ITL #90 Leading, not just communicating: why economic literacy and business knowledge are vital for PR
10 years, 2 months ago
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Mastery of basic economics and finance is called for if PR practitioners truly wish to lead the organizations they serve. By David Remund.
For the past several years, I have taught a graduate workshop called Financial Fundamentals for Communication Leaders. All of the students have been full-time communication professionals, working part-time on their master’s degrees.
Year after year, the pre-work assignment for this workshop has consistently revealed the same sad fact: very few can read a financial statement, let alone understand and interpret one. If we wish to help truly lead the organizations we serve, and be of service to the greater society, too, our profession must master basic economics and finance.
Why ‘knowing the business’ matters
In the U.S. alone, the public relations industry is expected to grow up to 20 percent in the decade from 2010 to 2020 (U.S. Bureau of Labor, 2011). Meanwhile, the average lifetime of a U.S. corporation is expected to be only 10 years by the year 2020, a nearly 80 percent drop over the course of just a century (Foster & Kaplan, 2000).
Related changes are happening as other markets evolve around the world. In order to survive and thrive, organizations of all types need to continually reinvent themselves, and adapt to changing conditions.
As would be expected, we are beginning to see greater demand placed on leadership skills such as communication and collaboration, as well as data analysis, critical thinking, and planning for multiple scenarios (Bryan & Farrell, 2009). In this new age of constant, rapid change, industries of all kinds need leaders who can think critically, develop more than one solution, and inspire others (Conley, 2009). Such leadership, I believe, is grounded in a solid understanding of economics and a basic mastery of financial fundamentals.
What PR practitioners should know
The Commission on Public Relations Education has long advocated for students to graduate with greater business knowledge. A good number of my colleagues in higher education across the United States – notably Sandra Duhe, Ph.D., APR, at Southern Methodist University – are leading the way on that front. I am proud of the progress we are collectively making.
Still, what are some of the deficiencies we, as professors, see? What specific competencies within the realm of economics and finance do aspiring public relations practitioners need? I believe there are three essential skills to master, based on my nearly 20 years of experience working in industry and, now, the past five years teaching at the university level. Here they are:
Understand changing economic conditions
By simple definition, economics are how people choose to use resources (American Economic Association, 2014); in other words, this is the science of understanding how people – individuals, as well as organizations like businesses, nonprofit associations, governments and so on – use limited resources to realize needs and wants. Economics are an important window to understanding social issues and human behavior, from a global perspective down to the individual level.
We pride ourselves in public relations on building mutually beneficial relationships between organizations and individuals, while working toward the greater good of society. If you work in public relations, you must understand, and care about, economics.
In today’s global economy, we should be particularly passionate about staying on top of constantly-changing economic conditions and forces. At the micro level, that means understanding the basics of supply and demand, and, more specifically, how pricing models and competitive markets impact individuals.
At the macro level, public relations professionals should have at least a basic understanding of monetary policy and fiscal policy, and the many related issues at the regional, national and global level, including employment, trade, and economic growth.
Business and economics aren’t one and the same. Economics influence business, and, in turn, one can learn quite a bit about economics from studying business. But, in the end, economics have wider-reaching implications than business. Reading stories from sources like The Economist is one way to keep a pulse on changing forces; news organizations in most of the major finance capitals around the world also do a solid job of reporting on economic forces, shifts and impacts. These reports are often readily available via the Internet, and at no or little cost.
Learn how to read and interpret financial statements
With students, I emphasize that organizations must thrive financially in order to stay alive and grow, and to grow and expand over time. There will be nothing to communicate if the organization can’t successfully manage finances. Communicators can do their part by learning how to read and interpret financial statements – and better tell the organization’s story to its many stakeholders, particularly customers, investors, donors, and the like.
My students learn to decipher balance sheets, income statements, and statements of cash flow. (We don’t focus as much on investments, as that would require a separate workshop, in order to do that topic full justice.) They learn to calculate ratios, and how to assess the overall financial state of an organization. Most importantly, they learn how numbers tell a story, so that, in turn, they can translate that story for key stakeholders through their communication efforts.
Two books I use with students are John Tracy’s How to Read a Financial Report: Wringing Vital Signs Out of the Numbers, and Karen Berman’s Financial Intelligence: A Manager’s Guide to Knowing What the Numbers Really Mean. (Note: I know neither of these authors personally, nor am I being compensated in any way for recommending their respective books.) A public relations professional could certainly find a book like this, access the online financial statements of various publicly-traded/supported organizations, and learn the fundamentals on his or her own, and/or with the help of a friend or family member who is well-versed in finance.
Forecast challenges – financial, competitive, and otherwise
The ultimate goal for public relations professionals should be to bring true leadership to their organizations. They can do so by understanding changing economic conditions, analyzing financial statements, and transforming all of this information and insight into a meaningful narrative for key stakeholders. This craft takes time and practice, but, in the end, delivers real and lasting value. Over time, this skill becomes one of forecasting, in which we can help identify and connect dots that others might not see. We become more visionary, and less reactionary. We become, in essence, true leaders.
Our profession strives to make a meaningful difference. By taking the reins on economic and financial literacy, we move one solid step in that direction.
About the Author
David Remund, Ph.D., APR, is an assistant professor of public relations at the University of Oregon. Before transitioning to higher education, Remund designed and managed corporate-wide strategic communication programs for Bank of America, Principal Financial Group, and multiple divisions of Wells Fargo & Company. He has served as an agency director of strategic planning, as well.
The Author
David Remund
David Remund, Ph.D., APR, is an assistant professor of public relations at the University of Oregon. Before transitioning to higher education, Remund designed and managed corporate-wide strategic communication programs for Bank of America, Principal Financial Group, and multiple divisions of Wells Fargo & Company.
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