benchmarking results 2005

Thursday 12th MayPRCA Annual Conference on Consultancy Management

Benchmarking Results 2005

PRCA Benchmark Survey 2005 - Confidential

PRCA Benchmarking SurveyHugh Birley & Richard Houghton


5th annual PR industry benchmarking survey by Consensus Research

Three elements in survey– 82 MD/CEOs (59%

response)– 66 Finance Directors (48%)– 66 HR Directors (48%)

Methodology




Optimism returning




PR Industry outlook for next 12 months

2%

35%

3%

52%

64%

14%

2003

2004

2005

Get worse Improve

Q11 Base: 82 MDs/CEOs PRCA Benchmark Survey 2005 - Confidential



Q3 Base: 82 MDs/CEOs

Anticipated change in income 03 vs. 04 vs. 05




Q4 Base: 82 MDs/CEOs

Anticipated change in operating margin 03 vs. 04 vs. 05




Income forecasts 2004 vs actual income growth 2004

Forecast for 2004 survey - MDs

Actual growth in 2004 - FDs

All : +11% All : 0%

Small : +15%

Medium: +12%

Large: +9%

Very Large: +3%

Small: +14%

Medium: +5%

Large: -2%

Very Large: +3%

Base: 82 MDs/CEOs, 66 FDs PRCA Benchmark Survey 2005 -

Confidential



Reporting year 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004

Income growth 21% 10% -1% -2% 0%

Net pre-tax profit growth 25% -21% -11% 18% 17%

(NB – basket of consultancies changes each year) Reported growth over time

Base: Q2, 66 FDs PRCA Benchmark Survey 2005 - Confidential



So what problems associated with growth?




• Salary inflation • Over-servicing• Recruitment/churn costs

Maintaining Profitability




Base: Q6, 66 HRDs

Average salary increases and bonuses – over time

6%

10%

5%

6%

7%

9%

3%

8%

3%

5%

6%

7%

1999 2000 2001 2002 2003 2004

% Annual salaryincrease

Bonus as % ofannual salary




Survey year 2000 2001 2002 2003 2004 2005

Over-servicing rate (as proportion of total net income)

22% 21% 21% 27% 26% 22%

Over-servicing rate over time

Base: Q8, 66FDs PRCA Benchmark Survey 2005 - Confidential



Survey year 2000 2001 2002 2003 2004 2005

% of business on retainer

75% 80% 76% 80% 77% 79%

% of business project work

Not asked

Not asked

Not asked

25% 25% 25%

NB: includes some double counting, so %s add to more than 100

Retainer work vs project work over time

Base: Q3/Q4, 66 FDs PRCA Benchmark Survey 2005 - Confidential



Survey year 2001 2002 2003 2004 2005

% offering performance related deals to clients

Not asked

19% 29% 27% 36%

NB: asked as “payment by results” in 2004 survey

Previously asked as “performance related pricing”

Performance related pricing over time

Base: Q17, 66 FDs




• Incentives and benefits• Recruitment

Staff retention and recruitment




Churn by consultancy size (excluding redundancies)

Base: Q2, 66 HRDs




31%

9%

8%

24%

2%

4%

11%

30%

19%

3%Did not return frommat/pat leave

Complete careerchange

Freelance/Consultant

Moved to in houseposition

Moved to newconsultancy

2005

2004

Next career moves

Base: Q3, 66HRDs PRCA Benchmark Survey 2005 - Confidential



13%

7%

4%

6%

14%

10%

8%

14%

11%

26%

21%

18%

17%

12%Profits share

Personal performance bonuses

Bonus based on co. performance

Commission for new staff

Commission for new business

PMI

Low/ no interest loans

2004 2005

% = proportion introducing benefit in past 12 months

Financial package

Performance-related

Benefits introduced in past year

Q11b Base: 66 HRDs PRCA Benchmark Survey 2005 - Confidential



1%

6%

4%

11%

4%

4%

13%

6%

11%

11%

17%

23%

24%

26%

12%

15%

Gym membership

Wellbeing programmes

Company mobiles

Special days (e.g. duvet days)

Company laptops

Free drinks sessions

Education sponsorship

Professional body/ journal subs

2004 2005

% = proportion introducing benefit in past 12 months

Career-related

Lifestyle-related

Benefits introduced in past year

Q11b Base: 66 HRDs PRCA Benchmark Survey 2005 - Confidential



7%

63%

75%

14%

3%

77%

10%

74%

Don't know/ not clear

Reduction throughnon-replacement

Likely to be recruitingsenior staff

Likely to be recruitingjunior staff

2005

2004

Employment outlook for next 12 months

Base: Q29, 66 HRDs




ISSUE PRCA SERVICE

1. Income growth •AM training-commercial skills•CMS •Core competencies for new business directors•Post pitch questionnaire •Preview

Profitability




ISSUE PRCA SERVICE


2. Margins •CMS•Best Practice commercial guidelines

Profitability




ISSUE PRCA SERVICE



3. Over-servicing •Standard contract•Negotiation skills training•Benchmarking survey•Procurement professionals •Guide to transparent relationships (ISBA)•CMS

Profitability




ISSUE PRCA SERVICE



3. Over-servicing •Standard contract•Negotiation skills training•Benchmarking survey•Procurement professionals •Guide to transparent relationships (ISBA)•CMS

4. Performance related fee agreements

•ISBA endorsed guidelines on structuring performance related pricing

Profitability




ISSUE PRCA SERVICE

1. Salary • Benchmarking survey

People




ISSUE PRCA SERVICE


2. Staff retention • Frontline breakfast seminars - 580 attended 2004• Research into AD and Associate Directors attitudes• Conferences on career development, work life balance

People




ISSUE PRCA SERVICE


2. Staff retention • Frontline breakfast seminars - 580 attended 2004• Research into AD and Associate Directors attitudes• Conferences on career development, work life balance

3. Staff recruitment • Guidelines for using recruitment agencies • Employment contract templates • Core competencies - Board Directors, ADs, AMs and AEs • Web chats

People





Conclusions and suggestions Take advantage of economic/market improvement

Beware erosion of profitability - recruitment, salaries and benefits 1% improvement in all areas

- Staff

- Client handling

- Marketing

- Sales

- Financial

Use information and expertise available at www.prca.org.uk

Enjoy rest of the day, including:

- Financial management

- Talent time bomb



http://www.prca.org.uk/

benchmarking results 2005

Documents

fdsprca benchmark survey

hrdsprca benchmark survey

mdsceosprca benchmark

benchmarking results

survey mdsactual growth

mdsceosanticipated change

mdsceos anticipated

monthsq11 base