Impact of Public Relations Expenditure on Corporate

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September, 2016

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Impact of Public Relations Expenditure on Corporate Performance of Commercial Banks in Nigeria Dr. Peter A. OtI Senior Lecturer, Department of Accounting, University of Calabar, Nigeria Dr. Ben E. Odigbo Lecturer, Department of Marketing, University of Calabar, Nigeria Agnes Bassey Graduate Assistant, Department of Marketing, University of Calabar, Nigeria Abstract: Motivated by the high rate of bank distresses in Nigeria, the study dwelt on an appraisal of public relations practices on the corporate performance of commercial banks in the country. The objectives sought were to: Determine the effect of corporate image management practices on corporate performance of commercial banks in Nigeria; ascertain the effect of media relations practices on the corporate performance of commercial banks in Nigeria, and examine the impact of customer relations practices on the corporate performance of commercial banks in Nigeria. The study linked the expenditure on public relations to the importance accorded this activity, which should generate the desired level of good corporate image as a fundamental for customers’ satisfaction. Survey research design were adopted in the study. The area of study was one of the major cosmopolitan cities in the country, Calabar in Cross River State, Nigeria. From a working population of 500 bank employees, a sample size of 60 was judgmentally determined. The data procured were analyzed with the chi-square (X2) statistical tool. Results indicate that: The public relations practices, media relations practices and customer relations practices of commercial banks in Nigeria have significant effect on their corporate performance. It was then recommended among other things that: commercial banks in developing countries like Nigeria should employ public relations two-way communications strategies as a tool for winning and sustaining the confidence, trust and patronage of their customers by shoring up their corporate image and performance. As a concomitance, a good business model should incorporate a reasonable public relations budget in order to shore up goodwill which is a vital variable in asset turnover equation. Keywords: Public relations, expenditure, corporate performance, asset turnover, commercial banks, Nigeria 1. Background of the Study The British Institute of Public Relations (BIPR) defines public relations as the deliberate, planned and sustained effort to establish and maintain mutual understanding between an organization and its publics. This means that public relations are not a chance activity nor a haphazard endeavour. It is a process that must be deliberately planned, carefully implemented and assiduously monitored to achieve a given goal or objective, targeted mainly at building and sustaining mutual understanding between an organization and its publics. “Sustained effort” means that the public relations exercise or process does not end until it has achieved its objectives. Public relations plan and activities must be carried out to a logical conclusion, no matter the difficulties encountered in the process (Onwunali, BelMolokwu, Onwubere & Ofulue, 2006). Daramola (2003) observed that public relations consist of all forms of planned communication both inward and outward between an organization and its publics for the purpose of achieving objectives concerning mutual understanding. This definition emphasises the place of effective communication as foundation for success in the building of mutual understanding and cooperation between an organisation and its publics and indeed in any public relations exercise. To do this effectively, public relations takes expertise and knowledge from the social sciences and arts. For instance, the survey method has become very useful in public relations to find out target publics’ feelings, opinions, attitudes and beliefs in an organisation, its products or services. Hence, public relations researchers and issues managers in the environment always try to align the policies and programmes of the organization in such a way that it will favour both the organization and its internal and external publics, so that there will be a mutual outcome (Onwunali et al, 2006). Hence, it is the duty of the corporate communications or public relations manager to professionally ensure that public relations serve as an intermediary between the organisation that he or she represents and all of that organisation’s publics (Meintjes, 2011).

INTERNATIONAL JOURNAL OF INNOVATIVE RESEARCH & DEVELOPMENT

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Over the past three decades in Nigeria, there has been a high rate of distress of commercial banks resulting in liquidation and closures that threw a lot of depositors and families into unforeseen difficulty, untimely death and squalor. These unpleasant developments are thus, the motivation for this study, to ascertain the effect of public relations practices on the corporate performance of commercial banks in Nigeria. 2. Statement of the Problem Despite the advantages of public relations in building and sustaining cordial relationship between corporate organizations and their target publics, some commercial banks in Nigeria accord less than priority attention to it and this is manifest in the non-existence of discernible public relations department in them. Secondly, the expenditure on public relations is most times subsumed under overheads or what some organizations would term miscellaneous expenditure. The consequence of this is that such commercial banks suffer from corporate image problem with a resultant poor public patronage (Nwosu, 2003:75). These in turn would hinder the attainment of their organizational goals and objectives. Sound public relations practices enhances the corporate image of a bank and this goes a long way to influence the way it is perceived, and boosts its marketing activities and overall corporate performance. Therefore, considering the high distress rate and liquidation rate in the Nigerian banking industry over the past twenty years, it became necessary to critically appraise their public relations practices, with a view to examining the impact on their corporate performance, with special emphasis on their corporate image management practices, media relations practices and customer relations practices. 3. Objectives of the Study The broad objective of the study is to determine the effect of public relations practices on the corporate performance of commercial banks in Nigeria. The specific objectives pursued were: i. To determine the effect of corporate image management practices on corporate performance of commercial banks in Nigeria. ii. To ascertain the effect of media relations practices on corporate performance of commercial banks in Nigeria. iii. To examine the impact of customer relations practices on the corporate performance of commercial banks in Nigeria. 4. Research Questions The following research questions guided the study: i. Do the corporate image management practices of commercial banks in Nigeria have significant effect on their corporate performance? ii. What is the effect of media relations practices on corporate performance of commercial banks in Nigeria? iii. Do the customer relations practices of commercial banks in Nigeria have significant effect on their corporate performance? 5. Research Hypotheses The following null-hypotheses were formulated and tested in the study: 5.1. Hypothesis 1 Ho: The corporate image management practices of commercial banks in Nigeria do not have significant effect on their corporate performance. 5.2. Hypothesis 2 Ho: The media relations practices of commercial banks in Nigeriado not have significant effect on their corporate performance. 5.3. Hypothesis 3 Ho: The customer relations practices of commercial banks in Nigeria do not have significant effect on their corporate performance. 6. Scope of the Study The subject scope of this study was confined to a critical appraisal of the effect of public relations practices on the corporate performance of commercial banks in Nigeria, considering the high casualty rate of firms in the Nigerian banking industry. The geographical scope embraced commercial banks in Calabar, Cross River State, where virtually all commercial banks in the country have their presence. The sample frame included bank staff and customers in the city. 7. Review of Related Literature 7.1. Theoretical Framework The theoretical construct for this work hinges on the corporate identity formation and performance model; the social learning theory and the two-way symmetrical theory/model.


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7.1.1. The Corporate Identity Formation and Organizational Performance Model

Figure 1: Corporate identity formation and performance model (van Riel &Balmer, 1997). Source: Van Riel, C. B. M., &Balmer, J. M. T. (1997). Corporate identity: the concept, its measurement and management. European Journal of Marketing, 31, 340–355 According to this model, an organisation’s corporate culture, history and corporate strategy determines its corporate reputation, and this corporate reputation in turn determines its corporate performance, even though external environmental factors could also impact on that (Van Riel &Balmer, 1997). That must be why the public relations school of thought in Nigeria insists that for the man at the helm of affairs of its electoral body to get it right, he must change the negative organizational culture of the umpire body, the independent electoral commission ( INEC ) such as, allegations of collusions with fraudulent politicians; work assiduously to correct its past negative history and map out a sound corporate strategy for elections that could transform to sound corporate reputation and commendable performance by the commission.Corporate strategy on the other hand is seen as an antecedent of corporate identity resulting from the cultural and historical background on which the firm is founded. However, Iyamabo (2013) observes that the manner of interaction between corporate strategy, corporate identity and corporate reputation was not explicitly specified in the model, even though the operating environment modifies what the corporate strategy is and how it evolves. Also, that the model does not incorporate corporate image. The interaction between corporate identity and the firm’s publics is only captured under the general description of “environment’; whereas, how corporate identity is operationalized through other elements before reaching the level of the external environment is not provided by this model. Instead, the focus seems to be on the internal processes for organizational performance. The major contribution appears to be the inclusion of “organizational performance” and “corporate strategy” as a critical measurement factor for corporate identity (Iyamabo, 2013). Based on that, we would examine other models until we find the best fit for INEC. 7.1.2. Akers’ Social Learning Theory Ake and Gronroos (2009), also emphasizes that social behavior is acquired through direct conditioning and through imitation or modeling of others' behavior. Cognitive-affective theorists, Ajzen and Fishbein (1980) had argued that the influences of others' behavior operate indirectly and are mediated through cognitive-affective processes. Parents should therefore watch the kind of companies that their children keep, in order not to get into acts that could damage the good names of their families and their country. Hence, in the aforementioned seminars and workshops for parents, the implementers of the national rebranding programme should also teach them how best to keep an eye on their children in order to redirect them off the course of ignoble acts that could tarnish the names of their families and the nation. 7.1.3. The Two-Way Symmetrical Model


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Figure 2.11: The Two-Way Symmetrical Model Source: Yaxley, Heather (2013), 2-way symmetric communications... https://greenbanana.wordpress.com/.../2-way-symmetric-communications... The two-way symmetrical model is a public relations communications technique in which organizations and their publics adjust to each other. Its aim is to achieve mutual understanding and two-way communication rather than one-way persuasion. The symmetrical model employs mixed motives, collaborative advocacy, and cooperative antagonism to resolve any conflict between the communicator and his target publics. Hence, it balances self-interests with the interest of others in a give-and-take process that can waver between advocacy and collaboration. The two-way symmetrical communication model of public relations is therefore a mustuse for many corporate organizations, in the mould of modern marketing (Pearce, 2013). This is why public relations experts according to the Chartered Institute of Public Relations (2012) argue that this is the most ethical public relations model, because all groups are part of the resolution of problems. This new model advances our thinking about the practice of public relations because it considers both parties in the public relations situation (Grunig, 2013; Yaxley, 2013). 7.2. Application of the Models in this Study These models are very useful and have been used in other countries to successfully package and market corporate and national images of other countries. That is why they are being seriously recommended in this research for the implementers of the Nigerian rebranding campaign. The application of the models is expected to help resolve the conflicts of arguments and criticisms that greeted the last rebranding-Nigeria campaign. They would also help to douse the doubts that existed between the programme implementation and the Nigerian publics, in order to achieve mutual understanding and consensual acceptance of the exercise. 7.3. Integrated Marketing Communications (IMC) Integrated Marketing Communications (IMC) is the coordination and integration of all marketing communication tools, avenues, functions and sources within a company into a seamless program that maximizes the impact on consumers and other end-users at a minimal cost (Carlesworth, 2009). IMC includes the coordination and integration of all marketing communication tools, avenues, and sources within a company into a seamless program in order to maximize the impact on end users at a minimal cost. This integration affects all firms’ business-to-business, marketing channel, customer-focused, and internally directed communications (Wikipedia, 2010). However, without a complete IMC plan there is no integration or harmony between client and customers. The goal of an organization is to create and maintain communication throughout its own employees and throughout its customers. Integrated marketing communications aims to ensure consistency of message and the complementary use of media. The goal of selecting the elements of proposed integrated marketing communications is to create a campaign that is effective and consistent across all the media platforms. 7.4. Communicating Effectively Black (1989) observed that almost all conflicts, misinformation, disinformation and relationship problems amongst men emanate from either lack of communication, inadequate communication, poor communication or no communication at all. Their solution also lies in effective two-way communication based on truth and full information. Hence, Black (1989) pointed out some cardinal rules for effective public relations practice as always insisting on truth and full information, keeping the message simple and straight forward, not exaggerating, remember that half your audience are women taking time to listen to Public opinion, continuity and being positive and constructive in every aspect of communication. Corporate accounting and financial performance.


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7.5. Corporate Accounting and Financial Performance Financial performance analysis in banks is aimed at keeping the banks in check by highlighting low and high performance areas with the understanding that it will bring about improvement in performance (Sebe-Yeboah and Mensah, 2014). According to Zuriekat, Abu-Ghazaleh & Salameh (2011), until recently, companies concentrated on the use of only financial performance measures as the foundation of corporate performance measurement and evaluation purposes. However, management accounting researchers like Otley (2000) criticized the practice of relying solely on financial performance measures as the benchmark for corporate performance. Hence, Zuriekat, Abu-Ghazaleh & Salameh (2011), observed that companies benefit from performance measurement systems that incorporate a wide range of financial and non-financial performance measures. This later approach gives to organizations information about their overall company situation. Speckbacher, Bischof and Pfieffer (2003), Hughes (2000), agree that non-financial performance measures can be indicators for current of future financial performance of an organization. In the same vein, Berrah, Mauris and Vernadat (2006), insist that it is not good management accounting information systems to rely on financial information alone in assessing corporate performance, because a combination of financial and non-financial information will give a more balanced view of the overall performance of the organization. This is why the contributions of public relations in corporate financial performance was examined in this study. Sebe-Yeboah and Mensah (2014), observed that notwithstanding the usefulness of financial ratio analysis in providing useful insight to an entity’s performance it does have some important limitations as an analytical tool in bank performance analysis. Hence, the inclusions of non-financial variables like public relations in this study. 8. Methodology The study employed the survey research design. The population of the study was 500 which encompassed a cross section of employees of select commercial banks in Calabar, Cross River State, Nigeria. From the 500 working population, a sample size of 60 was judgmentally determined. The data procured were analyzed with the chi-square (X2) statistical tool. 9. Data Presentation and Analysis Options Sex: Male: Female Age: 21 – 30 years 31-40 years 41 – 50 years 51 years Or Above Educational Levels: OND/HND BA/B.Sc./Equivalents MBA/M.Sc./Ph.D. TOTAL

Frequency

Percentage

32 28

53.33% 46.67%

16 27 11 6

26.67% 45.00% 18.33% 10.00%

21 35.00% 30 50.00% 9 15.00% 60 100% Table 1: Respondents’ Demographic Profiles

Data on table 1 reveal that 53.33% of the respondents were males, while 46.67% were females. 26.67% were in the age bracket of 21 to 30 years; 45% were in the age range of 31 to 40 years, 18.33% were aged between 41 to 50 years, while the remaining 10% were 51 years or above. S/N 1 2 3 4 5 6

Options Public Relations Techniques enhance the corporate performance of commercial banks in Nigeria Information and communication as public relations techniques enhances the corporate performance of commercial banks in Nigeria There is a significant relationship between the media relations practices and the corporate performance of commercial banks in Nigeria Managerial decisions on the use of public relation techniques are positive to the corporate performance of commercial banks in Nigeria Public relations activities significantly enhance the image of commercial banks in Nigeria Customer relations practices has a positive impact on the corporate performance of commercial banks in Nigeria Table 2: Respondents’ Views on the Issue-Based Questions

SA 29 20

A 31 28

D 0 6

SD 0 6

48

12

0

0

18

30

0

2

22 25

38 30

0 3

0 2

Data displayed on table 2 above show that in answers to option one, 100% of the employees agreed that Public Relations Techniques enhanced the corporate performance of the commercial banks in Cross River State, Nigeria. Answers to option two showed that 80%


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of the respondents agreed that effective information and communication through the press enhanced the sales performance of the commercial banks, while 20% of the respondents disagreed with that. Answers to question 3 show that, 100% of the respondents believed that media relations practices had significant effect on the corporate performance of the commercial banks in Cross River State, Nigeria. Again, 96.7% of the respondents agreed that public relations techniques are beneficial to their organizations, while 3.3% disagreed with that. 100% of the respondents agreed that public relations activities significantly enhanced the image of their organizations. Again, 91.7% of the respondents agreed that customer relations practices had positive impact on the corporate performance of commercial banks in Cross River State, Nigeria. 9.1. Test of Hypotheses 9.1.1. Hypothesis One • Ho: The public relations corporate image management practices of commercial banks in Nigeria do not have significant effect on their corporate performance. • Hi: The public relations corporate image management practices of commercial banks in Nigeria have significant effect on their corporate performance. Test Statistics = Chi-Square (X2) X2 = ∑ O – E E Expected Frequency = ∑Observed Frequency Number of Observations = 60 + 0 = 30 2 Degree of Freedom = 4. Hence, Critical Chi-Square at 5% Margin of Error = 9.49 Variables

Fo

Fe

Agreed Disagreed Total

60 0 60

30 30 60

Fo-Fe

(Fo-Fe)

30 900 30 30 900 30 60 1800 ∑X2=60 Table 3: Test of Hypothesis 1 Source: Responses to question 1 of the issue-based questions on table 2

Decision The table showed that the computed value for chi square (X2) is 60, with degree of freedom as 4, the critical value of 4 at 5% (0.05) level of significance is 9.49, which is less than the computed X2 value (X2calculated = 60 > X2critical = 9.49; p = 0.001 < 0.05, df = 4). Hence, the null hypothesis is rejected and the alternative hypothesis accepted which says that: “The public relations corporate image management practices of commercial banks in Nigeria have significant effect on their corporate performance.” 9.1.2. Test of Hypothesis Two • Ho: The media relations practices of commercial banks in Nigeria do not have significant effect on their corporate performance. • Hi: The media relations practices of commercial banks in Nigeria have significant effect on their corporate performance. Test Statistics = Chi-Square (X2) X2 = ∑ O – E E Expected Frequency = ∑Observed Frequency Number of Observations = 48 + 12 = 30 2 Degree of Freedom = 4. Hence, Critical Chi-Square at 5% Margin of Error = 9.49


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Variables

Fo

Fe

Agreed Disagreed Total

48 12 60

30 30 60

Fo-Fe

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(Fo-Fe)

18 324 10.8 -18 324 10.8 0 1800 ∑X2= 21.6 Table 4 Source: Responses to question 3 of the issue-based questions on table 2

Decision Since the computed value of X2 = 21.6, which is greater than the critical value 9.49, it means that null-hypothesis is rejected and the alternative hypothesis accepted, which says that: “The media relations practices of commercial banks in Nigeria have significant effect on their corporate performance.” 9.1.3. Test of Hypothesis Three Ho: The customer relations practices of commercial banks in Nigeria do not have significant effect on their corporate performance. Hi: The customer relations practices of commercial banks in Nigeria have significant effect on their corporate performance. Test Statistics = Chi-Square (X2) X2 = ∑ O – E E Expected Frequency = ∑Observed Frequency Number of Observations = 25 + 30 + 3 + 2 = 30 2 Degree of Freedom = 4. Hence, Critical Chi-Square at 5% Margin of Error = 9.49 Variables

Fo

Fe

Yes No Total

55 05 60

30 30 60

Fo-Fe

(Fo-Fe)

25 625 20.8 -25 625 20.8 0 1250 ∑X2=41.6 Table 5 Source: Source: Responses to question 6 of the issue-based questions on table 2

Decision Since the computed value of X2 (41.6), is greater than the critical chi-square (9.49), we hereby reject the null-hypothesis and accept the Hi which states that: “The customer relations practices of commercial banks in Nigeria have significant effect on their corporate performance.” 10. Summary of Results and their Implications A summary of the results of this study are as follows: i. Public relations corporate image management practices of commercial banks in Nigeria have significant effect on their corporate performance. ii. Media relations practices of commercial banks in Nigeria have significant effect on their corporate performance. iii. Customer relations practices of commercial banks in Nigeria have significant effect on their corporate performance. The implication of the first result is that public relations practices is the antidote to good corporate performance and cannot be ignored by any modern business organization, else it may be difficult to achieve the goals and objectives of such an organization. Certainly, commercial banks in Nigeria whose corporate existence, survival and growth depends on efficient customer services cannot afford to neglect sound public relations practices. The implication of the second result is that effective media relations practices by commercial banks in Nigeria will help to ensure sound corporate image, which is a sine qua non for improved customers’ patronage. This will consequently help to boost the banks’ customer relationship marketing and enhance their sales performance. To achieve this task, media relations’ tools like: promotional articles, editorials, feature articles, documentaries, news releases and many more could be employed. The implication of the number third result is that for any commercial bank to succeed it must be customer-focussed, customer-centred, customer-oriented and customer-driven. Public relations customer relations practices hold the key to achieving this for the commercial banks in Nigeria. The banks should therefore plan, budget and monitor public relations activities to engender goodwill that would eventually attract good business. Public relations functions effectively and efficiently, thereby the need of proficient Public relations experts are needed.


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Problem of irregular communication with the target publics must also be checked by the banks. The Public relations departments of the banks should therefore put in place measures that will enhance two-way communication flow with their target publics (the banking customers). 11. Conclusion This study has revealed that effective two-way communication is a vital tool for the survival of financial institutions, especially commercial banks which depend solely on their customers for that. This becomes more real in developing countries like Nigeria whose commercial banks are still not so strong yet to withstand sudden internal and external financial shock like the global financial distress of the last ten years. The study has been able to show that public relations techniques can serve as a good corporate weapon for the realization of such organizational goal. This is because, public relations serve as a veritable information and communication bridge between the organization at its various internal and external publics. The creation of goodwill through public relations practices can lead to enormous financial benefits, including share pricing. 12. Recommendations Based on the findings and other revelations of the study, it was recommended as follows: i. That commercial banks in developing countries like Nigeria should employ public relations two-way communications’ strategies as a tool for winning and sustaining the confidence, trust and patronage of their customers by shoring up their corporate image and performance. ii. To survive, grow and remain profitable, the commercial banks in developing countries like Nigeria, must try to carry the press along and always be in their good books in order to prevent negative press reporting that could send wrong signals, fear and panic amongst the banking public. This could be achieved through effective media relations practices by the public relations departments of the commercial banks. iii. Commercial banks in developing countries like Nigeria must also ensure effective customer relations practices as a public relations weapon to ensure satisfactory corporate performance for their shareholders at all times. iv. Commercial banks in developing countries like Nigeria must ensure that they strengthen their customers’ feedback systems suggestion boxes and have efficient customers’ complaints-resolution mechanisms as a tool for sustaining the confidence of their customers which translates to continued patronage and sound corporate performance. 13. References i. Ajzen, Icek. and Martin Fishbein. (1980), Understanding Attitudes and Predicting Social Behavior. Englewood-Cliffs. New Jersey: Prentice-Hall Inc. ii. Ake, Finne and Gronroos, Christian (2009), “Rethinking marketing communication: From integrated marketing communication to relationship communication,” Journal of Marketing Communications, Vol. 15, Nos. 2–3, April–July, p.179–195. iii. Black, Sam (1989), Introduction to Public Relations, London: Modino Press Limited iv. Charlesworth, A. (2009), Internet Marketing: A Practical Approach. Butterworth-Heinemann, p.49. v. Daramola, A.C (2003), Fundamentals of Professional Public Relations A Global Overview. Lagos: Certified Marketing Communication Institute of Nigeria (CMCIN). vi. Grunig, James E. (2013), Excellence in Public Relations and Communication Management, http://www.books.google.com/books?isbn=1136691758 vii. Iyamabo, Jeremiah (2013), Corporate Identity: Identifying Dominant Elements in Jackson, John S.; Brown, Barbara L and Bositis, David (1983), “Herbert McCloskey and Friends Revisited: 1980 Democratic and Republican Party Elites Compared to the Mass Public.”American Politics Quarterly10: 158-180. viii. Meintjes, Helene (2011), The perceived and potential role of a public relations/corporate communication practitioner in central banks of the common monetary area, Master of Technology Dissertation, Cape Peninsula University of Technology, Cape Town, p.7. ix. Nwosu, Ikechukwu E. (2003), Public Relations Management. Dominican Publishers, Aba-Nigeria. x. Onwunali, C.; Bel-Molokwu, J.; Onwubere,C. H. &Ofulue, C. I. (2006), Principles & Practice of Public Relations, Lagos: National Open University of Nigeria, p5. xi. Pearce,Craig (2013), Public relations: changing the world, xii. http://www.craigpearce.info/public-relations-changing-the-world/ xiii. Seitel, Fraer P. (2001), The Practice of Public Relation., 8th ed. Upper Saddle River, xiv. Van Riel, C. B. M., &Balmer, J. M. T. (1997), Corporate identity: the concept, its measurement and management. European Journal of Marketing, 31, 340–355. xv. Wikipedia.com (2010), Marketing Communication, http://en.wikipedia.org/wiki/Marketing Communication, Retrieved August 15, 2015. xvi. Yaxley, Heather (2013), 2-way symmetric communications... https://greenbanana.wordpress.com/.../2-way-symmetriccommunications...


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