Mega CSR opportunity: Are PR agencies ready?

Eminent lyricist-script-writer Javed Akhtar had presented the right perspective in which Corporate Social Responsibility (CSR) should be viewed as fatigue often sets with philanthropy. He was speaking at a recent CNBC-TV18 awards function.

“Do you know what percentage of Indian population had watched Aamir Khan’s hit film 3 Idiots?” he had asked the audience, answering the question himself. “Only 2 per cent of the Indian population. Yet the film was the biggest hit grossing Rs 200 crore. Imagine what the revenue would have been if a higher percentage of the population had watched the film?”

Akhtar had implied that the CSR should be considered an investment, not cost. CSR would eventually bring in profits for corporates as inclusive programmes tend to grow the market.

Such a realization has been sweeping across the US which, decades back, had witnessed radical anti-CSR views. "The social responsibility of business is to increase its profits," wrote Milton Friedman, economist and Nobel laureate, in his article in The New York Times Magazinein 1970. He had considered CSR a "hypocritical window-dressing", and had seen "a suicidal impulse" in business leaders who had pursued such programmes. Four decades later today, the US has come a full circle with CSR budgets increasing and concepts like cause marketing gaining increasing acceptance.

Maybe Akhtar’s thoughts on inclusive growth should set the agenda as to how the mandatory CSR budgets should be spent in India, as and when they are available in the near future, thanks to a new law. As it is well known, the new Companies Bill, passed by the Lok Sabha in December 2012 and which is likely to be tabled in the Rajya Sabha in the Budget Session beginning on February 21, 2013, makes it mandatory for companies to spend 2 per cent of their net profit on CSR. Perhaps India is the first country in the world to make CSR mandatory.

According to clause 135 of the Bill, “Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall make every endeavour to ensure that the company spends, in every financial year, at least two % of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility (CSR) Policy.”

“A Business Standard analysis of balance sheets of BSE 500 companies showed that some 457 companies will have to make provisions for spending,” according to a report by Sundaresha Subramanian and Sameer Mulgaonkar in Business Standard. “Based on the average profits of the preceding three financial years, these firms will have to spend a whopping Rs 6,751 crore in the first year after the Act comes into force. Over half of this amount has to be spent by the top 30 firms alone. Fifteen of these firms will have to allocate spends of at least Rs 100 crore. State-owned explorer ONGC has to allocate Rs 405 crore, while Reliance Industries has to spend Rs 377 crore, followed by State Bank of India (Rs 194.25 crore), NTPC (Rs 180.36 crore) and TCS (Rs 161.1 crore).” According to the media report, Business Standard Research Bureau arrived at these numbers based on the average net profit of these firms for the financial years 2009-10, 2010-11 and 2011-12 on a stand-alone basis.

The Bill specifies activities which may be covered under a company’s CSR programme. These include: (i) eradicating extreme hunger and poverty; (ii) promotion of education; (iii) promoting gender equality and empowering women; (iv) reducing child mortality and improving maternal health; (v) combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases; (vi) ensuring environmental sustainability; (vii) employment enhancing vocational skills; (viii) social business projects; and (ix) contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women.

Sachin Pilot, Union Minister for Corporate Affairs, has told the corporate world that he was open to the idea of corporate houses being incentivised by means of suitable tax provisions.

However, the corporate world would require a lot of assistance in scaling up their CSR activities. Business Standard had quoted a senior official of Indian Institute of Corporate Affairs in the above-mentioned report as saying, “At present the corporate sector is spending about 0.2% of their profits on CSR activities, even substantial portion of these spends may not fit in to the specific sphere of activities that are prescribed in the Bill.”

According to the World Bank’s May 2012 Newsletter,a symposium had been organized to launch a long-term engagement among the Government of India, the World Bank and Harvard Business School to spread the message of CSR across Indian industry.

Speaking at the symposium, Praful Patel, Union Minister for Heavy Industries, said that the public and private sectors needed to pool their resources and undertake larger projects to make a visible impact on the community they are working with. Ashok Kumar Pavadia, Joint Secretary, Public Sector Enterprises, Government of India, hoped “our partnership with the World Bank and HBS will help us share knowledge and learn from what's happening in the field of CSR".

Prof V Kasturi Rangan, the Malcolm P. McNair Professor of Marketing, Harvard Business School, told the symposium, "We can take good CSR models that are working in the country today and create a forum where they can be shared. Between HBS and the World Bank, we can create best practices, share through education forums, and probe in a much deeper way. This cross-pollination will work very well under a partnership of HBS and the Bank," he had suggested.

Bhaskar Chatterjee, Director General, Indian Institute of Corporate Affairs, felt that failure too should be looked at. "If people spoke of those failures, we'd learn far more," he had said.

Anu Agha, Chairperson, Thermax Limited, had raised a pertinent question at the symposium, "The past two decades has seen great economic growth, but India is among the three countries where the hunger index has gone up... Today public and private sectors may be working on the same issues, but separately. How can we converge and partner?"

Tata Group veteran Kishor Chaukar, who is presently Chairman, Tata Teleservices (Maharashtra) Limited, had urged companies to make CSR a strategic business exercise rather than mere philanthropy. "We need to stay there for the long run and can't be fly-by-night operators," he had said.

In her article, Why CSR's Future Matters to Your Company, in Harvard Business Review, Susan McPherson, Senior Vice President, Fenton, a London-based global network focusing on issue campaigns, had stated, “More and more companies are building long-term commitments to Corporate Social Responsibility.”

McPherson felt that the rise in consumer activism and mobility, the Occupy movement, 24-hour accountability (thanks to social media), and global resource depletion will force every enterprise, large and small, to make CSR a focal point. Four particular areas stand out among many, according to her. They are:

Employee engagement: According to Gallup, 86% of engaged employees say they very often feel happy at work, compared to 11% of the disengaged. Engaged organizations also grew profits as much as three times faster than their competitors. The Corporate Leadership Council reports that highly engaged organizations have the potential to reduce staff turnover by 87% and improve performance by 20%.

Cause marketing: According to a PRWeek/ Barkely PR Cause Survey in 2010, two-thirds of brands now engage in cause marketing, up from 58% in 2009. The same survey found that 97% of marketing executives believe this to be a valid business strategy.

The sceptical consumer: As social media platforms continue to grow beyond their pre-teen years, consumers will demand more transparency from corporations and non-profits.

Board-level involvement: In 2011, The National Association of Corporate Directors Public Company Governance Survey asked about the highest priorities for the Board. The highest priority at 72% was strategic planning and oversight and amongst the lowest was CSR at 2%.

In an article, ‘From Fringe to Mainstream: Companies Integrate CSR Initiatives into Everyday Business’, Knowledge@Wharton had stated, “Ten years ago, for instance, only about a dozen Fortune 500 companies issued a CSR or sustainability report. Now the majority does. More than 8,000 businesses around the world have signed the UN Global Compact pledging to show good global citizenship in the areas of human rights, labour standards and environmental protection.”

The Wharton article had also stated, “Today, amid a lingering recession that has dented corporate profits and intensified pressure from shareholders, companies are devising new CSR models. Rather than staffing a modest CSR department -- and slapping it on the org chart as a small offshoot of the public relations (PR) or philanthropy division -- many companies are instead trying to embed CSR into their operations. Some blue-chip companies, such as Visa, are creating new markets in the developing world by closely aligning social causes with their overarching corporate strategies.”

Jerry Wind, the Lauder Professor and Professor of Marketing, Wharton School, had said CSR is "socially responsible capitalism.... At the company level, the business objectives need to be to both maximize shareholder value in the long term and to address society's biggest problems. This requires having any CSR initiative be an integral part of the business strategy and not a separate department."

The Wharton article had also quoted Marcus Chung, Vice President, CSR and Sustainability Practice, Fleishman-Hillard, as saying, "There are more CSR practitioners today whose main job is to find ways to support business strategy and save the company money."

Leading PR consultancies featured in the CSR A list of PR News are: APCO Worldwide, Burson-Marsteller, Carmichael Lynch Spong, Cone Communications, Edelman, Euro RSCG Worldwide, MWW Group, RF|Binder, Strategic Objectives, Waggener Edstrom Worldwide and Weber Shandwick.

In India, a couple of consultancies claim they have built CSR practices, but whether any agency has initiated the required steps to equip itself to tap the emerging opportunity is the million dollar question. Stakes are high, and fast-tracking plans is the key to success.

Daniel Edelman: Creative PR guru

Daniel Joseph Edelman, founder of world’s largest independent PR consultancy Edelman, passed away on January 15, 2013. He was 92.

Journalist-turned-PR professional Edelman was known for his awe-inspiring creative PR work which had laid the foundation of modern PR. Some of his inventions are today an industry standard. These include, according to Verena Dobnik of Assocatied Press:

·       Media tour: In 1948, Dan Edelman invented the media tour – meeting journalists in their office

·       Celebrity connect: Retention of film star Vincent Price as a spokesman for the California's wine industry in 1960s and activist Gloria Steinem to promote birth control pills. A KFC executive dressed as late Colonel Harland David Sanders (founder of KFC), and served chicken to the waiting media at actress Elizabeth Taylor's 1991 wedding to construction worker Larry Fortensky, resulting in positive coverage for KFC

“PR people, I'm told, have the reputation of being glad-handers and schmoozers, intent on getting their clients' stories into print or on the air without much regard for how newsworthy those stories are,” wrote Rance Crain, President and Editorial Director of Crain Communications Inc, which publishes nearly 30 weekly business newspapers and trade papers including Ad Age.   “My opinion is that the good ones consistently come up with great story ideas, and so it's up to me to glad-hand and schmooze them so they won't give their stories to somebody else. And Dan Edelman... was definitely worth cultivating. No. 1, he had great clients that we at Advertising Age (and other Crain publications) liked to write about... And No. 2, he always came up with good story angles.”  

“One of the highest accolades you could receive from Dan was the recognition that you were a ‘hard worker’,” wrote David Brain, President and CEO, Edelman Asia Pacific.  “But if you were lucky enough to hear that you were also aware that he worked harder still… Any firm that loses a founder will mourn his passing and look to his legacy and re-visit his teachings. But few founders have the same effect on their whole industry.”

“In the same way that the automotive industry will never see another Henry Ford, that the fast food business will never see another Ray Kroc, PR will never see another Dan Edelman.”  wrote Paul Holmes in the Holmes Report. “Along with a handful of contemporaries -- Harold Burson, Carl Byoir, John Hill, Al Golin, Al Fleishman and Bob Hillard, David Finn -- Dan invented the modern public relations firm. But while most of the firms these individuals created are structurally similar (in terms of international offices, practice areas, sector focus), they were culturally quite distinctive -- and none was more distinctive than Edelman.”

Quoting from Franz Wisner’s book, Edelman and the Rise of Public Relations, Julia Hood, Executive Vice President,  Haymarket Media / PRWeek, narrated how the late PR legend had made his son Richard head of the New York office after struggling to find a replacement manager for the office. “Why don't you just take a shot at this until I find somebody decent,” Daniel apparently told Richard Edelman, who was 27 then.

Daniel retired as Chief Executive Officer in 1996, when Richard took over.  Richard is now the President and CEO of Edelman, the world’s largest public relations firm with 66 offices and 4,500 employees worldwide. 

Richard said his father was PR  "a marketing and public relations genius, because he really understood that PR could sell brands". 

 “He was a true entrepreneur,” wrote Richard. “Sometimes that led us to do things a bit backward…we began our Asian operations in Kuala Lumpur, Malaysia because one of our UK executives was marrying a man who lived there and wanted to stay at the firm.”

Big data: Revolutionary PR changes on anvil

Big data will bring about revolutionary changes in public relations, both in campaign planning and implementation as also impact assessment, as the following developments indicate:

·        Darren Oddie, co-founder at Agile.ci, has been talking about the end-to-end landscape for big data-based marketing. Data analytics enables marketing to move from mass communication to right-time dialogue, according to Oddie who had held senior marketing positions at Visa, American Express, Glaxo SmithKline and Reuters

·        WPP, London-based communications giant, has paid $70 million for a 20 per cent stake in Argentine big data marketing services company Globant which employs 2,700 people across 14 cities in Argentina, Brazil, Uruguay, Colombia, the US and the UK. Globant is known for its IT-business-function-convergence-oriented basket of services. These include technical infrastructure and creative agency style design services. Sir Martin Sorrell, CEO, WPP, had summed up the rationale for the acquisition. “Increasingly, clients want better coordination between their IT departments and their marketing departments, between their Chief Information Officers (CIOs) and their Chief Marketing Officers (CMOs),” he had said. “There are many consulting companies or digital agencies that are expert in one function or the other. Few, if any, do both and even fewer can integrate deep technical and creative capabilities on a global scale as Globant does. Partnering with Globant will allow our companies to increasingly provide our clients with insights and skills that will make their digital marketing efforts even more effective and simpler to manage at both the front and back ends.”  Globant’s clients inclulde American Express, JP Morgan Chase & Co., LinkedIn, Electronic Arts, Google and Coca-Cola

·        New York Times blogger Nate Silver had attained stardom by accurately predicting the recent US presidential elections, aided by his data sets, his statistical models and his computer. Before poll punditry, he made proven his mettle in baseball and poker

·       George Shen, an information management specialist master with Deloitte Consulting, had written, “Analytics played a bigger and more important role in the (recent US Presidential) election than just predicting the outcome. Analytics was an integral part of the 2012 political campaign... During the six months leading up to the election, the Obama team launched a full-scale and all-front campaign, leveraging Web, mobile, TV, social media and analytics to directly micro-target potential voters and donors with tailored messages.... The Obama campaign management hired a multi-disciplinary team of statisticians, predictive modellers, data-mining experts, mathematicians, software programmers and quantitative analysts. It eventually built an entire analytics department five times as large as that of its 2008 campaign.”

Eric Schmidt, CEO, Goolge, has said, “Every two days now we create as much information as we did from the dawn of civilization up until 2003. That’s something like five exabytes of data.”

According to IBM, the world creates 2.5 quintillion bytes of data every day — so much that 90% of the data in the world today has been created in the last two years alone.

David Selinger, Founder, CEO and Data Scientist at RichRelevance, a provider of personalized shopping experiences, has said, “Big Data is the business challenge of the 21st century, and 2012 was the year that the Big Data revolution rocked the C-suite.”

India too will have to catch up, both on corporate and non-corporate fronts... With elections round the corner in India, and increasing apprehensions regarding a more fragmented verdict, it would be interesting to see whether big data will play any role at all in consolidating vote banks.

Mukund Rajan is Tata Group’s Chief Ethics Officer

Mukund Rajan has been appointed as the Group Spokesperson and Brand Custodian of Tata Sons, the promoter firm of Tata Group companies.

Rajan will serve as the Chief Ethics Officer and will oversee and manage all corporate communications and brand-related activities for the Group in India and abroad, according to a statement issued by Tata Sons. He will also oversee all Tata Group Corporate Social Responsibility activities as Chairman of the Tata Council for Community Initiatives.

This is the first major appointment after Cyrus Mistry took over as the Chairman of the Group after Ratan Tata retired on December 28, 2012. Rajan reports into Mistry in his new role which is with immediate effect.

Rajan, 44, started his career as a Tata Administrative Service Officer and has been with the Tata Group for over 18 years. Prior to the latest appointment, Rajan was Managing Director, Tata Teleservices (Maharashtra) Ltd, Head, Private Equity Advisory, Tata Capital Limited and Managing Partner, Advisory Team, Tata Opportunities Fund.

Communications and successful leadership

Scott Edinger, Founder, Edinger Consulting Group, in his Harvard Business Review blog, offers tips on effective communication for successful leaders.

Edinger prescribes that, to be good communicators, one can rely on Aristotle’s time-tested formula revolving around three critical elements -- ethos, pathos, and logos.

 

·        Ethos is essentially one’s credibility. Credibility depends on one’s credentials, position held within an organization, technical expertise, strong levels of integrity and character.

·        Pathos is making an emotional connection — giving people one’s undivided attention, taking an active interest in the team members' career development and being enthusiastic about both the organization's progress and the individuals who enable it are ways that leaders do this well

·         Logos is the mode for appealing to others' sense of reason. Employing strengths in strategic thinking, problem solving and analytical skills are how today's leaders express logical ideas in clear and compelling enough terms to influence outcomes.... Facts do not speak for themselves, which is sad, since it would save so much time if they did. Effective leaders know the effort and time spent making explicit the connections they're drawing from the data to the analysis to their conclusion are well worth it.

 “These three elements of communication reinforce one another,” Edinger had written in his article. “You may rely heavily on data and analysis (logos) to make a point and in so doing create a perception of expertise and authority on a topic (ethos). And while all three are necessary to excellent communication, improving your ability to do any one of them will help you become a better communicator and so a better leader. Combining them is the path to achieving the greatest success.”

PR is $10 billion industry: Holmes Report

The Holmes Report has reported that the global public relations industry grew by 7.9 per cent (8 per cent in 2010) to $10 billion in 2011. The industry employs more than 66,000 people worldwide, up from around 59,000 people in 2010.

The key findings of the research are:

·        Small, midsize and independent firms, that had submitted their numbers for both 2010 and 2011 to the Holmes Report, saw their fee income increase by an average of 10.4 per cent, reporting combined fees of $4.5 billion (up from $3.75 billion in 2010)

·        Publicly traded holding companies (WPP Group, Interpublic, Omnicom, Publicis Groupe, and Havas), that did not provide revenue numbers to the Holmes Report, reported PR revenues of around $4.4 billion, with average growth of just less than 6 per cent. Those groups between them own eight of the 10 largest public relations firms in the world

·       The networks of independent public relations firms submitting numbers to the Holmes Report had together revenues of around $1 billion. In addition, at least $450 million in revenue comes from member firms that elected not to submit data to the Holmes Report

In all, the Holmes Report has identified a little more than $9.4 billion in worldwide public relations fee income.

“Given that there are literally thousands of smaller public relations listed in other rankings and directories and participating in trade associations around the world, we are confident that the public relations agency business is today at least a $10 billion business,” says Paul Holmes, Editor-in-Chief of The Holmes Report. “It is clear from this research that PR is a significant global business, and that it is growing faster than the world economy as a whole.”

Google-Good Relations creative PR tie-up

PR consultancies across the world will be in a position to fast-track adoption of advertising agencies’ creative practices if Google’s ‘experiment’ with Good Relations Group succeeds.

The Google-Good Relations three-month collaborative programme will enable the latter’s 15 employees team to develop “advertising agency style insights and creative ideas for clients, using tools that have previously been used primarily by creative and media shops”. The curriculum includes planning sessions, creativity workshops and the full array of Google’s ‘planning for insight’ products.

Amelia Torode, Head, Digital and Innovation, Good Relations, is among the participants. Torode, who has rich advertising experience, has been urging the PR industry to adopt advertising agencies best creative practices.

Google too is expected to benefit from the collaboration as it enables the company to showcase “the creative potential of its platforms and tools”.

Though the Google-Good Relations creative initiative is commendable, it should be remembered that creativity has been an integral part of all outstanding communications campaigns, and that several PR consultancies and PR professionals have been known for their creative contributions. Incidentally, this blogger had played a key role in setting the creative departments in two Indian PR consultancies....

However, as the Google-Good Relations experiment would enable a much larger canvass for creativity, if it succeeds, here is wishing them all the very best.

Dentsu’s global PR plans

Arun Sudhaman reports in The Holmes Report:

Dentsu has acquired US PR consultancy Mitchell Communications Group as the Japanese Group sets out to build a PR capability in Western markets. Mitchell’s clients include Walmart, Hilton Hotels and Tyson Foods.

Mitchell founder Elise Mitchell has taken charge of building Dentsu Network’s international PR offering.

PR and ethics

Sue Wolstenholme is launching an ‘only ethical approach’ campaign as the new President of the Chartered Institute of Public Relations (CIPR), a professional body in the United Kingdom for public relations practitioners.

“PR can be used for all kinds of things, whether it's starting wars or selling bars of soap,” according to Wolstenholme. “But when it is professionally done it usually changes something for the better. It is such a powerful tool it must be done ethically.”

Only 34 per cent of informed publics globally trust Indian companies: Edelman Trust Barometer

The 2013 Edelman Trust Barometer has revealed that companies from China and India are trusted by only 35 per cent and 34 per cent of informed publics globally.

The Barometer found multinational companies headquartered in developed markets consistently have higher trust levels than those in emerging markets (China, India and Mexico scored lowest).

Another significant finding is that less than one in five respondents believes a business or governmental leader will actually tell the truth when confronted with a difficult issue.

“We’re clearly experiencing a crisis in leadership,” said Richard Edelman, President and CEO, Edelman. “Business and governmental leaders must change their management approach and become more inclusive by seeking the input of employees, consumers, activists and experts such as academics, and adapting to their feedback. They must also pass the test of radical transparency.”

Other key findings from the 2013 Edelman Trust Barometer include:

• Business leaders are trusted by less than 50 per cent in 16 of 26 markets, while government leaders are trusted by less than half in 21
• Technology (77 per cent) and automotive (69 per cent) were again the two most trusted industry sectors
• Germany saw the most significant increases in trust across all institutions. NGOs up 16 points, media up 19 points, business up 14 points and government up 15 points
• Argentina experienced the greatest decline in trust among all institutions.

 Earlier Edelman Trust Barometer survey findings

MSLGROUP’s insight into Indian PR industry

MSLGROUP India, Publicis Groupe’s flagship PR consultancy in India, has released its annual state-of-the-industry report, ‘Public Relations in India: Inside the Industry’s Mind and the 2013 Outlook’.

Based on a third-party survey across the executive hierarchy in the PR industry in India, the report has concluded that talent crunch remained a top-of-mind issue for PR professionals. “A stringent selection process, followed by high investment in training, was the respondents’ top suggestion for dealing with this challenge,” according to the report.

The report feels that successful brands will be those that work collaboratively with communities, governments, customers and organizations to co-create solutions to the world’s toughest problems. Businesses will move from Corporate Social Responsibility to collaborative social innovation in 2013.

Here are the key findings of the survey:

• 51% of the respondents felt the industry would grow more than 20% over the next 12 months
• 63% of the respondents said their clients’ PR budgets are intact, while 33% said the budgets have in fact increased
• 48% of respondents identified digital media as the hottest vertical for 2013, followed by lifestyle and technology
• Knowledge-based PR emerged as a trend with 41% of respondents stressing the need for thought leadership initiatives.

Jaideep Shergill, CEO, MSLGROUP India, said: “The PR industry in India is witnessing a transformation. The industry is making an extra effort to be viewed as a strategic partner, and clients are acknowledging its value. With this study, we wanted to give the industry a voice. Having spoken to all stakeholders, from PR professionals to media to clients, I can say with certainty that a unified industry approach is the way ahead.”

Olivier Fleurot, CEO, MSLGROUP, said, “The report would have been incomplete without a survey of the way the media – a key stakeholder – perceives the PR industry. A qualitative survey of media persons conducted by MSLGROUP India offered a variety of suggestions – ranging from customized press releases to a better understanding of deadlines – for a mutually beneficial relationship with PR professionals. I would say that amongst the big companies keeping the PR aspect in focus, we are a strong leader. I am happy, and though our investment in Hanmer happened at a wrong time but investing in 20-20 has come at a right time. The industry trend is moving from media relations to strategic communications. We are here to help our clients build a business strategy which helps them reach their business goals. Our job is not the same as it was 10 years ago.”