I'm happy we were able to add to the conversation about why public relations agencies should move to this type of revenue model. I welcome your feedback as well! Stalwart Communications founder talks pay-on-performance David Oates founded Stalwart Communications four years ago on what he calls the Pay-on-Performance model, whereby his agency doesn't profit from any client unless they secure results. The firm represents a wide range of companies, including defense contractors, IT security providers, consumer product manufacturers and retail outlets. Q: Why the pay-on-performance model over the traditional P.R. model? A: There are several reasons, but it boils down to two. First, performance-based agencies are more focused on chasing opportunities for their clients rather than punching a time clock against a retainer. Their time is spent on building fruitful relationships with key media, industry and consumer publics instead of logging every phone call they fielded or email they sent. Second, clients will have a better understanding of what they are getting for their money, because their bill won't come in the form of a purposefully confusing, 20-page, four-color, glossy activity report. Instead, we provide a one-page invoice outlining what results were achieved during the month. PR firms that operate under a pay-on-performance model will most certainly see a rise in client satisfaction, retention and referral rates. Q: Why do you think you are the only pay-on-performance agency in San Diego? A: I honestly don't know, because I've been trying to convince other firms to move to this model. The direct competition will make our industry better, because companies will consider PR agencies, as a whole, to be more accountable for their efforts. I can tell you that the resistance to this model by other firms is fierce. At a San Diego Public Relations Society of America event a few years ago, a fellow practitioner called my business "unethical" and the "equivalent of a used car salesman." I find that laughable; that person's agency puts all the risk on their clients and gets their fees every month even if they don't generate one additional piece of buzz. From where I stand, retainer-based PR firms have a much tougher time justifying their value than performance-based ones, particularly in tough economic times like the one we're facing now. Q: Give us an insight on how you think P.R. will change or stay the same in the next year or two. A: There are several ways things are changing, but probably the most visible is the dwindling benefits press releases provide companies and agencies. I'm not saying that they'll go away altogether, but most media outlets are not giving them as much visibility. That's because many times the information has been broadcast on Twitter, Facebook and e-mail well before the news organization is able to run or post it, so it's no longer valuable. As a result, agencies have to become less of a press engine and more of a conversation facilitator, spending less time churning out announcements promoting the "leading provider of ..." and start looking at how their clients can add value on an industry topic around "what's next" within their targeted industry or community. This may take the form of contributed op-ed articles, speaking engagements, online seminars or a host of other methods. It may also mean sharing the limelight with other companies to articulate how the story topic has greater impact than just for the client. Performance-based firms are much better equipped to handle this change in our industry; because we're less concerned about filling hours with less effective PR tactics and more about figuring out how to get clients in front of potential customers, partners and investors through media and other influential organizations. Q: Is there profit in the pay-on-performance model? A: Without question. As I tell clients, we're a values-based organization; companies should pay as much for our agency as they do with a retainer-based PR firm, but only if they see results from us. So our revenue and profitability for a day's work should be just as good if we do our job right. But here's the real kicker. Because our clients clearly understand what they're getting for their money each month, we keep them around much longer than other agencies typically do. I've also seen a significant rise in referrals from our existing clients to other companies. It's a big reason why we've tripled revenues in three years. I know of no other firm that's done that in the same period of time. Q: What is the role of a good PR person? A: The big misconception is that all PR folks, particularly performance-based ones, don't do much more than chase down media coverage. The reality is far different. The main role of a good PR agency is to help shorten their clients' business cycles; creating more sales, partner and investor interest so companies spend less time trolling for new business and more time solving their customer's problems. We do this by getting other people to sing their praises. While press coverage is an important component, we also look for other avenues, such as securing our clients speaking roles at key conferences and trade shows as well as helping them forge partnerships with similar organizations that will endorse their products and services and a host of other ways. To do this effectively, PR practitioners must be good business strategists first, and quickly uncover the opportunities and issues that they can turn into effective initiatives. That also includes crisis and disaster recovery planning. I would submit, however, that agencies who have justified their retainer primarily on the strategic advice they provide companies are in for a rude awakening. Most companies expect such expertise from their consultants, and rightfully believe that a strategy is only as good as how well it was executed and the results it garnered. That's where we like to play at my agency, and one where I'd like to see other PR firms follow suit. Follow David at twitter.com/Stalwartcom.