PR is feeling the churn. Both staff and client turnover at firms grew significantly in 2019, according to the newly released PR Industry Turnover Reportfrom PR M&A advisory firm Gould+Partners. In fact, the industry’s staff turnover rate was more than twice the average turnover for the professional services category.
The report, based on responses from 61 PR firm owners, found that both staff and client turnover rose sharply among firms with numerous levels of revenue, as well as across most regions of the country.
PR firms with revenue between $3 million and $10 million were hit the hardest
Turnover was up 24.5 percent for these firms in 2019. PR agencies with revenue between $10 million and $25 million were close behind, with turnover up 24.3 percent.
The total staff decline for all firms participating in the survey—encompassing firms with revenue starting at $3 million, and up to $25 million—was 22.9 percent.
“A shortage of qualified mid-level account professionals is exacerbating the problem with staff turnover,” said Rick Gould, managing partner of Gould+Partners, in a news release. “That’s in addition to millennials who are constantly on the lookout for better agency jobs, with a higher salary, better perks, and flexibility to work from home.”
Gould added if PR firms want to stop the bleeding, they need to figure out ways to boost retention and create a more hospitable workplace. They should also reevaluate their compensation levels, incentives, and employee benefits packages.
Gould stressed that if staff turnover continues this year at the levels of 2019, the costs and distractions will have a seriously negative impact on the growth and valuation of PR agencies and hamper the industry at large.
The level of client turnover should also concern PR firm owners
Firms with revenue between $10 million and $25 million suffered the worst decline, with client churn up 28 percent.
Firms with more than $25 million saw client turnover rise 23.6 percent. Agencies with revenue between $3 million and $10 million saw a similar decline. Total churn was up 23.4 percent.
“Clients are a lot quicker to swap PR agencies these days because of budgets cuts, disappointing results, or wanting some fresh ideas from a different agency,” Gould said. “Whatever the case, losing an agency’s top client can turn a very profitable firm into a losing one overnight. And now several agencies are feeling the impact the of the Coronavirus, with clients putting retainers on hold, especially with firms specializing in travel & hospitality.”
He added, “While attrition of unprofitable clients or those requiring excessive over-servicing is for the better, it’s critical for agencies to document why they lost a client. Buyers of firms want to know the tenure of clients and whether losses were due to budget cuts or poor quality of work.”
There were double-digit increases in client turnover throughout most of the country. The biggest increase was in the Southwest, up 34.6 percent, followed by Southern California (31.8 percent), Northern California (26.8 percent), and the Southeast (25 percent). The one bright spot was in the Northwest, where client retention was up 2 percent.
Tracking the impact of turnover rates
Gould recommended that, if they haven’t already done so, PR firm owners create a spreadsheet analysis for the past three or four years to gauge the impact of lost fees and determine the reasons why clients left the firm. “Client longevity is a major factor in agency valuation and in the financial health of PR firms.”