We’re Dying Out Here!

…one hourly rate at a time.

It’s no secret that recessions, big old nasty deep ones like what we’re currently experiencing, are particularly hard on public relations budgets…which in turn is bad for the hundreds of PR firms in receipt of the shrinking largeness of those budgets…which in turn sends thousands of PR folks (often the young good ones, unfortunately) out on the street looking for new employment. But does it really have to?

Not in all cases. Not if we in the profession and those that employ us, would ever unshackle ourselves from the concept of the billable hourly rate. *

Ostensibly hourly rates are bestowed by the rank and expertise of the various account team members and translated onto daily and weekly timesheets, which translate into a cumulative monthly total of billable hours which, if God is heaven and the stars are aligned, translate almost exactly every month to the maximum budgeted dollar figure retainer agreed to by the client. Amazing…whomever within the agency first estimated the retainer based on all these various billable hourly rates must have been a math genius.

Not so ostensibly, or at least openly discussed, is the billable hourly rate “game” conducted in virtually every PR firm. The game starts at the top and falls heaviest on those on the bottom. For it is they that pay the most severe price when it fails…which it most certainly will in tight economic times. Based on that maximum monthly retainer figure which absolutely must be met, agency management demands downward that hours be recorded each and every week (if not daily in some firms) at the necessary rates to maintain this revenue stream. The game comes in the recording of the time actually spent “doing client business”, including writing timesheets…and is often the most creative thing one does weekly. Compounding the problem is the fact that these same firms have bloated their overhead and payroll with non-productive elements that become non-essential in tight times…facilities and trendy office space, specialty consulting practices, etc…that demands an equal increase in those same hourly rates.

Of course lost in all of this, is actually servicing the client in a reasonable efficient and measurable way. But exactly when did efficient, measurable client service translate to between $150 and $300 an hour?

Thus as times get tougher, management demands a higher and higher percentage of billable hours at rates that the clients’ budgets can no longer sustain. Add to this the fact that this monthly budget or retainer is shrinking. The paradoxical result is clients terminate the PR firm because they can no longer afford them; and the PR firm begins laying off employees…usually those at the low-end of the hourly scale…the ones actually doing much the work at an affordable rate.

Here’s a simple, elegant solution to keep good people employed…dramatically lower the hourly fees, or even better, eliminate hourly fees altogether. Charge clients fairly for actual PR services completed…actual media placements, and projects completed. Incorporate a bonus structure for meeting budgets and deadlines or levels of coverage. What a revolutionary idea…charging clients for actual work completed and not for creative time-sheeting.

The result will not necessarily keep everyone from losing their job…just the good ones.

*(For the sake of full disclosure, my firm and myself personally, have not billed our clients by the hour in seventeen years…through three recessions…but what do we know.)