Budgeting is not a sexy topic. It is fraught with politics, and annual PR budgeting strategy is rarely discussed in the literature. However, communicators can take a street-smart approach setting annual PR budgets.
In an ideal world, public relations budgets would be developed on the basis of principle, by deciding which communication programs and activities best support the organization’s mission and goals. Therefore your planning strategy would be undertaken on a long-term basis. In this ideal world, both the organizational and departmental strategic planning would look at the longer term, but in real life there are many variables in one year alone, much less any longer timeline, so it is difficult to plan very far ahead except in general terms. The horizons of your organization can be dominated by short term agenda. Indeed, as business cycles seem to be affected by more and more short-term, unforeseen events, eg Covid-19, economic impact of Ukraine invasion, it is not prudent to plan in detail too far ahead because events tend to overtake the best laid plans.
The vision and mission statements show the direction of the organization, but the pace of progress towards achieving the vision and mission depends largely on the available revenue stream. Major new projects and other initiatives can’t be implemented unless they can be financed, usually through the annual budgeting process, which is part of the annual strategic planning process.
Annual organizational budgets dictate the shape and size of annual PR budgets
The available funding in annual organizational budgets largely dictate the shape and size of annual PR budgets and hence the PR strategy. Since all organizational budgets tend to be prepared on an annual basis, the planning (including PR planning) in all organizations is conducted on an annual basis. So in reality, the budgets control much of the strategic planning process.
Management may try to plan ahead for the likely operational activities and funding needed 3-5 years ahead, but anything further than the next year has no certainty, especially in this age of global uncertainty.
In the context of the annual budgeting process it is important to remember that PR activities are both a mix of continuing activities such as stakeholder relations activities, which are long-term in nature, as well as cyclical activities such as the production of annual reports, which fit by definition into a budget year.
If funding isn’t available, the annual communication plan is restricted, and individual programs may be cut or cancelled, despite all your good intentions. The programs would need to be reviewed in priority order and any cuts should be made first to the lowest priority items. Also, when a budget is tight, expenditure can be cut on items where cheaper alternative actions could be put in place. For instance, research can be reduced or replaced by cheaper, if less satisfactory, alternatives such as the practitioner’s professional judgment, or a smaller sample of stakeholder opinions.
Accordingly, the first action in considering a communication strategy or individual program or project is to check the likely funding. Sometimes financial managers will direct how much is available for communication as a component of the organizational budget.
Always allow a buffer amount in annual PR budgets
When budgeting, you need to be reasonably generous in estimating costs because unforeseen factors can arise during the financial year that require communication and can require unbudgeted costs. Some ‘fat’ in the budget is therefore a wise precaution for any communication activity. This can be added to each budget item or can be added at the end as a contingency factor, around 10%. It is probably better to add it to each line item in case accountants see the contingency amount and decide without consultation that it isn’t necessary!
If a budget is based on the minimum cost of each activity, this approach will usually backfire. Instead of impressing the boss with tight housekeeping, you will find that some inescapable and unforeseen costs have exceeded the planned amount and you may have to ask your boss for more funding—not once, but several times. What’s more, it is probably better not to conduct activities based on a minimum cost because this approach often provides dubious value for money over the life of the activity.
Include a program of PR for your own PR function
It is extremely important to continually inform and educate your organization’s executives about the range of areas covered by the public relations / corporate communication function and the measurable value thus provided. Some of these activities may involve costs to some extent, so allow realistically for these possible costs. You are well advised to position the expenditure as a wise investment of funds and to make judicious use of various measurement techniques that enable a dollar benefit to be attributed to the public relations effort.
Most public relations managers find corporate and operational managers unaware of the sophisticated and valuable role of the PR/comms function. Senior managers usually have backgrounds in more measurable disciplines such as finance, engineering and marketing, and are not attuned to the important bottom-line benefits a well-run PR function can bring to the organization. Being senior management, they probably would have gained most of their exposure to PR earlier in their career when the PR work was more likely to be heavily based on journalistic and event-organizing activities—the ‘technician’s’ role—rather than the more recent strategic role.
In this environment you are obliged to tactfully make management aware of the way communication activity can directly improve operational performance. You can also arrange training for managers about communication with their team members, and briefings for all managers on important issues, on crisis prevention, and even briefings on AI ethics. And don’t forget – you can compare your budget with the annual PR budgets of other firms in your industry, highlighting the fact that cutting your PR budget may increase the risk of losing employees, customers, and adversely affect relationships with key stakeholders.
Annual PR budgets and forward planning generally requires long lead-time and therefore a typical individual project included in annual PR budgets require planning for budgeting purposes at least six months before the start of the financial year to which it applies. Therefore start planning for events that will take place between 6-18 months ahead. This is a long time in which many unexpected things could happen. In view of this, the budget items should preferably be kept broad to take account of unforeseen internal and external changes.
Although the following 2023 article is called “Is there really such a thing as ‘zero budget’ marketing?” some of the principles discussed can relate to PR/comms as well. Could be of interest to you. It is a Medium article, so your access might be limited if you are not a subscriber.
Organizational zero-based budgeting
Zero-based budgeting (ZBB) is making a comeback in organizational budgets after languishing for some years due to the view it is only about cutting costs. McKinsey experts say in their 2018 article, “Why zero-based budgeting makes sense again“:
…the fundamental imperative of keeping costs down—and allocating resources to maximum effect—remains a first principle. Advanced understandings of human behavior, dramatic improvements in digital tools, and an ever-growing body of empirical evidence for budgetary success sustained over time is leading many companies to take a fresh look at ZBB.
They also define zero-based budgeting with a ‘textbook definition’: “to build a completely new budget each year, function by function and project by project, by starting from a zero base (rather than by starting from the prior year’s expenses).” Also, they admit that:
For many years ZBB was tedious and time-consuming – certainly more difficult than rules of thumb such as “last year’s budget plus or minus some percent.
In the past, the ZBB process for organizational departments was coordinated through a separate spreadsheet received from each department. However, cloud-based computing now enables organizations’ financial management and executives to require everyone contributing data via spreadsheets to use disciplined data entry. This was a huge step forward. For example, one cloud-based tool used by a global company replaced more than 10,000 offline spreadsheets, reported the McKinsey consultants in the above article.
Anyhow, experience has shown that ZBB is successfully used to redirect unproductive costs to more productive areas that drive growth.
And what about the impact of ZBB on your PR/comms function? Well, in practical terms it means that instead of cutting or increasing expenses from your previous year’s budget, you start from zero and build a new budget based on evaluating and reviewing how necessary each item is your PR function.
Rather than accepting past cost items in your budget, you must question all of your significant expenses and activities, and make a thorough case for what you need. For example, you might ask questions such as, “Is this communication activity really necessary?”, “What would happen if we stopped doing this?” or, “How else can we perform this task or activity?”
Once you’ve decided on the essential activities you want to include in your budget, you should create a ‘decision package’ for each significant item. This helps you to identify different ways to conduct activities and to find alternatives. The package should include:
- The strategic PR category in which the activity will be planned and implemented
- The extent to which the activity will contribute to your organization’s mission and specific goals
- The activity’s importance to your organization
- The activity’s cost
- Its purpose
- Alternative ways to achieve this purpose
- How the activity’s performance will be measured
- The consequence of not performing the activity, or of performing it differently.
There is no doubt that the first time you engage in ZBB it will be very time-consuming. Once you build the first of your annual budgets using ZBB, your path will be improved considerably.
Further reading on organizational zero-based budgeting
- Bain & Company, 2018: “Effecting cultural change through zero-based budgeting“.
- Boston Consulting Group, 2021: “To make zero-based budgeting work, change behavior“.
- McKinsey & Company, 2014: “Five myths (and realities) about zero-based budgeting“.
- McKinsey & Company, 2019: “Zero-based budgeting gets a second look“.
Always write explanatory budget notes
You should always prepare explanatory notes in which the assumptions and the reasoning involved in calculating the dollar amount in each budget line are concise and readily understood. Ensure the notes are sufficiently detailed to:
- Substantiate to senior management and the financial executives the need for the particular public relations activity
- Provide a guide to the assumptions and reasoning behind the expenditure for the benefit of financial executives and decision makers—demonstrating your professionalism
- Remind yourself over an 18-month timeline exactly what activities were included in the original planning (the details and the assumptions on which they are based can easily be forgotten in the meantime in the face of other events!).
Quite often it is difficult to allocate costs simply to one program or another. For example, photography of an event is usually taken for several possible uses—an initial main use, but also for various other purposes, such as including in the annual report and in brochures, posters and publications, social media, and for publicity purposes, which are in different programs.
However, the photographs may be suitable for some uses and not others, so to allocate the cost of photographing one event to one program or to split it into several programs is a little arbitrary and messy. It is simpler to put all photography under the heading ‘photography’. This makes it easier to know total photography spending and would perhaps enable a master contract with a photographer to be arranged to save costs rather than having photography split into various separate programs.
The PR department needs to consider the budgeting responsibilities for some of the grey areas that don’t quite fall into mainstream PR. Often the PR department will take responsibility for some activity only because there isn’t another department that owns it. For instance, sponsorship can be handled by either the marketing area or PR area in most organizations – or in HR when recruiting new employees. However, if there isn’t a marketing department, then the PR function handles the activity. The question then arises: should the PR department be lumbered with the cost of marketing sponsorship activities?
Does some marketing support activity fall into marketing or into marketing communication, which is a PR responsibility? Is the PR department responsible for a direct mailing campaign? These types of activities have staff time and cost implications, if not budgeting implications. If the PR department is merely providing a support activity to another department, then the production costs have to be accepted by the other area. It always pays, therefore, to be quite clear in the initial discussions of such activities about who foots the bill. A cost code should be requested from the other area that has the prime responsibility for the activity.
You are also welcome to read my article, “Don’t just rely on previous figures and assumptions for budgeting“.