CorpComms Magazine

If there is one point with which every corporate executive agrees, it is this: this will be a tough year. Nobody is certain how difficult the next 12 months will be but everyone knows they will be among some of the most challenging in living memory.

Insolvency practitioners may be flourishing but everyone else is counting their pennies. Most companies are reducing investment spend or cutting it entirely and projects are being deferred till the end of the year and beyond.

In such an environment, all cost centres come under scrutiny - and that includes corporate communications. Executives are under pressure from a whole range of stakeholders to reduce expenditure and no function will be immune. In days gone by, corporate communications would have been one of the most vulnerable areas in a company's headquarters - budgets might well have been slashed and heads of department would have been obliged to make significant redundancies. But there seems to have been something of a sea change in recent years.

'Most senior management teams are pretty clear about the importance of the corporate communications function,' says Simon Lewis, group corporate affairs director at Vodafone.

This growing awareness may owe something to the very nature of what British companies do. Back in the 50s, 60s and 70s, when manufacturing was the predominant industry in this country, there was far less emphasis on PR as companies believed that the products spoke for themselves.

Since then, of course, service industries have come into the ascendant. As their offering is less tangible, external communication is frequently needed to explain exactly what is available and why it is special. There has also been an explosion of choice. Consumers and businesses can choose from an enormous range of different products and services and so reputation and brand has become increasingly important. And this is where corporate communications comes to the fore.

'Executive committees recognise more often than not that they have a responsibility to communicate, so they are prepared to back the corporate communications function,' says Catherine May, director of corporate affairs at Centrica.

In fact, many of those involved in corporate affairs, believe that it has an even greater role to play in the current climate. 'There may be some lingering pockets among less enlightened senior managers who regard corporate communications as part of the advertising and marketing budget and feel it is the first slice to be removed in terms of expenditure. But most enlightened companies will recognise that the maintenance and enhancement of corporate reputation is more important than ever before,' says Patrick Kerr, director of corporate communications at Reed Elsevier.

There are many reasons for this, some of which are more self-evident than others. There is the fact that so much is happening in business, politics and finance every single day that corporate affairs teams need to explain what is going on both internally and externally.

'When times are tough, there is even more need for the corporate communications team to interpret what is happening. There is a premium on interpreting events, markets, companies and the share price,” says Lewis. 'For a company such as Vodafone, which is truly global, we are like a window on the world. From a corporate communications perspective, we are able to help people understand and this can be quite useful.'

Similarly, many companies feel they need to show customers, suppliers and investors that they are coping with the current

situation. This is particularly the case for businesses in troubled sectors, such as finance or commodities.

Make the message understood

'This will be a challenging year for the financial services industry but it is as important, if not more so, that banks are actively engaging with the media to make sure their messages are being communicated and understood,' says Alistair Smith, head of media relations at Barclays.

The Financial Services Authority, the City watchdog, shares this view. 'We will not be cutting our budgets. Given the external environment, with the industry in the public spotlight, the FSA is duty-bound to make sure it communicates properly with stakeholders, from consumers, to firms it regulates, to trade associations and Government departments,' says John Murray, director of communications at the FSA.

Mining companies, under intense pressure as commodity prices plummet, are also firm believers in the necessity to keep communication channels open. 'Communications becomes increasingly important in this environment. We focus on communicating at least as frequently as we did, if not more, to our key stakeholders. We have to explain our strategy in a time of lower commodity prices, we have to demonstrate the robustness of the company and we have to show that we are able to get through the downturn,' says Claire Divver, group manager of corporate affairs at Xstrata.

Demonstrating financial and operational strength to the outside world is one side of the coin but many corporate affairs directors believe internal communications is equally important when times are hard. 'In tough times, when employees need reassurance, you need to invest in it. I think internal communications will be taking a bigger slice of the budget,' says Kerr.

While few people doubt the need for good corporate communication, budgetary pressures cannot be ignored. Organisations spent a significant amount of time last November and December calculating where they could save costs. In many instances, corporate communications teams were told to trim expenses.

'Budgets are being streamlined. Above-the-line expenditure is being looked at particularly closely and people are thinking more carefully about what their budgets are for. Corporate communications teams will have to respond to situations as they evolve and I think people will have to be careful for the next two years,' says Lis Lewis-Jones, outgoing president of the Chartered Institute of Public Relations.

This does not just apply to the private sector. Public sector bodies are also under pressure to trim costs.

'It is inevitable that public sector budgets will get tighter. Demand for front-line services is rising so budgets are allocated accordingly. Corporate communications departments will have to focus on what really makes a difference,' says Alex Aiken, head of corporate communications at Westminster Council.

Aiken explains his team ran 42 campaigns in 2008 across a range of different areas, some of which were markedly more successful than others.

'We were able to be rather more creative before. Now, we have to focus on where we can really help to shape perceptions. We have to show where the council is helping residents and the services we offer. We have to show how we are keeping the streets clean and how residents can recycle their waste and we have to show that we are focusing on customer service and getting it right,' he adds.

Redundancies likely

Many in the public sector believe corporate communications teams will face a particularly rough environment this year. 'Government communications has been very well resourced and there are plenty of opportunities to look for efficiencies. There will be fewer jobs but there will be opportunities for good people,' says one corporate affairs director.

Clearly, the focus on human resources applies to the private sector as well. Executives want results and employees who fail to cut the mustard will be tolerated even less now than they would have been in more buoyant times. 'You need people to understand that you have the flexibility to deal with changes, that you are thinking about how you allocate resources and the people you have on your team. You really need a quality team,' says Vodafone's Lewis. 'Fortunately, I have one.'

While the prospect of redundancies is very real in many companies, most corporate communications directors are hoping to deal with budget cuts more creatively. 'There will be a reduction in discretionary spend and a focus on must-do. Annual reports have to be written, results have to be published but obvious areas for review include travel, overseas conferences and corporate hospitality. You only had to look at restaurants in the run-up to Christmas to realise entertaining is in decline,' says Kerr.

Tabitha Aldrich-Smith became communications director at Whitbread last October with a remit to challenge every activity in her department. 'My job is to make everything count and question everything we do. We used to get every single newspaper, for example, but we don't have time to read them all and we tend to read a lot online so we simply don't need every paper every day,' she says.

A number of companies are reviewing terms with all their suppliers, including external PR agencies. 'We are continuously reviewing suppliers and the more complacent will be forced out. There will be a Darwinian survival of the fittest,' says Reed Elsevier's Kerr.

Agencies, naturally enough, believe they have a role to play.

'With resources slashed internally it's time to get your PR consultancy to do more work for you. Get the account principals working for you and use their experience on your behalf,' says Nick Miles, co-founder

of M: Communications. 'If you are contemplating cutting the consultancy out altogether then ask yourself why did you hire them in the first place? If they are not doing what they should be doing for you, they should already have been fired. If they are performing and you still feel you need to axe them, who is going to do their work? Are you going to end up hiring someone internally to replace what may be a three or four person external team?'

Andrew Grant, founder of Tulchan Communications, agrees. 'If a company decides it doesn't need its external agency, there was probably something wrong with the relationship in the first place. If the relationship is okay, most companies will say they are cutting budgets and you are a part of it,' he explains.

Miles points out that agencies can be quite flexible when they are dealing with companies they have known for years. 'There is the option of a 'fee holiday' but a very high level of trust and authority is needed for this to work for both sides,' he says.

Trust is certainly considered increasingly important. 'With external consultancies, long-term relationships really count. You have to ask yourself if you want to risk changing that relationship,' says Lewis.

External agencies can also provide a useful perspective. 'Communicating in a downturn is difficult and consultancies can tell executives how other people are faring, which can be informative - and comforting,' says Grant.

While most companies expect to retain their PR agencies, albeit on different terms perhaps, they will be looking closely at advertising spend and seeing whether they may be able to use below-the-line more productively.

Creativity comes to the fore

'You can't substitute below-the-line for above-the-line but you can be a lot more creative with your campaigns,' says Centrica's May.

Centrica is coming to the end of a 'Green Streets' campaign, where it challenged eight houses in eight streets around the country to compete with one another and see who could be most environmentally friendly. The idea, dreamt up by agency Blue Rubicon, has been a huge success, with 81 million 'opportunities to see' (OTS).

'It has been a fantastic bridge with a range of stakeholders, including MPs and Cabinet ministers,' says May.

For executive boards, this kind of campaign delivers demonstrable value. Corporate affairs directors believe they will be under pressure to prove they are adding value in whatever they do. Ironically, this may lead to increased expenditure in some areas.

'Executives will be looking for value for money so corporate communications directors will have to show boards a return on their investment. This may lead to an increase in the use of evaluation consultancies,' says CIPR's Lewis-Jones.

'I would not be surprised if the approach of buying in research about the impact of corporate communications holds up quite well. We need to be strong advocates for corporate affairs, demonstrate value for money and show how we make a difference,' adds Vodafone's Lewis.

While everyone agrees that this will be a tough year, corporate communications directors firmly believe they have a vital role to perform. They also stress the need not to become bogged down in the daily grind of cost-cutting, belt-tightening and balance sheet watching.

'It's like looking at a painting while holding a drop of oil on a spoon. You have to keep one eye on the here and now but you must also think about your long-term strategy. You mustn't forget the vision,” says Aldrich-Smith.

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