In the firing line

Since we took the decision to brief our members on our 2009 finances, and to speak to PRWeek, the questions have come thick and fast – some of them understandably pointed.

Of course, for a not-for-profit, member organisation of our size, a projected loss of £700k is of huge concern. It is certainly not the legacy I had in mind at the start of my year in office.  David Brain’s Sixty Second View blog is among many asking important and valid questions.

The background is complex, as you can imagine.  A loss of this size does not simply appear one day, nor does an Executive Board of a member organisation take any decisions knowing it will lead to such a loss.

But first up, let’s nail one thing about our ‘love’ of expensive London squares. 

We moved out of our cramped offices on two floors of a Farringdon side street into St James Square (SJS) in order to be able to run more training events onsite and to offer improved member facilities in a Central location (as our members, and those who attend our training events, travel from all over).  This worked – training increased, we had less need to hire space for our events, and income grew.  I know because I was Treasurer during that successful year.

But then the SJS building was sold and the new landlord applied for planning permission to re-develop the property and served us notice to quit. We had no alternative but to move.

The success of SJS meant that we looked for a property and a location that could offer the same opportunities to support and grow our in-house training.  Russell Square was perfect – and arguably more business-like than the “clubby” St James’s area.  It also had a stable landlord in Bedford Estates and a rent and rate proposition that was comparable to what it would have been at 32 St James’s Square, but with more usable space. 

Written financial proposals jointly agreed with the landlord regarding statutory compensation and other recompenses when the Institute was forced to leave SJS have not materialized. As you may know, this is because the property was re-possessed by the Bank and sold to a new landlord who was not obliged to honour the previous terms offered regarding our departure. Various matters surrounding the building and its former owners remain the subject of a Serious Fraud Office investigation. (See CorpComms magazine article for further information.) To add these woes, we are also still owed our original deposit of £125,000.

We do have some legal redress of course, for some of the monies we are owed, but it is a complex web and the decision I must take – with the help and support of my colleagues - is whether to press ahead with potentially costly legal action. The decision here is to ensure we build our case against the right party.

As every part of this sorry property issue unfolded, we took the best decision we could based on the information we had at our disposal at that time. 

Now, onto the remainder of the loss. Trading income was down across the board in the last quarter. Why didn’t we ‘predict’ this?  Well, because recent trends, upon which forecasts are based, gave no indication of a shortfall. Trading was healthy last year and in quarters one and two of 2009. 

Many PR businesses and client organisations have sustained losses in this recession.  We are no different.   It is what you do next that is a measure of your business performance.

So, a working party developed a cost management proposal based on a line-by-line review of our activities.  These cost cutting measures are across the board and are being implemented now together with other means of generating new or additional income from our activities and operations.

Most importantly, we have developed a three-year plan, which includes a root and branch review of the Institute’s role and structure. This is currently in consultation and is a vital part of our recovery.  One thing we are clear about is that, moving forward, we need to put in place a revitalised and firm strategic plan and that it should be the subject of regular and rigorous review.

I have confidence in the ability of the Institute, its Executive Board, members, staff and army of volunteers to place the Institute in a stronger position in 2010.

I understand the concerns and questions.  I’ve asked them myself, as have my fellow Board members.  But when I look back at the decisions taken, step-by-step throughout the process, I feel that they were honest and – on balance – correct at that time.  Would I change any of them with the benefit of hindsight, possibly.  But I can’t do that – all I can do is ensure we learn from the process, focus on the future and move forward with purpose. And that is exactly what we are doing.