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If your CEO or CFO ever asks the question of financial ROI you say:

2/11/2015

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Is it possible to determine an exact monetary value for the relationships created through the work of the public relations function?


==> Possibility rejected for reasons explained on p. 35 (more elaborated upon in the first and last of the Excellence books by Grunig)



In a nutshell (p. 35):

  1. Not possible because no exact correlations between PR actions and financial performance can be established (too many confounding variables affecting the dependent variable)
  2. Some costs are evaded (cf. bad publicity, litigation). However: not possible to calculate the cost of something that did not happen
  3. Return on relationships is delayed
  4. Return on relationships is lumpy (and therefore difficult to measure)

"Compensating variation, as economists term this process, provides a way of transforming nonmonetary values, such as the benefit of good relationships to the organization and to society, into monetary values. The idea behind the method is simple. You ask people how much they would be willing to pay to have something. For public relations, you ask members of the dominant coalition or public relations managers how much public relations is worth to them on either a monetary or nonmonetary scale (p. 36)."


Working with a "fractionation scale" in which 100 stands for the typical department "our survey research showed that CEOs and communicators alike agree that public relations returns significantly more than it costs - and more than the typical department in their organization. CEOs estimated the average return-on-investment for public relations to be 186%. This ROI increased to 225% under conditions of excellence. It was 140% for the least excellent public relations departments. CEOs estimated values for public relations in comparison with other management functions to be 160 (where 100 was average) for all departments, 232 for excellent departments, and 109 for less excellent departments (my emphasis, p. 37)."

All this information comes from the following book:

BOTAN (Carl) & HAZLETON (Vincent) (Eds.). Public Relations Theory II. Mahwah (New Jersey), Lawrence Erlbaum Associates, 2006, 528 p.

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    Mark Verheyden

    Blogging away about my PhD. My goal is to keep you up to date about the progress made in my research. Stay tuned for more news and feel free to interact and comment.

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