An organization’s financial performance has three drivers: increase in revenues; decrease in costs or expenditures; and cost avoidance associated with a decrease in risk (such as that associated with litigation, government regulation or public issues). Public Relations/Communication (PR/C) has long sought to demonstrate how its work contributes to these three drivers.
The financial metric most widely discussed in the PR/Communication literature, particularly the practitioner literature, as a possible link between PR/C work, the possible financial value of that work and an organization’s financial performance is that of Return on Investment (ROI) The PR/C ROI discussion goes back thirty or forty years, but has accelerated greatly in the last decade (Watson 2011a). However, there has been little discussion on the use of two other financial metrics: benefit-cost ratio (BCR); and Cost-Effectiveness Analysis (CEA).
The purpose of this paper is to propose a set of principles for the use of ROI, BCR and CEA measures. The principles will address the where and how of possible applications, from the perspective of the PR/C function. In examining these three financial metrics, an argument will be made that the BCR and CEA financial metrics are more applicable and perhaps more useful than the utilization of a ROI measure.
Finally, the paper will present two frameworks. The first indicates where Chief Communication Officers (CCOs) make investments in PR/C departments (within three general categories of investments or costs: PR/C operational costs; PR/C program costs; and PR/C function costs). The second establishes where each of these three financial metrics is best utilized within each of these investments categories.
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