Tuesday, June 14, 2011

Can PR use ROI as a form of measurement? Its harder than you think

This week three academics have presented challenges to the PR academic community.

Professor Tom Watson at Bournemouth, Richard Bailey at Leeds Metropolitan University and my co author Philip Young at Sunderland have all made interesting contributions to PR thinking ahead of the the CIPR’s new Research and Development Unit (R&DU)  meeting next week.

Before entering into the debate on Grunigian theory presented by Richard and Philip, I wanted to respond to Tom's point.

Tom makes a point: "I still have doubts as to whether ROI, other than in a strictly financial format, can be re-purposed into a more general expression of value creation or contribution to organisational efficiency.  Business managers understand what ROI is, so why would they accept a mixed-concept PR ROI."

It is important. As AMEC boldly goes for some form of measurement of PR providing a return on investment. There seems to be a belief that ROI is a simple idea.

It would seem there is a belief that ROI is a financial measure. Of course it is not. ROI is a profoundly Public Relations measure.

Lets have a look at what ROI is. It is defined in accounting terms as:

(Gain from Investment minus Cost of Investment) divided by (Cost of Investment)

Can we pause for a moment and explore what 'Investment' means. Investment requires that an organisation has cash flow, capital reserves or some other asset that can be deployed as an investment.

Organisations comprise three principle assets: capital, proprietary process and/or service and  relationships. The acquisition of capital, and development of process or service; 'vision, mission and corporate objectives' (Kaplan 2001) are a function of relationships.

It follows that to invest in anything, an organisation needs relationships of a nature that can be invested.

So lets re-draw what ROI means:

(Gain from Relationships minus Cost of Relationships) divided by (Cost of Relationships).

ROI is profoundly about relationships. In an industry called 'Public Relations', this could be of interest. In a sector called 'marketing communications' it will be pivotal because Marcoms depends on 'public relation' to optimise relationships to create capital and cash flow to pay for this, a special area of relationship management, namely marketing. In principle the same applies to the trade of 'Corporate Affairs' and other trades associated with 'Public Relations' in practice.

Which takes us back to Richard and Philip and the Grunigian excellence model coming from systems theory. We can, if we desire stay with the systems theory view because already have a grounded reserach into the nature of relationships in the work of Bruno Amaral (2009).

This, Amaral, hypothesis is that relationships  are formed at the nexus of values and using latenet semantic analysis was able to show that where there is a nexus of semantic values there is very strong evidence that they are central to the formation of convergent relationships.This empirical research supports conclusions as to the impact of public relations as relationship management offered, by  Ledingham and Bruning (2002).

Convergent values relationships have some resonance with the Grunigian position of Publics forming round issues but in the Amaral study, it was less issues as values that were key which is a broader construct.

What we have done is to extend and develop the ideas of Grunig and Ledingham and Bruning to identify an empirically based idea of what public relations can be which accommodates both theoretical perspectives.

Can we now re-draw ROI yet again.

(Gain from Nexus of Values minus Cost of Nexus of Values) divided by (Cost of Nexus of Values).

Of course, I have only taken one view as to the nature of relationships namely the empirical research of Bruno Amaral. There will be others drawn from Psychology to the Evolutionary Sciences.

What I hope to have shown is that the theoretical concepts of Public Relations have moved on and that we can, should we wish, pursue ROI but that it will require more than an AMEC Commission to come to any meaningful conclusion unless there is a great deal more by way of, notably academic, research.

And the there is the problem of getting such ideas into the heads of the PR industry's clients. But that is another story.

RS Kaplan  Nonprofit management and Leadership, 2001 - Wiley Online Library

Excellence in Public Relations and Communication Management, 1992  IABC Research Foundation Edited by James E. Grunig

Relationship management in public relations: dimensions of an organization-public relationship (1992) John A. Ledingham and Stephen D. Bruning Public Relations Review Volume 24, Issue 1, 1998, Pages 55-65