Is There an ROI in ABCs?
Paul A. Argenti (email@example.com), “Measuring the Value of Communication,” Tuck School of Business working paper no. 2005-31. Click here.
You can’t manage what you can’t measure, goes the old saw. And corporate communications activities such as public relations and advertising are no exception. In recent years, determining the effectiveness of these aspects of business has taken on an increased urgency as efforts to gauge their value have continued to fall flat. In a 2004 survey of chief communications officers in major corporations by the Communications Executive Council, respondents ranked “measuring communication effectiveness” as the second most important issue facing the communications industry.
Weighing in on this persistent problem is Paul A. Argenti, professor of corporate communications at the Tuck School of Business at Dartmouth College. “In many cases, companies do not require more or better measurement, only better use of existing measurement data,” he argues. The average company already collects data in 20 different communications areas, but fails to convert this into useful information, Professor Argenti writes. This shortfall occurs because communications professionals have not developed the right tools to demonstrate value to senior managers.
The problem is that there is a fundamental mismatch between what communications departments produce to evaluate their effectiveness and what senior managers view as yardsticks. Senior managers are interested in business outcomes, such as revenue, earnings, and market share, but communications professionals instead spend 90 percent of their measurement efforts calculating the outputs of specific communications activities. A 2002 survey by Delahaye, a public relations advisory firm in Norwalk, Conn., found that counting press clippings and calculating the cost of placing an ad in the same publication (known as advertising value equivalency) were the most common methods for attempting to demonstrate a return on investment for public relations.
Communications managers must now take the next step, Professor Argenti says: They must quantify the impact of communications activities on business outcomes using statistical analysis, which involves collecting, evaluating, and drawing conclusions from data.
Statistical analysis is already in vogue in many diverse fields, including scientific and government research and the study of new medical treatments. It is used to identify population trends and to predict election outcomes. In business, it is used to measure quality — at GE, for instance, in its Six Sigma quality program — or to predict customer behavior, among other things.
Such techniques are also now being implemented to measure the impact of online advertising. In 2004, 30 blue-chip companies, including Procter & Gamble and Walt Disney, conducted a series of tests with the Interactive Advertising Bureau that matched consumer data — such as browsing and online and offline transaction behavior (including purchasing) as well as surveys of consumer attitudes and intentions — against marketing budgets in different media. The results were startling. For example, these analyses demonstrated that by raising its online ad budget from 2.5 percent to 6 percent, Ford Motor Company could have sold an additional $625 million worth of trucks. In response, Ford announced plans to move almost a third of its $1 billion ad budget into media that targeted individuals, half of it going to Internet ads.
“Communications professionals are on the precipice of an incredible opportunity [with] the use of statistical analysis in a field that has previously been barren of any definitive methodology for demonstrating value and predicting causality,” Professor Argenti concludes.
It’s Not a Company, It’s a Sponge
Miguel A. Rodriguez (firstname.lastname@example.org), Franc Ponti (email@example.com), and Silvia Ayuso, “The ‘Sponge’ Organisation: A Creativity-Based Reflection on the Innovative and Sustainable Firm,” Center for Business in Society working paper no. 616. Click here.
Our traditional and long-lived understanding of organizations is built around a mechanistic metaphor: Companies are efficient mechanical devices that take inputs in terms of raw materials — human, financial, and material — and turn them into outputs. In this model, the outside world is something to be exploited rather than listened to. This metaphor, the prevailing one over the last century of organizational life, regards organizations as disconnected from their environment. More recently, fashionable organizational models have encouraged executives to think of their organizations in biological ways, as cells, atoms, or even amoebas. These newer metaphors increasingly emphasize how, where, and why organizations are connected to their surrounding environment.
For academics, as well as executives, this is difficult terrain. Metaphorical interpretations of organizations do not come easily to most executives concentrating on results. And it is a challenge for academics to train and help rational executives to take leaps of metaphorical fancy. The related question is whether such leaps are actually useful or worthwhile. Does it make for better organizations if we can conceive of them in terms of new and improved metaphors?
Miguel A. Rodriguez and Silvia Ayuso, lecturers of general management at Spain’s IESE Business School, and Franc Ponti, a professor at EADA Business School, also in Spain, contend that such metaphors are helpful but not conclusive. Each metaphorical model must be adapted to each individual organization.
The trio’s unusual research, exploring the most appropriate contemporary organizational metaphors, involved a four-month project with five sessions. Nine senior executives from leading Spanish companies took part. To encourage the creativity of participants, the first session took paintings by Henri Rousseau, Hieronymus Bosch, and Wassily Kandinsky as its starting point. Participants created a list of the feelings aroused by the artworks. They were then challenged to use these sensations to address the question of how an ideal company could turn its relationship with the environment into an essential part of its innovation process. The consensus was that values and principles shape organizations and their ability to generate unique ideas, products, and services.
Next the executives engaged in a role-playing exercise to encourage them to develop concepts using other people’s viewpoints. Adopting a variety of personae — from Cleopatra to Bill Clinton — they discussed the role of people and managers in an ideal company as well as the structures and systems. “Acting out the chosen role was intended to help participants relate facts and ideas in unusual ways,” the authors write.
From these discussions, a number of potential metaphors emerged to describe the kind of company that managers would find ideal. The group was most comfortable with interpreting the organization as a sponge, as a “porous, distributed, and adaptable organization that seeks difference and promotes collaboration, beauty, and happiness.”
For some, this kind of research is irredeemably flaky. But metaphors are a powerful force in how we understand our world and our place in it. This research also provides a clear message: Openness to the environment in which you live and operate — the same openness a sponge has — is increasingly critical in generating the fresh thinking necessary for business success. At a time when diversity, collaboration, flexibility, and ethics are high on the organizational agenda, mechanical metaphors appear more and more out of place.
Des Dearlove (firstname.lastname@example.org) is a business writer based in the U.K. Mr. Dearlove is the author of a number of management books and a regular contributor to strategy+business and The (London) Times.
Stuart Crainer (email@example.com) is a business writer based in the U.K. and a regular contributor to strategy+business. He and Des Dearlove founded Suntop Media, a publishing and training company providing business content for online and print publications.