized their PR/communication staffs by about one-fifth (22%) last year, SCPRC said.

Another 15% (all of which have PR/communication staffs of 1 -17 full time people) reported staff growth.

As a group, the pool of organizations that participated in the study experienced no net change in PR/communication staffing in 2008, with staff reductions in some organizations being offset by no changes and/or new positions in others.

For the current (2009) fiscal year, 73% anticipate no changes in staffing levels while 7% anticipate growth, of about 15% on average. A fifth (20%) anticipate that staff reductions, averaging to 27%, will occur at some point during the year.


Staff Compensation Trends

Unlike staff size, compensation in 2008 was greatly affected by the recession. Nearly two-fifths (39%) of participating organizations froze the salaries paid to PR/communication staff, while 7% reduced employee compensation.


For 2009, 56% anticipate compensation freezes, while 21% believe they will have to reduce compensation by an average of 11.7%.

Use of Outside Agencies

Of the 58% of responding organizations who reported working with one or more outside agencies, 69% indicated that they have already reduced, or plan to reduce, the fees paid to those agencies. Those that have already reduced agency compensation have done so by an average of 28%, while those anticipating cuts expect them to amount to an average of 22%.


These figures, in combination with the data on the staffing situation,? suggest that these organizations are addressing budget cuts by reducing fees paid to their agencies and/or limiting or reducing what they pay their employees, with internal staff reductions seen as a last resort, the study said.

Sector Impact

Although respondents of all types indicated that they have been adversely affected by the downturn, those in the corporate sector have suffered more than governmental and nonprofit organizations. The latter experienced somewhat less adversity in 2008, but definitely anticipate budget and personnel cuts in 2009.

About the survey: The online survey was conducted between January 13-27, 2009, with 200 respondents who are senior level PR/communication professionals Of those who responded to the survey, 61% work for companies, 27% for non-profit organizations, 13% for government agencies.

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