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January 22, 2005
Managing a Professional Services Firm
In the wake of the recent scandals that have engulfed the PR industry (willfully over billing a government entity, pay for play for a government agency), it is important to review how we manage our firms. These issues are obviously not limited to public relations. Note the disappearance of Arthur Andersen, one of the Big Five accounting firms, the major settlements reached with customers who were defrauded by commercial or investment banks, and now the revelation of kickbacks in the insurance brokerage business. In each of these cases, the fundamental obligation of the professional--to offer unbiased advice and outstanding client service--appears to be sacrificed on the alter of incentive compensation. These problems are only aggravated by problems of rapid growth into far-flung geographies. Here are a few ideas to consider in assuring that quality, not bonus, is the preeminent value of the firm.
1) Balancing Geography and Practice through the Client Relationship Management position (CRM)--Smart professional service firms recognize that they must execute globally for multinational clients, while maintaining a vibrant local practice able to offer counsel on trends in market. An entirely geographic focus creates silos preventing spread of best thinking, plus the risk of financial impropriety based on phantom billing (note the Andersen problem was far away from headquarters). An entirely practice focus makes the geographic offices simply a delivery mechanism for thinking done in a few global centers. What is required is a dynamic tension arbitrated by a client relationship manager who has the power to work the other arms of the triangle. The CRM can manage issues including fee levels, staffing and content, while assuring profitability. In short, this is "client at the center" thinking.
2) Culture of the Firm--This is a powerful guarantee of proper behavior. At our firm, my father, the founder, continues to come to the office every day and writes "Dan-o-Grams" to Edelman colleagues around the world. At Leo Burnett Advertising, account people use pencils in meetings and bowls of bright red apples greet you at the door. These are the subtle signals that imply continuity and importance of values. It is critical to grow and retain senior people who can tell stories about the firm. The senior partners of law firms who move to an of-counsel role are important glue for the younger staff. Successful engagements in the history of the firm should be touted on their Web site.
3) Labor Mobility--The Issue of Expatriates--We have found that many of our best people have spent time in other offices, particularly outside of home market. It is critical to have these foreign nationals defer to local staff on mattes of local culture. But in general, the expats bring energy, experience on global clients and a new way of thinking to their new homes.
4) Financial Integrity--We have moved to a system where our regional CFOs report to the global CFO, not to the regional geographic manager. This gives our finance team an independent reporting line and allows them to question account staff on any billing issue. This is new for us--but I believe it is best practice for our sector.
5) Training--Too many of our training modules focus on skills, not enough on ethics or finance. We teach our account staff to write, pitch media, hold a brainstorm. Financial skills are learned on the job. We are going to implement a case method for training. We are also going to move quickly to include an ethics segment in training.
6) The Importance of Community Involvement--We believe this type of "giving back" helps to keep our people grounded in reality. We call it "Living in Color." Life has to be more than billable hours and work, work, work.
7) Incentives--I don't believe in pushing people to make excessive profits. I feel there should be a reward for performance, but that it should not be anywhere near as much as the base compensation. We are not in a transactional business--we should perform in the long run.
I hope this is useful. As always -- welcome comments and suggestions on what you find works.
By the way, just a final word on the Ketchum issue. Bravo, Ray Kotcher, CEO, for stepping up. You are a mensch!
Posted by Edelman at 7:59 AM
Comments
Richard,
I've enjoyed reading your blog and insight into the business of public relations. This entry on managing a professional services firm is of particular interest to me as I'm challenged with many of the same issues -- although at a much more modest level.
I work hard to gather together a group of highly talented professionals who share a desire to provide value to clients while building a professional services firm of significance. I suspect that all high quality PR agencies share this goal.
"Strategic Guy" Blog: http://www.gotostrategic.com/blog/index.php
Posted by: Marc Hausman at January 23, 2005 11:06 PM
Hi Richard,
Great to see a CEO blog and with the discipline that you do. I came across your posting while browsing though your corporate website and could not help notice the emphasis, both direct and indirect, on people. Your earlier writings also reveal your innermost feelings about family and personal values. You also mentioned elsewhere that your father's personal style--his ethics, values and honesty-- have formed the bedrock on which your global employee Vision, Mission and Values program is raised and thrives. However your list above does not directly talk about quality of people, both acquisition and retention of the right people and the significance of that in today?s scandalous times.
There is a great article from down under on www.ceoforum.com http://www.ceoforum.com.au/200310_leadership.cfm that mentions two out of three particular areas where Professional Services firms demonstrate to be best practice are talent management and high-performance teams. Allow me to quote a paragraph from that article that you may best identify with.
"In this kind of world the most successful leaders are first and foremost inspirers, motivators and facilitators of business creativity. All the more in a world where top talent has options. One of our clients refers to such talent as "volunteers". He recognises that these individuals are motivated by much more than monetary compensation. They seek to achieve and have impact. The leaders of professional service firms have long understood this. They understand that talented professionals do not want to be told what to do. They want to be excited by their leader's passion and inspired by his or her vision. It is this kind of leadership that will attract and retain the best talent in a talent-constrained world."
Given your management style, you may have well taken the above for granted because the ideas you have listed are great for a team already in place. Preventing errors in judgment on ethical issues can be addressed to some extent by providing training but do you think Professional Services firms could do better by selecting people who have a record of "quality" of service rather than looking mainly at the "quantity" of business they can bring in? Any other thoughts on the intake process are most welcome. Thanks.
Regards,
Sri Alathur
Posted by: Sri Alathur at January 24, 2005 3:37 PM
Hir Richard,
Since this is the third post that you had alluded to the 'cash for advocacy scandal' I thought that you may be interested in the following link from the New York Times
It does beg the bigger question of it is not only the PR industry that needs to get a swift dose of integrity but their clients as well.
On todays column:
- I saw that you rated continuity higher than values like creativity and innovation, yet the most powerful thing in the world is an idea
- How do you keep a culture 'fresh' to deal with talented companies that have more of a 'young turk' perspective?
- How do you move company values off a notice board or the acrylic block on their desk and into their own ethos?
I realise that there are more questions than answers here, sorry!
Best,
Ged
Posted by: Ged Carroll at January 27, 2005 4:40 AM
Marc,
This professional services firm approach is so much better than being considered an agency, a line extension of advertising. We are of counsel, not middle men
Posted by: Richard Edelman at February 1, 2005 10:15 AM
Ged,
The longer I am in this business, the more I revere company culture. Companies that have it tend not to have ethical violations. Those that import Change Agents to shake up the place--note Marsh McLennan. They get into trouble. Juicing the earnings too much focus on bonus. Ideas are key but nobody should forget whatthe basis of business must be. Ethical behavior and client focus teach the next generation well
Posted by: Richard Edelman at February 1, 2005 10:17 AM
Sri,
This is great
Exactly right too
We need to have people at our firm who embrace the culture
Which is client focus delivery of results continuous pursuit of excellence Creativity
I love the concept of volunteers those who really buy into the firm and its goals
We are just doing a train the trainers session in Chicago so we spread our culture We also do an annual Edelman Summer School for our best and brightest from all over the world So we are into this...big time.
Richard
Posted by: Richard Edelman at February 1, 2005 10:18 AM
Richard,
I'm helping a client prepare a e-newsletter article about professional service firms and how they align their go-to-market strategies with their culture. May I quote from your original post and your Feb 1 comment?
Thank you,
Andrea
Posted by: Andrea Harris at February 2, 2005 1:36 PM
Company culture is a basis for good business!
Posted by: Dilan at August 1, 2005 4:15 AM
Dilan,
Company culture is number one factor for successful firms, especially in professional services.
Richard
Posted by: Richard Edelman at August 1, 2005 10:03 AM
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January 15, 2005
The License to Operate
It has now been a week since USA Today revealed that a prominent journalist had been paid by a major PR firm to produce public service spots for placement on his TV and radio shows. This same journalist also received a fee for placing spokespeople from the Department of Education on his program and for asking his fellow journalists to do the same.
The response from the journalist is candid and direct--in short, he acknowledges his error and promises never to do it again. The response from several key members of the PR establishment is frankly very disappointing. We are being asked to believe that the problem is convergence, that the blurring of the lines between advertising and PR as a function of technology and immediate access to information.
I fundamentally disagree. We are in a professional services business with an inviolable code of ethics. We are paid for our time and our counsel, not for specific number of insertions in the media. We have a responsibility to tell the truth, to foster dialogue and to reveal funding sources. We cannot tolerate any arrangement that envisages payment for placement. To do otherwise completely undermines the essence of our position as honest advocate and eliminates the separation of church and state for the media. Why bother reading the editorial copy if it is purchased in the same way as the advertising?
We have a license to operate only on the basis of these precious tenets. We should operate in the "smart zone" (phrase coined by my friend Tony Long of World Wildlife Fund) where we are above the legal minimum standard and beyond the minimum expectation of society. It's not simply about transparency on government contracts. We need to make sure there is no blurring of the lines when it comes to ethics in PR.
Posted by Edelman at 7:29 PM
Comments
Richard
Thank you for your courage. You are the only CEO of a global PR firm that has the guts to address this issue and call for reform.
You know, when I tell people what I do -- particularly those in the arts, in academia, in non-profit work -- I get this look, like "well, look at the guy who would sell his soul for an article in the New York Times." I have fought to make the argument that our profession is noble and is ethical and we can truly influence the public debate on key issues. Then an issue like this appears that cuts right to the heart of ethical practices and the silence from our industry leadership is deafening.
So far, I appear to be the only pr firm CEO to have withdrawn from the Council of Public Relations Firms in protest over this "trade group's" defense of one of its largest and most significant dues paying members. My colleagues and I see this as a defining moment for our firm and we are public with our convictions. There's plenty of room on my rock if someone wants to join me.
Elliot Sloane
CEO
Sloane & Compnay
Posted by: Elliot Sloane at January 15, 2005 9:36 PM
Elliot,
I remember keenly the pain my father would endure each year on his birthday when local columnist Irv Kupcinet would congratulate him as publicist Dan Edelman. We have moved beyond this proimitive stage but we need to earn the respect each day. This most recent incident is a serious challenge to the industry and we cannot be silent.
Posted by: Richard Edelman at January 18, 2005 10:06 AM
Then which CEO/Director/Partner will be the one to say, "We were wrong." Aren't they naturally defending their business interests above those interests of a larger industry which at the moment aren't ominous as a NCLB fiasco? From reading Mr. Kotcher's op ed piece, he spends an enormous amount of white space discussing the "blurring" and how the PR industry should come front and center. I wholeheartedly agree with you Richard in absolute transparency and honesty in practicing public relations.
Ethics, unfortunately, needs to become a very large part of training and education for PR practitioners. This industry cannot afford to lose any more ground due to isolated PR blunders, many which plant themselves in the front page of national newspapers.
Disbarred lawyers are castigated by their bar associations. Doctors face stiff penalities from the medical board for impropriety. PR practitioners fade away until the dust settles. The PR industry needs one all-encompassing organization or board that demands the membership of all persons and organizations practicing PR. Clearly, accountability and lax enforcement of existing codes and guidelines have enabled a blase attitude in certain camps.
Posted by: Steve at January 18, 2005 10:53 PM
But, as Jay Rosen noted, we are silent. And, that's just wrong.
As I noted in an email to you the other day, now is the time for PR to stand up, and be a driving force on what is kosher in online media and VNRs and SMTs and other tools of the trade. We need to figure out where we want PR to go in the future, what our industry stands for.
Right now, it stands for silence.
The one cool thing was that I was the one link to your site :-) Okay, it's also sad and pathetic.
Posted by: Jeremy at January 19, 2005 10:43 PM
Hi Richard -- Remember me? I worked for Edelman in the NY office in the early 80s. Remember the K.R.U.M.S campaign for Ragu Pasta Meals -- Kids Reject Unappetizing Meals and Snacks? Anyhow, I'm just checking into the blogging scene. Not sure how it can positively influence my clients (I have my own one-man PR shop in Portland, Oregon).
Best,
Jack Rubinger
Posted by: Jack Rubinger at January 20, 2005 2:23 PM
There's undoubtedly some color to the latest drama in that the corrupter was our own government on our dime, but where has been the industry during the last two decades, for example, when one of our most rapacious monopolies ever (Microsoft) abused the hell out of the computer industry with the help a PR outfit? Was directly helping a monopolist abuse its power for so long (as shown by voluminous court papers) any less repugnant? Microsoft would never have been able to do the damage it has done without the carefully crafted manipulation of the trade press on so many levels. Why the double standard?
Posted by: kontra at January 21, 2005 12:34 AM
FYI: PR companies "... fearing a derailment of the gravy train."
PR Pros Defend Government Contracts - Broadcasting & Cable
John Eggerton
January 19, 2005
PR companies fearing a derailment of the gravy train have weighed in on a proposed Senate investigation into government "public-relations contracts."
The investigation was prompted by the discovery that conservative TV and radio commentator and columnist Armstrong Williams had been paid $240,000 to promote the Bush administration's No Child Left Behind education policy in his commentaries.
In a statement, the Public Relations Society of America said it, too, was "disheartened" by the news of the pay-for-play deal, but took pains to try and distance it from government PR contracts in general.
"We are confident that this effort will find what we know to be the truth, that the daily practice of ethical public relations by government employees and the public relations agencies they work with represents a critical government function that serves both the government and its citizens by encouraging the free flow of information," said the PRSA in a statement.
Rep. George Miller (D-Calif.) has called for an investigation into whether the Williams contract was illegal or unethical and whether there have been other contracts that resulted in overt propaganda. Separately, Senator Tom Harkin wants to introduce a bill requiring federal agencies to show thier ad budgets to Congress and to include notification in those ads that they are paid for with taxpayer dollars.
Posted by: Gudrun Herrmann at January 21, 2005 12:29 PM
Steve,
The idea of a standards board is a good one. Self regulation is fine to a point. We need this kind of body with teeth.
Posted by: Richard Edelman at January 24, 2005 8:30 AM
Jeremy,
But, as noted, we are silent. And, that's just wrong.
As I noted in an email to you the other day, now is the time for PR to stand up, and be a driving force on what is kosher in online media and VNRs and SMTs and other tools of the trade. We need to figure out where we want PR to go in the future, what our industry stands for.
Right now, it stands for silence.
The one cool thing was that I was the one link to your site :-) Okay, it's also sad and pathetic.
Posted by: Richard Edelman at January 24, 2005 8:31 AM
Kontra,
This standard of no pay for play must apply to all clients whether government or private sector.
Posted by: Richard Edelman at January 24, 2005 8:33 AM
Jack,
My god I certainly do it was a great creative idea. Maybe we should revive the group. I am out your way end of feb and would love to see you.
Posted by: Richard Edelman at January 24, 2005 8:34 AM
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January 7, 2005
Pay to Play PR is Not On
Today's story in USA Today on payments to a journalist by a major PR firm was profoundly depressing. The article states that prominent TV commentator Armstrong Williams received $240,000 from Ketchum PR to "regularly comment on the No Child Left Behind (NCLB) campaign during the course of his broadcasts" and to interview Education Secretary Rod Paige for TV and radio spots that air during Williams program' The Right Side. USA Today, which cites information secured through a Freedom of Information Act request, reports further that Williams was to use "his contacts with America's Black Forum, a group of black broadcast journalists, to encourage their producers to periodically address NCLB" on TV and radio.
This kind of pay for play public relations takes us back in time to the days of the press agent who would drop off the new record album and $10 to the deejay. It makes our industry's efforts to "clean up" behavior in newly created PR markets such as China and Russia look decidedly ridiculous (my favorite China anecdote is journalists in the mid 90s asking for $40 in cab fare to attend an interview when the newspaper was across the street from our office).
I know Ray Kotcher and Dave Drobis of Ketchum. I am sure that they would never tolerate this kind of contractual arrangement. I am also confident that they will take steps to assure that it never happens again.
Some things are black and white. We need to set a very high standard of disclosure for our business, with total transparency on funding sources and mission. We should also eschew any practice that calls into question the integrity of the information being disseminated. Let's try to turn this negative for our industry into a positive, by making a long term commitment to the best ethical behavior.
Posted by Edelman at 3:08 PM
Comments
Senior executives are nonetheless accountable for the actions of the people in their firm. It is my sincere hope that there are steps taken so unethical behavior is addressed and openly dicussed among practitioners, instead of giving it the ugly step-sister treatment.
Those in the trenches are often confronted with situations and circumstances in which producing results for clients is paramount. It is imperative for senior leaders to convey the importance and critical need to uphold the ethics of the firm, agency, or company.
On January 7th, Ketchum was caught with the hot potato. Haven't been there instances in which PR firms and practitioners have walked the dangerous line of unaccpetability?
Posted by: Steve at January 9, 2005 8:51 PM
Steve,
Thanks for your post. You are absolutely right that senior leaders must make ethical behavior the most important value for the firm--above making money, above creativity and above anything else. I would tell you that the image of PR is still in a fragile state. We were blamed for the demise of tech in the bubble--too much hype was the charge. We are still carrying the can for large firm representation of the Church of Scientology and other marginal enterprises. We have such a great opportunity NOW to take share from advertising that we cannot let these types of violations mar the image of our industry. That is why I wrote what I did in my blog--some things are just black and white.
Posted by: Richard Edelman at January 10, 2005 10:41 AM
PR is at a cross-roads, and its the nature of open dialogue on blogs that is changing public relations.
As I noted on my blog yesterday, as more and more citizen journalists come out of the woodwork, such practices as VNRs, SMTs and paid spokesmen might fall to the side - and as PR professionals, it will be up to us to find ways to get information to the public. Do I think that PR needs to get rid of the VNR/SMT/spokesperson genre? Not at all - just be smart about it.
Posted by: Jeremy at January 12, 2005 2:26 PM
Richard
I couldn't agree with you more in expressing your disgust at these practices and the risks our industry faces today. I was equally surprised at the rather tepid and apologetic response from our industry trade group in the media regarding this matter...so much so that we have resigned our membership from the CPRF effective today. I also believe the industry is poised to do great things -- as long as we focus on ethics and integrity. In the end, it is this integrity that we bring to our client engagements and interactions with the press, the investment community, elected officials, and yes...syndicated columnists.
Elliot Sloane
CEO
Sloane & Company
Posted by: Elliot Sloane at January 12, 2005 3:17 PM
Jeremy,
When you say we should be smart about it I agree But I have caveats Smart could be construed as clever I want us to be transparent Process matters as much as message We cannot allow any similarity to advertising We don't buy the space we earn it
Posted by: Richard Edelman at January 13, 2005 5:45 PM
Elliott,
You and I have always been like minded
PR has its greatest opportunity EVER to take share from advertising But we are blurring the lines and ruining our credibility We must take a strong stand on ethics and transparency Thanks for your response.
Posted by: Richard Edelman at January 13, 2005 5:47 PM
Its an interesting comment piece Richard. Where do you think that PR should draw the line in terms of practices in order to leave clear water between legitimate practices and the Armstrong Williams affair?
- Should agencies stop using journalists to write bylined articles?
- Is it ethical to pay journalists to do media training with clients?
Posted by: Ged Carroll at January 15, 2005 3:16 PM
This is a joke, right? Isn't this the same hand wringing that accompanied all those outings of interested parties, otherwise referred to as financial reporters/experts back in the dot com days? Try telling a "reporter" what they can and can't do when they're 'off the clock' and you'll see yourself in court. The problem will not be fixed.
Posted by: Hack at January 22, 2005 5:11 AM
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January 3, 2005
The Central Role of PR in Tsunami Relief
I am wondering how many of you had an ambivalent feeling as you began your New Year's Eve revels. I just could not put out of my mind the images of the devastation wreaked on the largely impoverished communities in Sri Lanka, Indonesia, Thailand, Malaysia, India and the Maldives. The mother kissing the feet of her dead child which were protruding from the back of an Army truck, the father pressing the limp hand of a dead child to his forehead...these and many other moments are etched onto my brain.
How can as the PR community react to such an overwhelming disaster? In short, we should use our core competencies to mobilize the private sector as part of a long term relief effort. Governments and Non Governmental Organizations are the right vehicles for short term assistance. To revive the devastated tourism and fishing industries will require a different kind of intervention, based on mutually beneficial business relationships. We can act as a bridge among the stakeholder groups and as a catalyst for action.
Job #1 must be to reinforce the positive coverage on NGOs and other relief enterprises emanating from the affected areas. The continued flow of funds from donors depends on the volume and tone of media. Several of the relief organizations, such as the Catholic Relief Services (CRS) have asked for temporary assistance from the PR community through the Arthur W. Page Society (AWPS). Please contact Paul Basista, director of AWPS, at exec@awpagesociety.com or 1-212-387-4238. Our firm's Asia Pacific mid year management meeting on Jan. 16-17 in Bangkok will be devoted totally to brainstorming with NGOs on how to keep this story in front of the world's opinion formers, and help clients support NGOs. Edelman Canada is now in a full partnership with Save the Children Canada, one of the five NGO's that the Government of Canada has agreed to match.
Job #2 should be a dedicated effort by PR executives to conceive of ideas that will reestablish normal business conditions in the affected areas. I want to commend two of our clients, Pfizer for its munificent gift of $10 million in cash and $25 million in drugs, plus Starbucks for its long term commitment to purchase large quantities of Sumatran coffee. I read this morning about an initiative led by the BBC to produce an album featuring leading recording artists, hoping to raise $8 million. Could major purchasers of fish not combine with financial institutions to put fishermen in a position to buy new vessels? The tourism industry is a huge employer in several of these markets. I noted a web site this morning: Image-asia.com which told a very different story about the condition of the Thai resorts--in fact many are open and ready for business. We should encourage our clients to put convention business into these and other regional resorts, and then put the story out to restore confidence.
Job #3 is a longer term concept. How can we turn this disaster into long term positive? I heard a speech by John Pepper, chairman of Procter & Gamble, on bringing the 3 billion very poor into the global economy. He discussed specific products under development at P&G, including a straw with a charcoal filter that allows safe consumption of water. We in the PR field should be pushing an agenda that envisages free trade, continuous improvement of environmental conditions and spread of technology. Note the progress of China and India as a hopeful sign that the gap can be closed.
I am reminded of a quote from Victor Hugo, Les Miserables "Daring is the price paid for progress. All sublime contests are more or less the rewards of boldness. To attempt to brave, persist and persevere, to be faithful to oneself, to astound the catastrophe, to hold firm and withstand. Such is the example people need and which electrifies them. In order for the human race to progress it must have proved lessons of courage permanently before it. The dawn dares when breaks."
Happy New Year to all of you. Let's get to work on tsunami relief!
Richard
Posted by Edelman at 11:31 AM
Comments
I recently read your comment in Fortune's TOP TEN TECH TRENDS that "Now you've got to pitch the bloggers too. You can't just pitch to
conventional media."
How does one go about "pitching" the bloggers? It isn't as if there is a wire service for bloggers you can send a press release to.
Posted by: Tiffany at January 6, 2005 10:49 AM
No wire service for bloggers that I know of. Make sure that you track most frequent commentators on given subject (Google, Technorati). Send along press materials with links to other credible source sites. Have email conversation. Offer interviews. In short, treat like a journalist but continue the conversations.
Posted by: Richard Edelman at January 10, 2005 10:39 AM
Richard -
Next time you're in Portland, let's catch up, please. I'm at 503-469-9209 or jackrubinger@verizon.net. Wonder what ever happened to all those great accounts from the 80s -- Brown & Williamson, etc.?
Best,
Jack
Posted by: Jack Rubinger at May 9, 2005 4:56 PM
Jack,
Thank god we have moved beyond those clients!
Would love to see you
Richard
Posted by: Richard Edelman at May 10, 2005 5:13 PM