I recently participated in a discussion among senior marketing executives about the “right” way to organize an in-house PR department.

In the 1980s, Siemens USA ran a very successful in-house agency called “PRO” (Public Relations Organization). It worked very well, with high professional standards and high levels of (internal) client satisfaction. There are probably other examples, but sadly they’re few and far between.

(These comments are related to using PR for revenue-generation. Legal/social /political agendas should be centrally controlled and coordinated.)

Most in-house anything doesn’t work well. The arrogance, isolation and bureaucracy of a corporate staff person easily outweighs any alleged cost savings.

An outsourced service provider knows his job depends upon offering excellent value and service and treats his clients accordingly. Not always true with a corporate staff person person.

When the in-house agency is dictated by corporate, business units feel (quite rightly) cheated. “If WE’RE responsible for P&L, then WE should have full discretion over any resources used to support the business.”

On the other hand, most business unit managers don’t give much attention to the skills and quality of their marketing communications. My observation: the lower the contribution margin, the poorer the marketing. If there’s no big reward for big or savvy marketing, there’s little incentive to spend the money.

If your products and markets are fairly narrow, and you have a modest contribution margin, simply outsource PR to a small agency and exchange a fixed cost for a variable one. Then manage that agency for results, not effort, and trade up to a better agency if the current agency can’t keep up.

If you are a bigger company with exposure to multiple markets, an in-house PR operation might make sense. I strongly recommend you give the staff a market focus, and not product- or business-unit focus.

Market-centric PR managers are immediately customer-centric, which makes them a better resource for information and intelligence for all business units… and an eminently quotable source for the media. It also has implications for industry analyst and stock analyst/investor relations, since market savvy is more useful than product or technology savvy. Corporate can still control the message without holding it hostage.

Market focus demands product expertise PLUS relevancy for trends, competition and macro economics. These folks should also have a global role so that each person can be up to speed on all trends, wherever they may be.

The other key to making an in-house PR agency a success is to have a head of the corporate communications department who insists on delivering high service levels and has the mandate to fire people who don’t agressively respond to business units needs. If the corporate communications department has sufficiently earned a reputation for service and market insight, a business unit manager might willingly concede to allowing corporate to hire and manage the outside PR agency resource. Of course the business unit should pay for it!

Business units make the money; corporate is ALWAYS an expense to be trimmed.

For International, I reject the “pan-continent” agency model pitched by bloated “global” PR agencies. Centralized command and control is near impossible with multiple languages and cultures.

A better solution is to assign one marketing communications manager (not just PR) per country and one AGENCY per country. It sounds expensive, but most local agencies are inexpensive compared to “global” agencies, and most business units operate on a per-country basis for sales and costs. Then insist on company-wide standards and affiliations (annual or quarterly, in-person meetings + monthly conference calls) to be sure everyone knows what’s going on.