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Gini Dietrich

Gaining Respect for Yourself and the PR Industry

By: Gini Dietrich | January 19, 2011 | 
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A few weeks ago, Doug Davidoff wrote an open letter to PR professionals, which speaks about the client’s view of our profession and how we’re stuck on tactics and not on results.

And on Monday, Les McKeown wrote “Living with the Pregnant Widow,” a tongue-in-cheek look at the so-called social media experts who, again, are stuck on the tactics and not on results (mostly because having a Facebook page or a Twitter account does not lead to business growth, directly).

The interesting thing about both of these letters (blog posts) is both Doug and Les run businesses and have hired PR firms. And they didn’t check with one another before writing their perspectives. This perception of our industry is pretty rampant and it’s also why mainstream media such as The Economist write articles like, “Public Relations: Rise of the Image Men.”

It’s our own fault, really. We ARE stuck on the tactics and the process and not on the results. And it’s because we’re typically not business people. We’re liberal arts people. We can skate by without ever having to take a business class or learn the difference between a P&L and a balance sheet or if revenue or income is better or how to grow the bottom line. Most of us have never walked in our client’s shoes and most of us likely won’t.

We’ve always gotten away with increased brand awareness and media impressions and advertising equivalencies. And that stuff is bogus because general accounting principles don’t value a company based on brand awareness (unless you’re Coca-Cola). It’s based on assets and income.

This is not going to be a one blog post lesson for PR professionals, but let’s begin now and continue next week.

Right now, learn the difference between the P&L and the balance sheet. Learn where equity and money invested plays into the business. Learn why profits exceeding expenses is better than a huge revenue number with huge overhead. Use Groupon as an example.

Find answers to the following questions:

  • How can Google offer them $6B to sell when their revenues (not income) are somewhere in the $300-$500 million range?
  • How can they raise $950MM on that kind of revenue number?
  • Why are they being valued on a multiple of their revenues and not on how much money they actually make?
  • How can the stock market be valuing them at $15B if they IPO?
  • How have they structured the business with debt and equity to not only pay out stock holders but the public when they IPO?

Granted, Groupon (and Facebook) is being way over-valuated and we’re about to have another bubble burst, but it’s a great way to begin to understand how a business makes money and how your efforts can help.

Ask questions.

If your company has an open book regarding financials, sit down with the CFO and have him/her explain how your business makes money and where the money goes. If your company does not have an open book policy, ask if the CFO will explain the P&L to you with $1 as an example.

For instance, if you take $1, is $0.60 of it going to payroll and $0.20 percent of it going to technology and $0.10 of it going to employee perks and $0.05 of it going to insurance and $0.04 of it going to reinvesting in growth and $0.01 of it going to bonuses and raises? I think you’ll be surprised at how it’s broken down.

Learn it. Understand it. Revel in it.

If you’re a solopreneuer or just starting your company, take some business classes. Find a mentor who has a financial mind. Join an organization like Vistage. Get yourself some help on this side of things or a) you won’t be able to counsel your clients effectively and b) you’ll never grow your business (or your income if you’re not going to hire staff).

Once you really understand how the company you work for makes money and once you’ve used examples such as Groupon to further your education, then you’ll be ready to begin having different conversations with your clients that lead to your becoming a growth generator, not an expense.

About Gini Dietrich


Gini Dietrich is the founder and CEO of Arment Dietrich, an integrated marketing communications firm. She is the author of Spin Sucks, co-author of Marketing in the Round, and co-host of Inside PR. She also is the lead blogger at Spin Sucks and is the founder of Spin Sucks Pro.

64 comments
human resource consultancy
human resource consultancy

when you are have a respect from your industry you need first to have a respect to those who are the member of human resource consultancy. e.g if you are going to enter one organization you need to make a relationship first to the hr.

JoelFortner
JoelFortner

This is solid advice. In addition to understanding how the numbers work, in my experience, I've learned it's equally important to learn how leaders operate. This is another skill PR peeps should learn to help their clients even more and acquire and keep that infamous "seat at the table." Whether generals in the military or CEOs, they are brought up very differently than communicators. They're data-driven, we're instictive. They want decision options, we tend to present a single option and just expect them to take it. They think strategically, we think about our "lane." PR peeps aren't the only groups who tend to think this way. So called staff jobs such as lawyers, financial managers and human resources face the same challenge. By no means am I saying these groups aren't doing a good job. They could just be doing a better job. PR master Jim Lukaszewski wrote an outstanding book called "Why Should the Boss Listen to You?" If you haven't read it, do so and then read it again. It is truly transformative.

ElissaFreeman
ElissaFreeman

This post struck a real chord with me, Gini. So few busines people understand PR - yet so few PR pros understand business. And you can only get away with this for so long. After all, I went into PR because they told me there would be no math...lol...

My big wake-up call happened when I began working for a CEO who's background is steeped in Consumer Packaged Goods. If I didn't understand the P&L before, I sure do now. Not understanding 'where the money goes' and how it gets spent will not get you a seat at the Senior Management table. I am now expected to understand everybody's business. And that requires me to meet with my colleagues and basically ask 'the stupid questions'. But trust me, nobody thinks the questions are stupid, if they see you take an interest in learning. As time goes by, now I'm asking the smarter questions.

Helping one another learn about our respective specialties requires time and patience - but all round, a company, or your client, will be better off for it.

Steve_Mann
Steve_Mann

Gini - Hope you don't mind, but I'm sharing the heck out of this post. I've found that too often junior-level PR pros are left in the dark when it comes to the business side of their work. There's no reason we shouldn't be introducing younger employees to the world of budgets, ROI and the bottom line (at least the basics). It will only make them better counselors in the future.

Nikki Little
Nikki Little

Hi Gini - Like many PR programs, mine did not include any business classes, and I really, really, REALLY wish it had! I've had to do a lot of self-education to understand business principles, and I'm still learning. MBA's aren't in everyone's future once they graduate with an undergrad degree, so I hope more universities start integrating business classes into their PR programs.

I cringe knowing there are still PR pros who measure results based on ad equivalencies. :/

CarmenBenitez
CarmenBenitez

I <3 you Gini Dietrich! Why are you da bomb?! This article is more than spot-on...it is a must-read. Go, Gini, GO!

JonHearty
JonHearty

The numbers tell the story. I have many friends who see someone driving a certain car, say, a BMW 7-Series, and automatically start making assumptions about how much money the person has. They see money with only their eyes and not their brain. Money is the blood of business, and it is common for people to make the same mistake with business.

You can't understand a business without understanding the money that drives it and how it is treated.

This is a great post and looking at the numbers is a great exercise for anyone, for either their business or their personal finances.

Frank_Strong
Frank_Strong

Amen Gini! Assets + Liabilities = Owner's Equity. Note that there's a line item on the balance sheet called "goodwill" that PR pros should pay close attention too! After that, let's distinguish between the financial meaning of ROI and the word benefit which we often mistakenly use interchangibly with ROI. Doing so is a little bit like learning a new language, mispronouncing words and seeing our meaning is often lost in translation on the locals. We can go a long way by learning the language of business!

rachaelseda
rachaelseda

Wow, I feel like I just got assigned some grueling math homework...but in a weird way I like it! I am printing this post and going down the hall to talk to some people who understand this type of math...because well, it never was my forte but you're right we need to learn this stuff!

Thanks @ginidietrich for always mkaing me think!

3HatsComm
3HatsComm

Great post as always @ginidietrich and now I have to confess that even with my minor in B.A., I don't pay enough attention for my own practice. I'll spare all the time, interest, life excuses and just admit my slackness. As to business and clients, I've had those who love having me as their sounding board, eager for my input on their business well beyond marketing communications. I've got clients who will barely let me in the door, agree with my advice but then.. not act on it, go around me to save a buck. I'm putting in more time elsewhere so I can say yes to the former, no to the latter. FWIW.

Howie Goldfarb
Howie Goldfarb

PR is Dead. Long live PR.

I think the view of PR gets short shrift (is shrift a word?) anyway...until you need PR. Facebook is one of the worst at PR. From their stats page to how they roll out new features to how they handle the press. But they get a lot of free PR from the press who focus on just the shiny stuff vs the core. Look at Apple having to deal with PR this week with Steve taking a sick leave. Stock dropped in Europe then recovered.

I blog a lot trying to help Marketing people understand the numbers and financials. But they don't care. As long as there is a cash cow to milk so be it. But for long term survival this stuff needs to be understood. I asked a client what would be the sales number that maxes out her business. She didn't know. I said you need to figure this out because that is what I am shooting for with my Marketing efforts. Right there I just became more of a needed part of her world.

On the note of valuations. Here ya go:
At Apples $24 Billion in earnings run rate would cost $13 to buy $1 of earnings. Current annualized its $19 which is the P/E ratio.
At Facebook's $50bil valuation and $500m rumored profits it will cost $100 for $1 of earnings.

Apple makes things. What does Facebook make?

Lauren_AnnS
Lauren_AnnS

I'm about to graduate with a B.A. in Corporate Communications from a liberal arts college. Now, with that being said, I'm a 22-year-old aspiring into the field of Public Relations and Marketing, but have only taken one course in Marketing and and intro and writing course in PR. The intro to PR course I took emphasized the need for proficient writing and communication skills, and I'm fairly certain that the mention of business knowledge was a byline in a topic we discussed concerning different fields of expertise. For me, the lines between PR and Marketing are becoming more distorted as the boundaries of social media and generational shifts occur (Bloomberg Businessweek article "Marketing to Millennials"). The methods of traditional practices and tactics are becoming heavily linked to progressive forms of viral campaigns and marketing strategies. (At least, that is what I am seeing.) Ketchum is a great example in their integration of PR and marketing in the Stride gum case study of the "King of Kong: a fistfull of quarters" campaign. I'm excited to see how the industry transforms itself as the digital age gets more and more digital and expansive.

PeterFaur
PeterFaur

Gini, I got my MBA not because I wanted to be a CFO but because I wanted to be able to have an intelligent conversation with a CFO. Having the degree has helped me better understand the contributions that each department within a company makes to the overall enterprise. Your advice makes a critical point and comes at a good time.

In our field, I don't believe that every last thing we do can have a dollars-and-cents valuation placed on it. Communications is a process, and in business, that process usually moves through a cycle of gaining attention, to cultivating interest, to creating desire and finally, stimulating action. Only the final step can really be measured in dollars and cents. But is there value in increasing attention, interest and desire among a greater number of people? Is there value in moving people through the process more quickly and stimulating action more quickly? Absolutely. (Check out the time value of money to learn more!)

If we're trying to help businesses achieve financial goals, then it only makes sense that we learn how to talk the language of business. Thanks for the post.

Soulati | Hybrid PR
Soulati | Hybrid PR

Isn't that what investor relations is for, Gini? LOL (kidding). You're spot on, and I've been wanting to respond re that "open letter" thing which boiled me. This PR industry criticism is nothing new. When you've been in the industry as long as I have, you get used to it, sort of.

What that means is what you suggested -- never stop learning. Re-invent, re-innovate, and invigorate in what's coming around the corner. If we don't, we're dead.

lesmckeown
lesmckeown

Good response, Gini - and all true.

I would add is that while a good understanding of financials is important (it's why I started my business career as the UK equivalent of a CPA), the *reason* it's important is mostly to remove a barrier of communication with business owners and C-level execs. In other words, once it's clear that you understand the financial impact of any discussion, you get a better hearing for the underlying strategies you're proposing to the client.

I've written elsewhere that financial literacy is one of the seven non-negotiable differentiators between mere competence and mastery of any business occupation, and PR is no different. I think this debate underlines that point. Thanks for inviting me in to it.

EricaAllison
EricaAllison

Wow. This is chock full of business lessons. It's dangerously close to home for me in that I'm a solopreneuer who is experiencing tremendous growth, to the point that I am about to hire someone. The thought of that terrifies me and exhilarates me all at the same time. I'm fortunate in that I am a very bottom line, practical kind of gal, who has entrepreneur parents with unbelievable business acumen. They are my board of directors and financial advisors at the moment. When I first started my business, my mom sat me down (biz major herself) and made me learn the difference between a P&L and a Balance Sheet and why I am the most important person that needs to understand that. For my major business decisions they are my go-to. I have an accountant that guides me on tax issues. I have other folks in my life that I count on for a variety of business and management advice. Because just like my clients, I'm running a business too. This isn't just a joy ride; it's the read deal.

What I think is most important for me, and ultimately, the success that I have with my clients, is that if I don't fully understand not just their 'budget', but how the work I do impacts their overall bottom line, I'm just 'spinning' and not really helping. I also make it a point to fully understand and nail down my client's 1,2--and if they know them--5 year business goals, so that the work I do supports that and isn't just a one-hit wonder for the need of the moment. Operating in a vacuum is, well, self-serving and based on instant-gratification. Operating within your client's business context is powerful.

Thanks for the thought-provoking post, Gini!

JulieWalraven
JulieWalraven

Great advice, Gini! Some days I feel like a start-up. I have learned more in the last two years or so about business operations ... and I have outsourced and paid for more services than ever before in my 27+ years of being a solopreneur. :-) Small (like me) try to do everything themselves... and big businesses that should know better often start out without using the resources you should from the beginning.

Whitney Punchak
Whitney Punchak

In a recent discussion about the most desired qualities for a PR person on LinkedIn the #1 answer was good writing skills. Clearly, business skills (not to mention leadership) are not particularly valued. Also, I haven't come across a PR related job description yet that asks for an understanding of business. You hit the nail on the head, PR and business go hand in hand.

Jasper
Jasper

Very true! The focus on tactics and "PR for the sake of PR" is definitely an issue. One that I think could be adressed by integrating marketing & PR departments and giving someone from that division a seat in the companies' board. That way, that person is responsible as much for business decisions and economic success, as for the size and budget of the PR department...

As for Goupon: I don't think its that simple. The value of that service lies in its growth potential, not in the current revenue (Amazon anyone?).

Doug_Davidoff
Doug_Davidoff

Great stuff Gini.

I've been talking for years about the need for salespeople to gain business acumen. Ever since I became aware of just how important it is, and the difference it makes; I've become increasingly aware that it's not just salespeople who lack it. A PR professional with business acumen and judgment is, well, gold!

Thanks for the lesson - I may send a few salespeople over here to read it.

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  1. […] instance, a couple of weeks ago, I wrote a blog post about gaining respect for yourself and the PR industry. In it, I talked about how to learn and really understand how a company makes money so you can have […]

  2. […] would you like to charge and why? For instance, a couple of weeks ago, I wrote a blog post about gaining respect for yourself and the PR industry. In it, I talked about how to learn and really understand how a company makes money so you can have […]

  3. […] Gaining respect for yourself and the PR industry Public Relations heeft iets te maken met communicatie en wordt daarom vaak in de sociologische hoek gestopt. Maar wil je je klanten echt begrijpen dan moet je je ook gaan verdiepen in hoe je de klant zijn geld verdient. Gini Dietrich spoort alle PR professionals aan om zich te verdiepen in ‘balance sheets’ en andere financiële vraagstukken waar je vroeger het liefst zover mogelijk van uit de buurt bleef. […]