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Journalism Studies
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Public Relations in Strategic


Management and Strategic
Management of Public Relations:
theory and evidence from the
IABC Excellence project
James E. Grunig & Larissa A. Grunig
Available online: 12 Dec 2010

To cite this article: James E. Grunig & Larissa A. Grunig (2000): Public Relations in
Strategic Management and Strategic Management of Public Relations: theory and evidence
from the IABC Excellence project, Journalism Studies, 1:2, 303-321
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Journalism Studies, Volume 1, Number 2, 2000, pp. 303321

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

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University of Maryland, USA

ABSTRACT This article establishes the case for public relations as a critical component of an
organizations 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 Foundations Excellence project, presented next, conrmed 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

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 Managers 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 politicaleconomic systems. The theory also applies

ISSN 1461-670X Print/ISSN 1469-9699 Online/00/020303-19 2000 Taylor & Francis Ltd

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304

in different organizational settings such


as government agencies, corporations,
non-prot 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 Foundationthe 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
conrmation 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 conrm 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


briey 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
conrm 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 ofand
books onexcellence searched for attributes of excellent management, but
they dened 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) identied his excellent
companies by measuring return on
sales and return on owners invest-

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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 dened excellence in
terms of organizational behaviors and
outcomes other than nancial performance. Kanter (1983, 1989) and Pinchot
(1985) dened 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 benets for employees;
and Zeitz and Dusky (1988) on benets
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, unjustied 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

305

several excellent governmental and


nonprot organizations.
Most of these studies of excellence
have had two major problems. The rst
problem is that most began with a single or limited denition of an outcome
of organizational behavior that could be
used to identify excellent organizations.
For example, Peters and Waterman
(1982) identied 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 Watermans limited denition 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 signicant earnings declines
that stem from serious business problems, management problems, or both.
Studies of excellence such as Peters
and Watermans 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
dened 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
characteristicsi.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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306

tions variables could be linked to organizational effectiveness. Thus, we


dened 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 dene 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 identied 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 conicting 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,

JAMES E. GRUNIG AND LARISSA A. GRUNIG

for example, Cunningham (1989,


p. 127) pointed out that public organizations rarely die. The systems
approach also denes 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 organizations 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 dened in different
ways.
A theory of organizational effectiveness that incorporates the competing
values of strategic constituencies into
the goals chosen to dene 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-

PUBLIC RELATIONS IN STRATEGIC MANAGEMENT

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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 difcult for other managers to attain:
The task of separating the strategic constituencies from the larger environment
is easy to say but difcult 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 identied and are assumed
to be relatively stable, what separates
the strategic constituencies from the
almost strategic constituencies? Where
do you cut the set? And wont 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 worldor the organizations strategic
constituenciesin 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 publicsor potentially active
publicsare most strategic for an organization. Thus, it is their values that
must be incorporated into organiza-

307

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-benet 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 publicspublics
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 satised 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-

308

tional effectiveness explains why a theory of strategic management and public


relations is the essential link between
public relations and organizational effectiveness.

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Strategic Management and


Public Relations
Strategic public relations is a loosely
dened 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-

JAMES E. GRUNIG AND LARISSA A. GRUNIG

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
Chandlers (1962) historical study of
how the strategic ideas of executives
changed the direction of four major corporations, Ansoffs (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 signicance
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 organizationwhat it is, what it wants to be
and what it wants to dowith what the

PUBLIC RELATIONS IN STRATEGIC MANAGEMENT

environment will allow or encourage it


to do.

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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 organizations 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 specic rms, or on
how rms attempt to adapt to these
changes.

To a public relations scholar, Rings


(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-

309

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 organizations 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


Porters 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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310

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 bypublics 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
identied 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
specic plans that result. He dened
planning as a formalized procedure to
produce articulated result, in the form
of an integrated system of decisions;
and he dened 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

JAMES E. GRUNIG AND LARISSA A. GRUNIG

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 environmentthat 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 difculty
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 Mintzbergs
(1994, p. 27) term. In short, we need
theories
to
identify
stakehold-

PUBLIC RELATIONS IN STRATEGIC MANAGEMENT

ers and strategic publicstheories that


disciplines other than public relations
have not developed.

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Public Relations at the


Organizational and Functional
Levels of Strategic Management
Public relations is most effective, in
other words, when the publics with
whom practitioners communicate are
identied 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 identied in
the literature on strategic management.
According to Pearce and Robinson
(1982), strategic management takes
place at three levels:
At the corporate or organizational
level, where the board of directors,
chief executive ofcer, and chief administrative ofcers set grand strategies and reect 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

311

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 benet 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 strategicallythat is, the presence of a strategic public probably provides the

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312

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 Reppers (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 stakeholderssuch as
employees or residents of a communityare 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

JAMES E. GRUNIG AND LARISSA A. GRUNIG

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 organizations
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 Reppers (1992) model, the issues stage,
incorporates the concept of issues
management into our theory of public
relations and strategic management.
Grunig and Reppers model states that
issues arise because publics create
themi.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-

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PUBLIC RELATIONS IN STRATEGIC MANAGEMENT

volved in the decisioni.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 Reppers (1992) model of
strategic management and public relations dene the traditional four steps
of public relations management that the
public relations department should apply to each program it implements at
the rst three stagesi.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-

313

sisted of two empirical stages. In the


rst stage, the research team administered three questionnaires to the head
of public relations, the Chief Executive
Ofcer (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-prot 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 dene an
underlying variable of Excellence in
communication management, which

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314

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 identied 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,

JAMES E. GRUNIG AND LARISSA A. GRUNIG

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 equally186 per cent and 197
per cent, respectively. The heads of
public relations underestimated the
CEOs 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
CEOsa 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 benets such as positive relationships that served as buffers be-

PUBLIC RELATIONS IN STRATEGIC MANAGEMENT

tween the organization and its publics


during crises.

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Contribution to Strategic
Management
Our research about the value of public
relations served mostly to develop evidence related to the research teams
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 inuential people outside the organization and judgement based on experience. Public relations less often

315

conducts research or uses other formal


approaches to gathering information for
strategic planningan indication that
many communication units are not
qualied 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

316

JAMES E. GRUNIG AND LARISSA A. GRUNIG

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)

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,**

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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 specic questions
Other formal approaches
Informal approaches
Contacts with knowledgeabl e
people outside organization
Judgement based on experience
Other variables
Percentage return on public
relations

* Differences are signicant at the 0.05 level of probability.


** Differences are signicant 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 10the square root of
100represents 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 specied 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

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PUBLIC RELATIONS IN STRATEGIC MANAGEMENT

works much like factor analysis, but the


technique makes it possible to determine if two groups of variables correlate with each other simultaneouslyin
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 signicant. 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 signicant 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-

317

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 CEOs 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
fullls the strategic managerial role
specied 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 reect
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

JAMES E. GRUNIG AND LARISSA A. GRUNIG

Table 2. Canonical correlation of variables measuring


value of public relations with other excellence variables
Variable

Overall
Variate

PR Head/CEO
Variate

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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 0.49
2 0.48
2 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

0.41

2 0.56

0.23

2 0.41

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.

0.70**

0.63**

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PUBLIC RELATIONS IN STRATEGIC MANAGEMENT

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 CEOs worldview related to
strategic planning. According to one
top communicator, despite the expertise in his public relations department,
the departments primary function was
reactive: taking care of problems when
they develop.
Nevertheless, even with what one
interviewee considered a presidents
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 exemplied those who play an
integral role in overall strategic management. He said he is involved in

319

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, Its 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 specic monetary values
to their estimatesalthough a few did.

JAMES E. GRUNIG AND LARISSA A. GRUNIG

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

Notes
1

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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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