Public Relations in Strategic Management and

Journalism Studies, Volume 1, Number 2, 2000, pp. 303–321

Public Relations in Strategic Management and Strategic Management of Public Relations: theory and evidence from the IABC Excellence project JAMES E. GRUNIG AND LARISSA A. GRUNIG

University of Maryland, USA

ABSTRACT This article establishes the case for public relations as a critical component of an organization’s strategic management processes and of the subsequent strategic management of public relations in an effective organization. The article begins with an elaboration of a theory of the value of strategic management in public relations. Qualitative and quantitative results of the IABC Research Foundation’s Excellence project, presented next, con rmed the importance of strategic public relations in helping make organizations effective. The involvement of public relations in strategic management consistently was the best predictor of excellent public relations in the 323 organizations studied. Both CEOs and communication managers in organizations with excellent public relations departments believed the function contributes more to organizational effectiveness than did those with less-excellent departments. However, the research also showed that “strategic management” means different things to different practitioners of the eld and that most public relations departments do not practice public relations strategically. Interviewees in effective public relations operations explained the value of their work primarily in building relationships with strategic publics. KEY WORDS: Excellence, Public Relations, Strategic Management

Since 1985, we have been part of a team of six researchers who have conducted research, funded by the International Association of Business Communicators (IABC) Research Foundation, on the characteristics of excellent public relations departments and on how such departments make their organizations more effective. After completing an initial literature review, we conducted research on more than 300 organizations in the United States, Canada and the United Kingdom to determine if organizations actually practice public relations in the way described by our theory of excellence and to look for evidence that excellent public relations makes organizations more ISSN 1461-670X Print/ISSN 1469-9699 Online/00/020303-19 Ó

effective. Preliminary results of our research have been published in two publications issued by the IABC Research Foundation (Grunig et al., 1991, 1994; and in a book written primarily for public relations practitioners, the Manager’s Guide to Excellence in Public Relations and Communication Management (Dozier et al., 1995). A third and nal book reporting the complete results of the study is in preparation. The result of this research is a theory that consists of several generic principles that seem to apply throughout the world, although we believe that these concepts must be applied differently in different cultures and political–economic systems. The theory also applies 2000 Taylor & Francis Ltd

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in different organizational settings such as government agencies, corporations, non-pro t organizations and associations. In short, the theory offers a conceptual framework for a professional culture of public relations which, with appropriate applications and revisions in different organizational and national cultures, is a fundamental component of effective management throughout the world. We began our study of excellent public relations by addressing the research question posed in a “Request for Proposals” issued by the IABC Research Foundation: How, why and to what extent does communication contribute to the achievement of organizational objectives? When we began the research, however, the members of the research team realized that the one question posed by the IABC Foundation—the effectiveness question— was not enough. We knew that many organizations do not manage communication programs strategically and that these programs do not make their organizations more effective. Thus, we added what we called the excellence question: how must public relations be practiced and the communication function organized for it to contribute the most to organizational effectiveness? The theoretical answers that we developed to these two research questions as well as our empirical con rmation of the theory show the importance of an organization viewing public relations as a critical component of its strategic management processes and of the subsequent strategic management of public relations. The results of our research further con rm the importance of strategic public relations in effective organizations: involvement of public relations in strategic management consistently was the best predictor of excellent public relations. To understand the importance of public relations to strategic manage-

JAMES E. GRUNIG AND LARISSA A. GRUNIG

ment, this article begins by reviewing brie y our theory of the value of public relations. This theory leads directly to two of the characteristics of excellent departments: public relations is involved in organizational strategic management, and public relations is managed strategically. The second section of the article presents our theory of public relations and strategic management. Finally, the third section presents results from our research that con rm the importance of strategic public relations in making organizations more effective.

How Public Relations Contributes To Organizational Effectiveness To develop a theory of the relationship of excellent public relations to organizational effectiveness, the IABC research team began by reviewing studies of excellence in management (Grunig, 1992) and the literature on organizational effectiveness (Grunig et al., 1992). Most of the studies of—and books on—excellence searched for attributes of excellent management, but they de ned excellence in different ways. Most researchers began with a dependent variable, an indicator of organization effectiveness, to identify organizations for study. They then worked backwards to identify management characteristics these “effective” organizations had in common. Peters and Waterman (1982), for example, used six nancial criteria to identify excellent companies for analysis: compound asset growth, compound equity growth, average ratio of market value to book value, average return on total capital, average return on equity and average return on sales. Hobbs (1987) identi ed his excellent companies by measuring return on sales and return on owner’s invest-

PUBLIC RELATIONS IN STRATEGIC MANAGEMENT

ment. Paul and Taylor (1986) used similar nancial measures to identify the 101 best-performing companies in America. Carroll (1983), in a review of Peters and Waterman (1982, p. 79), criticized the use of nancial measures for identifying excellence in management. He pointed out that several independent variables other than management also affect nancial performance: “… such factors as proprietary technology, market dominance, control of critical raw materials, and national culture and policy also affect nancial performance, regardless of the excellence of management”. Other writers de ned excellence in terms of organizational behaviors and outcomes other than nancial performance. Kanter (1983, 1989) and Pinchot (1985) de ned excellence as innovativeness. Fortune magazine annually lists the most admired corporations based on quality of management; quality of products and services; innovation; value as a long-term investment; nancial soundness; ability to attract, develop and keep talented people; community and environmental responsibility; and use of corporate assets. Similarly, Lydenberg et al. (1986) rated corporations on their social conscience; Levering et al. (1984) on human resources bene ts for employees; and Zeitz and Dusky (1988) on bene ts for women. Hickman and Silva (1984) suggested that each organization creates its unique criteria for excellence and then suggested how leadership can help the organization meet those criteria. Finally, Nash and Zullo (1988) named a “Misfortune 500” on the basis of such criteria as “badvertising” campaigns, unjusti ed promotions, mismanagement and poorly conceived products. Although all these lists are of corporations, the Public Broadcasting System (PBS) also aired a program in 1990 in which it named and featured

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several excellent governmental and nonpro t organizations. Most of these studies of excellence have had two major problems. The rst problem is that most began with a single or limited de nition of an outcome of organizational behavior that could be used to identify excellent organizations. For example, Peters and Waterman (1982) identi ed 43 excellent corporations using nancial criteria that, as Carroll (1983) pointed out, are subject to many variables other than the behavior of management. Peters and Waterman’s limited de nition of the outcome of excellence called the entire study into question within 2 years, when Businessweek (1984, p. 76) reported that “at least 14 of the 43 excellent companies … had lost their luster … signi cant earnings declines that stem from serious business problems, management problems, or both”. Studies of excellence such as Peters and Waterman’s would have had a sounder theoretical basis if they had been linked to the extensive literature on organizational effectiveness, which shows that no single criterion can identify the best-managed organizations (Hall, 1991). The second problem with these studies, however, is that they made only an empirical connection between the outcomes they de ned as indicators of excellence and management characteristics these excellent companies shared. They did not begin by developing a logical theoretical relationship between management characteristics of excellent companies and the outcomes produced by the characteristics—i.e. a theoretical linkage between independent and dependent variables. In the Excellence project, we began by reviewing the literature on organizational effectiveness (Grunig et al., 1992) to determine what an effective organization is so that we then could conceptualize how different public rela-

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tions variables could be linked to organizational effectiveness. Thus, we de ned excellence in public relations not by an arbitrary set of outcomes or of characteristics of management alone, but as the theoretical relationship between a set of independent variables (characteristics of public relations) and a set of dependent variables (indicators of organizational effectiveness) to which they are logically and empirically related. The literature on organizational effectiveness is large and contradictory. In fact, some theorists question the value even of trying to de ne effectiveness (for overviews of the literature see, e.g. Price 1968; Goodman and Pennings 1977; Robbins 1990; Hall 1991). Robbins (1990) and Hall (1991), however, have integrated this literature into a coherent framework that clearly suggests the role of public relations in making organizations more effective. They identi ed four approaches that contribute to a comprehensive theory of organizational effectiveness. 1. The goal-attainment approach holds that organizations are effective when they meet their goals. The goal-attainment approach is limited, however, because it cannot explain effectiveness when an organization has multiple goals and different stakeholders of an organization have con icting goals. It also cannot explain the role of the environment in organizational effectiveness. 2. The systems approach states that organizations are effective when they survive in their environment and successfully bring in resources from the environment necessary for their survival. The systems approach, therefore, adds the environment to the equation of organizational effectiveness, but it is limited because survival is an extremely weak goal. In government,


for example, Cunningham (1989, p. 127) pointed out that “public organizations … rarely die”. The systems approach also de nes the environment in vague terms. It does not answer the question of how an organization determines what elements of the environment are important for its success. 3. The strategic constituencies approach puts meaning into the term “environment” by specifying the parts of the environment that are crucial for organizational survival and success. Strategic constituencies are the elements of the environment whose opposition or support can threaten the organization’s goals or help to attain them. Taken broadly, the environment is both external and internal so that employee groups and management functions can be strategic constituencies as much as can external groups. 4. The fourth piece of the effectiveness puzzle comes from the competingvalues approach. That approach provides a bridge between strategic constituencies and goals. It states that an organization must incorporate the values of strategic constituencies into its goals so that the organization attains the goals of most value to its strategic constituencies. Different organizations with different strategic constituencies in their environments will have different goals and thus their effectiveness will be de ned in different ways. A theory of organizational effectiveness that incorporates the competing values of strategic constituencies into the goals chosen to de ne success ts logically with theories of strategic management that provide a model for organizations to develop missions (sets of goals) that t with the threats and op-


portunities provided by strategic constituencies in the environment. Such a theory also makes the role of public relations in organizational effectiveness clear. Robbins described that role well when he discussed the limitations of the strategic constituencies model. The role of public relations is to provide the information about the environment that Robbins said is dif cult for other managers to attain: The task of separating the strategic constituencies from the larger environment is easy to say but dif cult to do in practice. Because the environment changes rapidly, what was critical to the organization yesterday may not be so today. Even if the constituencies in the environment can be identi ed and are assumed to be relatively stable, what separates the strategic constituencies from the “almost” strategic constituencies? Where do you cut the set? And won’t the interests of each member in the dominant coalition strongly affect what he or she perceives as strategic? An executive in the accounting function is unlikely to see the world—or the organization’s strategic constituencies—in the same way as an executive in the purchasing function. Finally, identifying the expectations that the strategic constituencies hold for the organization presents a problem. How do you tap that information accurately? (Robbins, 1990, p. 67).

The theory of strategic management and public relations developed by the Excellence team provides the mechanism that Robbins called for in this quote. It states that public relations managers can begin to identify strategic constituencies by identifying stakeholder categories and then by segmenting members of those categories into active and passive publics. Active publics—or potentially active publics—are most strategic for an organization. Thus, it is their values that must be incorporated into organiza-

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tional goals. To do so means that an organization must build both short- and long-term relationships with strategic publics to be effective. If there are more strategic constituencies than the organization has the resources to build relationships with, it must separate the strategic constituencies from the “almost” strategic constituencies, to use Robbins’ (1990) words. To help make that decision, the Excellence research team used theories of cost-bene t analysis to help set such priorities (Ehling, 1992). Similarly, the Excellence research team also found that excellent public relations managers help to bring the values and goals of different functional managers together by working with them to build relationships with relevant publics and to bring the perspectives of those publics into strategic management (Grunig et al., 1994)—another of Robbins’ questions about strategic constituencies. This integrated theory of organizational effectiveness, therefore, provides the basic premise for a general theory of public relations. When public relations helps the organization build relationships with strategic constituencies, it saves the organization money by reducing the costs of litigation, regulation, legislation, pressure campaigns, boycotts or lost revenue that result from bad relationships with publics—publics that become activist groups when relationships are bad. It also helps the organization make money by cultivating relationships with donors, consumers, shareholders and legislators that are needed to support organizational goals. Good relationships with employees also increase the likelihood that they will be satis ed with their jobs, which makes them more likely to support and less likely to interfere with the mission of the organization. Most importantly, the premise that relationships are an essential ingredient of organiza-

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tional effectiveness explains why a theory of strategic management and public relations is the essential link between public relations and organizational effectiveness.

Strategic Management and Public Relations “Strategic public relations” is a loosely de ned concept that recently has become popular among public relations practitioners. Both major professional organizations in the United States, the Public Relations Society of America (PRSA) and the IABC, for example, regularly hold seminars on the topic and include the topic in their publications. Most of the discussion of “strategic” public relations, however, consists of loose references to the idea that public relations should be planned, managed by objectives, evaluated, and connected to organizational objectives. Thus, in essence, “strategic” public relations refer to managed public relations as opposed to public relations as a set of communication tactics supplied by communication technicians. In their chapter in the rst Excellence book, Grunig and Repper (1992) reviewed the literature of strategic management in the search for the role of public relations within that overall organizational function. They concluded that a strategic approach to public relations is one of 14 characteristics of excellent public relations departments and that involvement in the overall strategic management of the organization is a second of those characteristics. Strategic management is extremely important to excellent public relations because it describes how public relations should be practiced if it is to contribute the most to the success of an organization. As an academic eld, strategic man-


agement is as young as public relations. Both disciplines have much in common, but until recently both have been oblivious to the other. Bowman (1990) said that business schools offered capstone courses in business policies in their MBA programs before the 1960s, courses in which students were expected to tie together the courses they had taken in different functional areas of management. In the 1960s, however, three books became available that helped strategic management to emerge as a eld that was more than a composite of other management functions (Bowman, 1990; Rumelt et al., 1994). These books were Chandler’s (1962) historical study of how the strategic ideas of executives changed the direction of four major corporations, Ansoff’s (1965) more normative book on the concept of strategy and the process of strategy formulation, and the Harvard textbook on business policy (Learned et al., 1965), Business Policy: text and cases. In the Harvard book, according to Rumelt et al. (1994), Kenneth Andrews wrote a section in which he introduced “the notion of an uncertain environment to which management and the rm had to adapt”. Since Andrews introduced the concept of environment to strategy, two words, “mission” and “environment” have permeated the literature. Together, they suggest that organizations must make long-term, strategic choices that are feasible in their environments. According to Steiner et al. (1982, p. 6) “strategic management” can be distinguished from “operational management” by “the growing signi cance of environmental impacts on organizations and the need for top managers to react appropriately to them”. Managers who manage strategically do so by balancing the mission of the organization—what it is, what it wants to be and what it wants to do—with what the


environment will allow or encourage it to do.

Enacting the Environment: the critical role of public relations Although the concept of environment pervades the literature on strategic management, until recently the concept has been conceptualized in “general, even rather vague” terms (Rumelt et al., 1994). Wheelen and Hunger (1987) helped clarify the concept of environment when they distinguished between the task environment and the societal environment. They explained that in accomplishing its mission, an organization works in its task environment but that the societal environment may divert its attention from the task environment. In a comprehensive overview of theories of an organization’s environment, Ring (1989, pp. 56, 71) pointed out that researchers have paid more attention to the task environment than “to the categories and components of the external environment that do not t within the scope of the task environment”. He added that: historians, political scientists, and economists, among others, regularly chronicle changes in these [non-task] components of the external environment. Only rarely, however, … do they focus on the impact that these changes have on the strategies of speci c rms, or on how rms attempt to adapt to these changes.

To a public relations scholar, Ring’s (1990) discussion of the inadequacies of strategic management theories in explaining how an organization should relate to the environment clearly suggests the role of public relations in strategic management. Although writers on strategic management discuss the en-

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vironment and list its components, only a few of these writers have recognized or described the role of public relations in helping the organization to identify the most important components of its environment and in using communication to build relationships with them.1 Although scholars of strategic management originally conceptualized the environment as a constraint on an organization’s mission and choices, Porter (1980, 1985, 1990, 1994) turned the relationship around and conceptualized the environment as a source of competitive advantage. For example, he found that multi-national corporations with strong competitors in their home country were better able to compete in other countries because of the pressure to excel at home (Porter, 1994). Similarly, he found that government regulation, traditionally seen by corporate managers as an intrusion on their decision-making, can stimulate changes in organizational behavior that provide a competitive advantage: Stringent standards for product performance, product safety, and environmental impact contribute to creating and upgrading competitive advantage. They pressure rms to improve quality, upgrade technology, and provide features in areas of important customer (and social) concern (Porter, 1990, p. 647).

Vercic and Grunig (2000) extended Porter’s idea that an organization can gain competitive advantage from successful relationships with competitors and governments in the environment to relationships with other stakeholder publics. For example, a corporation that successfully solves its environmental problems, usually when pressured by environmental activists, gains an advantage from relationships with stockholders, consumers, employees, government and communities that can

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support or constrain that corporation. Similarly, a government agency that responds well to pressures from its constituents will be more likely to gain support from those publics as it competes for limited public funding. Out of this framework, the contribution of public relations to strategic management and, as a result, to organizational effectiveness becomes clear. Public relations contributes to strategic management by building relationships with publics that it affects or is affected by—publics that support the mission of the organization or that can divert it from its mission. Organizations plan public relations programs strategically, therefore, when they identify the publics that are most likely to limit or enhance their ability to pursue the mission of the organization and design communication programs that help the organization manage its interdependence with them. The value of public relations to strategic management becomes even clearer if we also look at strategic management as the arena in which important organizational problems are identi ed and decisions are made about how to address those problems. Mintzberg (1994, pp. 31, 27), for example, emphasized the process of strategic management more than the speci c plans that result. He de ned planning as “a formalized procedure to produce articulated result, in the form of an integrated system of decisions”; and he de ned strategic as “an adjective to mean relatively consequential”. In this decision-making arena, the primary actors do not make rational decisions in the way that classical economists envisaged. Knights and Morgan (1991) and Knights (1992) took a postmodern view of strategic management as a subjective process in which the participants from different management disciplines (such as marketing, nance, law, human resources


and public relations) assert their disciplinary identities. A rational approach to strategic management would suggest that participants come together to nd the best solution to problems on which to agree. The subjective view, however, suggests that participants in strategic management from different disciplines recognize different problems as important as well as different solutions. Marketing would see the problems of selling products as most important, manufacturing the problems of producing products, human resources the problems of motivating employees, and nance the problems of acquiring resources. The value of public relations, therefore, is that it brings a different set of problems and possible solutions into the strategic-management arena. In particular, it brings the problems of stakeholder publics into decisionmaking; publics who make up the environment of the organization. The environment, however, is not an objective reality that all managers will see in the same way. Instead, Weick (1979) explained, managers enact their environment—that is, the environment to an individual manager is what he or she perceives it to be. In the quotation above, Robbins (1990, p. 67) pointed out the dif culty of separating the strategic constituencies in the environment from the lessstrategic constituencies. Consequently, public relations will have value in strategic management if it can develop theories that enable the organization to enact those parts of the environment that representatives from other management disciplines are unlikely to recognize and if it can develop a method that can help strategic decision makers determine which stakeholder publics are “relatively consequential” to the decisions, to use Mintzberg’s (1994, p. 27) term. In short, we need theories to identify stakehold-


ers and strategic publics—theories that disciplines other than public relations have not developed.

Public Relations at the Organizational and Functional Levels of Strategic Management

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Public relations is most effective, in other words, when the publics with whom practitioners communicate are identi ed within the framework of organizational strategic management and when the function is managed strategically at the level of the public relations department. These two levels of strategic management also are identi ed in the literature on strategic management. According to Pearce and Robinson (1982), strategic management takes place at three levels:

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At the corporate or organizational level, where the board of directors, chief executive of cer, and chief administrative of cers set grand strategies and re ect the interests of stockholders and society. At business or specialty levels, which deal with market segments or provide specialized services. At functional levels, composed of managers of products, geographic areas, or functions such as marketing or public relations. In addition to these three levels, Bowman added a fourth, institutional, which involves “the issues of how a corporation ts itself into the social environment and the body politic” (Bowman, 1990, p. 30). Of the four levels, Bowman said, scholars of strategic management have paid the least attention to the institutional level and need to address that level much more: “For instance, problems of hazardous waste in the chemical industry are enormously important to that industry … This is an institutional problem of

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the kind that strategy research typically ignores.” What Bowman called the institutional level obviously is the substance of public relations and a level at which theories of strategic management would bene t greatly from the work of public relations scholars and practitioners. Brody (1987), however, pointed out that public relations traditionally has been relegated to the functional level, where it is responsible for implementing organizational objectives but not for helping scan the environment and participating in the formulation of organizational objectives. Thus Kotler and Andreasen (1987) concluded that marketing is strategic for an organization but that public relations is not. However, a survey of public relations counselors reported in Nager and Truitt (1987) showed that respondents rated strategic planning and in-depth counseling of senior executives as the most important contributions that their rms make to clients. Only half as many counselors responding rated implementation of communication programs as their most important contribution.

A Model of Strategic Management and Public Relations It is crucial, therefore, for public relations to be involved in strategic management; but in reality the two functions often have no connection. Most organizations carry out the same public relations programs year after year without stopping to determine whether they continue to communicate with the most important publics. Dozier and Grunig (1992) have pointed out that at some point in their history, most organizations probably develop their public relations programs strategically—that is, the presence of a strategic public probably provides the

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motivation for initiating public relations programs. As time passes, however, organizations forget the initial reason for the programs and continue communication programs for publics that no longer are strategic. Public relations then becomes routine and ineffective because it does little to help organizations adapt to dynamic environments. In the rst Excellence book, Grunig and Repper (1992) developed a model of strategic management and public relations that incorporates the dual role of public relations in the overall strategic management of the organization and in the strategic management of public relations itself. They described the rst three components of the model as “stages” rather than steps because the stages characterize the evolution of publics and issues. These three stages described the contribution that public relations make to strategic management at the organizational level. Public relations makes its contribution to overall strategic management by diagnosing the environment to make the overall organization aware of stakeholders, publics and issues as they evolve. Therefore, the three stages in Grunig and Repper’s (1992) model are called the stakeholder, publics and issues stages. Often the terms “stakeholder” and “public” are used synonymously. There is a subtle difference, however, that helps to conceptualize the strategic planning of public relations. People are stakeholders because they are in a category affected by decisions of an organization or because their decisions affect the organization. Many people in a category of stakeholders—such as employees or residents of a community—are passive. The stakeholders who are or become more aware and active can be described as publics. Stakeholders can be mapped by developing broad categories of people or groups who affect or are affected by an


organization (Freeman, 1984). Not all people in these categories will be equally likely to communicate with or affect the organization, however. As public relations practitioners develop communication programs for stakeholders, therefore, they can increase the probability of communicating with their strategic publics by dividing the category into segments. Grunig has developed a “situational theory of publics” over the last 30 years that he and Repper incorporated into their model of strategic management and public relations (for a review, see Grunig, 1997b). In that theory, Grunig conceptualized the crucial distinction for segmenting a population of people into publics as the extent to which people passively or actively communicate about an issue and the extent to which they actively behave in a way that supports or constrains the organization’s pursuit of its mission. There are three major concepts in the theory that are used to segment people into active and passive publics. The theory states that publics are more likely to be active when the people who make them up perceive that what an organization does involves them (level of involvement), that the consequences of what an organization does is a problem (problem recognition ), and that they are not constrained from doing something about the problem (constraint recognition) (Grunig and Hunt, 1984, chapter 5; Grunig, 1997b). The third stage in Grunig and Repper’s (1992) model, the issues stage, incorporates the concept of issues management into our theory of public relations and strategic management. Grunig and Repper’s model states that issues arise because publics create them—i.e. publics make issues out of problems. Thus, a public relations manager serves strategic management by identifying management decisions that have consequences on people not in-


volved in the decision—i.e. create problems for those people. Publics develop to address the problems and, if the organization does not involve them in the decision, make issues out of the problems. Issues, therefore, can be “managed” most effectively by involving publics in strategic decisions that might have consequences on them before the publics perceive the need to make an issue out of the problems those consequences cause for them. At the functional level (the level of the public relations department), these initial three stages provide a link between public relations programs and organizational goals and decisions. Organizations need different kinds of public relations programs for each of these stages. Thus, the last four parts of Grunig and Repper’s (1992) model of strategic management and public relations de ne the traditional four “steps” of public relations management that the public relations department should apply to each program it implements at the rst three stages—i.e. they make it possible to manage public relations strategically as it contributes to strategic management of the overall organization. These four steps include the development of realistic and measurable objectives for communication programs, the planning of communication programs, the implementation of the programs and the evaluation of those programs. This, then, is the role of public relations in strategic management in theory. The last section of this article provides evidence that excellent public relations departments do indeed participate in strategic management in a way that is similar to this theoretical model.

Research Evidence From the Excellence Study The Excellence research project con-

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sisted of two empirical stages. In the rst stage, the research team administered three questionnaires to the head of public relations, the Chief Executive Of cer (CEO) and an average of 14 employees in 323 organizations in the United States, Canada and the United Kingdom. These organizations included corporations, government agencies, non-pro t organizations and associations; large and small organizations; and some organizations believed to be excellent and some less than excellent. The Excellence research team began its analysis of these quantitative data by attempting to reduce as much of the data as possible into a single index of Excellence in communication management. This was necessary because both the Excellence theory and the data gathered in the study are complex. The theory consisted of relationships among variables from such subtheories as public relations roles, participation in strategic management and models of communication. The causal relationships among these subtheories could begin at different points for different organizations. The sub-theories were operationalized into some 1700 questions on the three questionnaires. We reduced these variables to a single index after rst combining a number of indicators of variables into indices or by using factor analysis to produce broader variables for related variables. We then factor-analyzed these indices or factors to isolate a single factor of Excellence, which we then used to calculate an overall index of Excellence in public relations. The factors produced by factor analysis represent underlying variables that are broader than the original variables analyzed. In this study, we expected that a factor would de ne an underlying variable of Excellence in communication management, which

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would subsume the variables of the sub-theories. Factor analysis allowed us to determine if all of the characteristics of Excellence clustered as we predicted so that we could use the underlying factor to identify the mostand least-excellent communication departments as well as average ones. We then used this index to choose organizations for the second stage of empirical research. We identi ed the 24 organizations with the highest and lowest scores on the overall Excellence factor and then conducted qualitative research on these organizations to gain insight into how excellent public relations came about in different organizations as well as detail on the outcomes produced by Excellence. We began the search for a single Excellence factor with the goal of including as much of the information from the three questionnaires as possible in the index. We then correlated the overall index of Excellence with several variables that could not be included in it. The result of this analysis was a comprehensive view of the characteristics of the most-excellent public relations departments.

The Value of Public Relations The major premise of the Excellence theory stated that communication has value to an organization because it helps to build good long-term relationships with strategic publics, so measures of the value of public relations were perhaps the most important variables to be included in the Excellence factor. We measured the value of communication through the method of compensating variation, by which we asked the CEO to estimate the value of public relations in comparison with other management functions and to estimate the rate of return to communication (Ehling,


1992). We also asked the top communicator to make similar estimates and to predict the estimates that the members of senior management who made up the dominant coalition of decisions makers in the organization would make on the same variables. The CEOs and top communicators estimated the return to public relations almost equally—186 per cent and 197 per cent, respectively. The heads of public relations underestimated the CEO’s estimate, however: 131 per cent. Results were similar on the question that asked the CEOs and public relations’ heads to compare the value of the public relations department with the typical organizational department. Respondents were told that 100 was the value of a typical department. CEOs provided a mean score of 159 as the value of the public relations department. Heads of public relations departments rated the value of public relations even higher than did the CEOs—a mean of 189. As they did for the rate of return, however, the PR heads underestimated the value that the CEO would assign to the department (138), but not by so large a margin. In the qualitative portion of the study, we asked CEOs to elaborate on why they assigned the value they did to their public relations departments, and their explanations provided further evidence that our theory of the contribution of public relations to organizational effectiveness was accurate (Grunig et al., 1994). The support came more in the form of their explanations of the value of public relations, however, rather than from estimates of monetary value. Most of the senior practitioners of public relations and their CEOs in the study were reluctant or unable to attach a monetary value to the contribution of public relations. However, they cited bene ts such as positive relationships that served as buffers be-


tween the organization and its publics during crises.

Contribution to Strategic Management Our research about the value of public relations served mostly to develop evidence related to the research team’s conceptualization of the contribution of public relations to organizational effectiveness. These estimates of value were most useful when we could correlate them with the characteristics of excellent public relations. For this article, the relationship between public relations’ involvement in strategic management and the estimated value of public relations were most relevant. Four questions in two of the three questionnaires asked CEOs and heads of public relations units to describe the extent to which public relations contributes to four strategic functions: strategic planning, response to major social issues, major initiatives such as acquisitions or new products and programs and routine operations such as employee communication or media relations. For the overall sample, we found that public relations units most often contribute to routine operations and in response to major social issues. They are less likely to participate in major initiatives and, especially, in strategic planning. We also asked what public relations units do to contribute to strategic management when they are involved in the process. (The departments not involved in strategic planning did not respond to these questions.) The responses showed that communication units that participate in strategic planning most often do so through informal approaches, contacts with in uential people outside the organization and judgement based on experience. Public relations less often

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conducts research or uses other formal approaches to gathering information for strategic planning—an indication that many communication units are not quali ed to make a full contribution to strategic planning. The results for the CEOs and the heads of public relations units were similar. The only exception was for participation in strategic planning, for which public relations heads estimated the participation to be greater than did the CEOs. As a general picture, therefore, these results showed that most public relations practitioners are not strategic managers. However, the picture changed dramatically when we looked at the departments that were most valued by their CEOs and that conform most to our criteria for Excellence.

Strategic Management as Seen by CEOs To develop a preliminary and relatively simple picture of how CEOs view excellent public relations, we placed organizations into three categories based on responses to the item that asked participants to compare the value of public relations with the average department in the organization. Most (212) of the responses fell into the category between 100 and 200, which is labeled “medium value” in Table 1. We compared the responses of the CEOs in this category with those of CEOs who rated public relations below 100 (38 respondents) and those who rated it above 200 (34 respondents). Participation of public relations in these critical organizational functions, especially in strategic planning, most distinguished the perceptions of CEOs who assigned these three levels of value to public relations. Similarly, Table 1 shows that the CEOs of highly valued departments assigned a return

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Table 1. Characteristics of public relations in departments valued differently by CEOs

Variable

Low value (n 5 38)

Medium value (n 5 212)

High value (n 5 34)

F

6.56 8.78 8.24 10.09

8.89 11.95 10.90 12.71

13.04 14.27 14.20 15.17

21.96** 22.57** 30.06** 26.98**

5.05 6.76 6.11 7.74

8.29 9.56 9.12 10.54

11.07 11.88 11.72 14.21

15.86** 15.74** 18.22** 33.18**

8.88 8.89

11.32 11.38

15.55 14.45

32.52** 19.37**

126%

178%

265%

9.36** 14.83 1,**

Contribution to organizational functions Strategic planning Response to major social issues Major initiatives Routine operations Contribution to strategic management (if any) Regular research activities Research for speci c questions Other formal approaches Informal approaches Contacts with knowledgeable people outside organization Judgement based on experience Other variables Percentage return on public relations

* Differences are signi cant at the 0.05 level of probability. ** Differences are signi cant at the 0.01 level of probability. 1 Calculated after scores are transformed to a square root to reduce skew. Except for the percentages, the numbers in this table are based on an open-end, “fractionation scale.” Scores are the square roots of responses on the scale for which respondents are told that 100 is a typical response on all of the items in the questionnaire. Thus, in this table a mean of 10—the square root of 100—represents this typical response.

on investment in public relations about twice as high as for the low valued departments.

Canonical Correlation of Characteristics of Public Relations with Value of Communication The comparisons in Table 1 provide only a snapshot of the relationship of public relations’ participation in strategic management to organizational effectiveness. We went on to conduct factor analyses of 20 key characteristics of excellent public relations measured in the questionnaires completed by CEOs, heads of public relations, and employees. We then performed a

reliability analysis to verify that all these characteristics made up a single index of Excellence. After constructing this scale of Excellence, we conducted an additional analysis to determine the correlation of all of the characteristics of public relations in the scale as one set of variables with all of the estimates of the value of public relations as another set of variables. Our general theory of public relations stated that the dominant coalition would support and assign greater value to public relations when the department and organization have the characteristics speci ed in the theory. We used the statistical technique of canonical correlation to determine if there was a relationship of the two sets of variables. Canonical correlation


works much like factor analysis, but the technique makes it possible to determine if two groups of variables correlate with each other simultaneously—in this case Excellence of public relations and value of public relations. Canonical correlation produces canonical variates that are much like factors except that it separates the blocks of variables. The correlations of each variable with the underlying variate also indicate the strength of the relationship of each variable with the underlying variate. Table 2 shows the result of a canonical correlation of the questions measuring the support and value of public relations by the dominant coalition and the rest of the Excellence variables. In contrast to factor analysis, canonical correlation indicates the number of underlying variates that can be extracted that are statistically signi cant. The rst variate maximizes the correlation of all of the variables, and the second attempts to explain any remaining correlation between some or all of the variables that is not explained by the rst variate. In this case, there were two signi cant variates. The rst variate essentially reproduced the Excellence factor from the factor analysis we conducted before doing the canonical correlation and reproduced the index of Excellence constructed through a reliability analysis.2 Table 2 shows that all the variables except one have high correlations with the underlying variate (participative organizational culture has a positive but low correlation). The canonical correlation between the public relations and organizational variables and the value variables is high. This high correlation supports the theoretical soundness of the Excellence theory: excellent public relations and an excellent context for public relations increase the value assigned to the function by the dominant coalition. In addition, the size of the correla-

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tions suggests which characteristics increase the perceived value of public relations most. Table 2 suggests that involvement of public relations in strategic management and the CEO’s preference that the senior public relations person be a manager or senior adviser increase the perceived value of public relations most. In other words, the CEOs seemed to believe that public relations has its greatest value when it ful lls the strategic managerial role speci ed in the Excellence theory. The second variate in Table 2 consists of the variables that came out of the CEO questionnaire. In a canonical correlation, variables with the same sign in each block of variables have a positive relationship with each other. The CEO variables in Table 2 have a positive sign, and all of the variables from the public relations questionnaire have a negative sign. Participative culture has no correlation with the second variate, most probably because it came from the third questionnaire completed by employees. Both sets of CEO variables correlate positively with each other, in other words; and both sets of senior communicator variables correlate positively with each other. The covariation between the two sets of variables that was not explained by the rst variate, therefore, seems to re ect the difference between the supply of excellent public relations from the public relations heads and the demand for excellent public relations from the dominant coalition. The second variate provides evidence that supply of and demand for excellence are not always in equilibrium in the same organization.

Qualitative Observations on Strategic Management As in the quantitative phase of the Excellence study, our qualitative inter-

318


Table 2. Canonical correlation of variables measuring value of public relations with other excellence variables Overall Variate

Variable

PR Head/CEO Variate

Characteristics of public relations and organization (variable group 1) CEO Variables PR in strategic planning Importance of communication with external groups Preference for two-way asymmetrical model Preference for two-way symmetrical model Preference for managerial role Preference for senior adviser role Public Relations Head Variables PR in strategic planning Estimate of preference for the two-way asymmetrical model by the dominant coalition Estimate of preference for the twoway symmetrical model by the dominant coalition PR head in manager role PR head in senior adviser role Knowledge of two-way asymmetrical model in public relations department Knowledge of two-way symmetrical model in public relations department Knowledge of managerial role in public relations department Estimate of support for women in organization Participative organizational culture

0.64

0.39

0.47

0.32

0.51

0.32

0.42 0.58 0.56

0.41 0.24 0.44

0.64

0.42

0.34

2

0.22

0.44 0.38 0.26 2

2

2

0.49 0.48 0.32

0.43

2

0.26

0.39

2

0.26

0.45

2

0.32

0.43

2

0.41

0.11

0.00

0.37 0.38

0.60 0.37

Value of public relations (variable group 2) CEO variables Support for PR by dominant coalition Value of PR department Public Relations Head Variables Perceived support for public relations by dominant coalition Estimate of the value dominant coalition would assign to PR Canonical Correlation *p ,

0.05; **p ,

0.01.

0.41

2

0.56

0.23

2

0.41

0.70**

0.63**


views with CEOs and senior public relations practitioners suggested that the arena of strategic management may represent the greatest difference between excellence and mediocrity in public relations. In the least-excellent organizations, communication played virtually no part in strategic decisionmaking. In most organizations that scored high in overall excellence, members of the public relations department described their vital role in strategic management. However, we discovered in our long interviews that strategic management and strategic planning both had many meanings to the people we talked with. To some, strategic planning is done strictly on a nancial basis: numberscrunching. As a result, public relations is out of the planning loop. To others, strategic management referred almost exclusively to media relations: representing the company to the press. To still others, strategic planning was an integral part of the public relations function, a true contributor to the top management team For too many of our interviewees, however, communication did not enter into the CEO’s worldview related to strategic planning. According to one top communicator, despite the expertise in his public relations department, the department’s primary function was reactive: taking care of problems when they develop. Nevertheless, even with what one interviewee considered a president’s “lukewarm support”, public affairs could play a strategic role. He managed to help set the “strategic agenda” for the whole organization, largely because of the backing of his board of directors. The director of corporate communications at a chemical company we studied exempli ed those who play an integral role in overall strategic management. He said he is involved in

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planning for such concerns as environmental equity or environmental racism in locations in which chemical plants are built, along with people from health, safety and the environment; legal; and business. He added that some of this strategic planning is accomplished informally, over lunch, rather than as a more formal responsibility. The vice president of strategic management in this company explained that everything in a company has to do with relations with the outside world. He also viewed public affairs as more of a two-way than a transmittal process. Thus, in his view, “It’s perfectly logical for the public relations function to be directly tied to the strategic function.” Over time, members of the corporate communication department there had managed to move from being order takers to strategic planners.

Conclusion Both the quantitative and qualitative results of the Excellence study provide evidence that the conceptualization of the role of public relations in strategic management and the strategic management of public relations developed in this article are practiced by the mostexcellent public relations departments among the 323 organizations we studied. However, we also found that most public relations departments do not practice public relations strategically. Our data further show that both the CEOs and the senior public relations practitioners in the organizations with excellent public relations departments believed public relations contributes more to organizational effectiveness that did those with less-excellent public relations departments. In the quantitative phase of the study, respondents were willing to use the method of compensating variation to estimate the rate of return to and value of public

320

relations. In the qualitative phase of the study, however, they were more reluctant to assign speci c monetary values to their estimates—although a few did.


More often, they were content to explain the value of public relations in building relationships.

Notes 1 2

The exceptions are Post et al. (1982), Gollner (1983) and Marx (1990). We conceptualized only the strategic management variables in Table 2, but readers familiar with the Excellence theory will recognize the other variables. All these variables are included in Table 2, in contrast with Table 1 that contains only the strategic management and value questions, so that readers can compare the contribution of strategic management to organizational effectiveness with the other public relations variables.

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