September 2021

Lender of last resort facility (LLR) Banks can borrow from the Federal Reserve’s/ Central Banks discount window. While discounting is a tool of monetary management, the 1 Fed/CBK can also use discounting to prevent bank panics. When the Fed acts this way, it is acting as the lender of last resort to the bank. When depositors know the Fed is standing by as the LLR they have more confidence in the bank’s ability to withstand a panic and are therefore less likely to withdraw if financial trouble is looming. When crisis prevention fails Central Bank as LLR has an obligation to deal with the consequences at minimum cost. Central Banks intervention must be decisive. Owners and managers must incur substantial losses. Besides, the Central Bank should not unnecessarily be drawn into LLR financing of banks and exposure to major credit risks. Only in a systemic case should the Central Bank deal with the crisis. Where the Central Bank directly or indirectly funds pay outs through deposit insurance the issue of limiting monetisation arises. Bagehot 1873 classic, in a crisis the lender of last resort should lend freely, at a penalty rate on good collateral. Meltzer (1986) argues that insolvent financial institutions should be sold at market price or liquidated if there are no bids for the firm. The losses to be borne by owners of equity, subordinated debentures, uninsured depositors and the deposit insurance fund. The discount window should be opened only in times of systematic failure, but be freely available to all institutions that are creditworthy and who provide substantial amounts of liquidity insurance. Deposit insurance, moral hazard and adverse selection Deposit insurance is a guarantee that all or part of the amount deposited by savers ina bank will be paid in the event that a bank fails. The guarantee may be either explicitly given in law or regulation, offered privately without government backing or may be inferred implicitly from the verbal promises and/or past actions of the authorities. In recent years, many nations have adopted or are considering a system of explicit or formal deposit insurance. Deposit insurance may encourage bankers to make risky loans because depositors no longer have reason to withdraw their funds from carelessly managed banks. Therefore deposit insurance presents the danger that bad business judgements will distort the market. Ricki Tigert Helfer (1999) argues that anything that encourages risky behavior by leading financial risk takers to believe that they will reap the benefits of risky investment they make while being protected from the losses is a moral hazard. Diaz Alejandro 1985 argues that like any other insurance scheme, deposit insurance is vulnerable to moral hazard consequences i.e. it induces depositors to think that onebank is as good as another and leads bank managers to undertake riskier loans. This follows from Maxwell Fry (1995).A bank accepts deposits at competitively determined terms that are set before the bank makes its project choices. The bank then has an incentive to invest in projects if riskier projects carry higher repayment obligations from entrepreneurs to the bank. This is asset substitution moral hazard. Under deposit insurance there is a balancing act, assure financial stability when liquidity and solvency problems arise but at the same time minimizing moral hazard. To limit moral hazard, the market place should be allowed to discipline financial risk takers by letting insolvent institutions to fail. Those that come close to failing should pay hefty costs; this could be in the form of high interest costs on short-term liquidity support. In general insolvent banks should be left to fail and shareholders lose their equity. In the case of too big to fail, countries have to save institutions to ward off systemic problems. As Ricki Tigert Helfer indicates a reasonable balance between moral hazard and a stable financial system would permit a very limited exception for failures that pose a systemic risk, while letting the market discipline improvident behavior. The too big to fail doctrine imposes moral hazard on the investors. They no longer have the responsibility to investigate the soundness of the institutions in which they deposit their funds. The doctrine is immoral. It segregates the industry. The big banks can afford to take considerable risk/moral hazard incentives whereas the small banks are constrained. Besides it accords an unfair competitive advantage over small banks apart from reducing depositor incentive to police their banks. It also conflicts with the tenets of a discipline encouraging market friendly DI as outlined by Garcia and Carl-Johan Lindgren (1996).

BANK REGULATION AND SUPERVISION The rationale for regulation Financial systems are prone to periods of instability. In recent years, a number of financial crises around the world (South-east Asia, Latin America and Russia, Global financial crisis) have brought about a large number of bank failures. Some argue that this suggests a case for more effective regulation and supervision. Others attribute many of these crises to the failure of regulation. Advocates of the so-called ‘free banking’ argue that the financial sector would work better without regulation, supervision and central banking. In the absence of government regulation, they argue, banks would have greater incentives to prevent failures. However, the financial services industry is a politically sensitive one and largely relies on public confidence. Because of the nature of their activities (illiquid assets and short-term liabilities), banks are more prone to troubles than other firms. Further, because of the interconnectedness of banks, the failure of one institution can immediately affect others. This is known as bank contagion and may lead to bank runs . Banking systems are vulnerable to systemic risk , which is the risk that problems in one bank will spread through the whole sector. Bank runs occur when a large number of depositors, fearing that their bank is unsound and about to fail, try to withdraw their savings within a short period of time. A bank run starts when the public begins to suspect that a bank may become insolvent. This creates a problem because banks want to keep only a small fraction of deposits in cash; they lend out the majority of deposits to borrowers or use the funds to purchase other interest-bearing assets. When a bank is faced with a sudden increase in withdrawals, it needs to increase its liquidity to meet depositors’ demands. Bank reserves may not be sufficient to cover the withdrawals and banks may be forced to sell their assets. Banks assets (loans) are highly illiquid in the absence of a secondary market and if banks have financial difficulties they may be forced to sell loans at a loss (known as ‘fire-sale’ prices in the United States) in order to obtain liquidity. However, excessive losses made on such loan sales can make the bank insolvent and bring about bank failure. Bank loans are highly illiquid because of information asymmetries: it is very difficult for a potential buyer to evaluate customer-specific information on the basis of which the loan was agreed. The very nature of banks’ contracts can turn an illiquidity problem (lack of short-term cash) into insolvency (where a bank is unable to meet its obligations – or to put this differently – when the value of its assets is less than its liabilities).Regulation is needed to ensure consumers’ confidence in the financial sector. According to Llewellyn (1999) the main reasons for financial sector regulation are: To ensure systemic stability; To provide smaller, retail clients with protection; and To protect consumers against monopolistic exploitation. Systemic stability is one of the main reasons for regulation, as the social costs of bank failure are greater than the private costs. The second concern is with consumer protection. In financial markets ‘ caveat emptor’ (‘Let the buyer beware’) is not considered adequate, as financial contracts are often complex and opaque. The costs of acquiring information are high, particularly for small, retail customers. Consumer protection is a particularly sensitive issue if customers face the loss of their life time savings. Finally, regulation serves the purpose of protecting consumers against the abuse of monopoly power in product pricing. The most common objectives of Bank regulation are: 1. Prudential: To reduce the level of risk bank creditors are exposed to (i.e. to protect depositors) 2. Systemic risk reduction: to reduce the risk of disruption resulting from adverse trading conditions for banks causing multiple or major bank failures 3. Avoid misuse of banks: to reduce the risk of banks being used for criminal purposes, e.g. laundering the proceeds of crime 4. To protect banking confidentiality 5. Credit allocation :to direct credit to favored sectors Types of regulation Systemic regulation; Prudential regulation; Conduct of business regulation. Systemic regulation Charles Goodhart et al. (1998) define systemic regulation as regulation concerned mainly with the safety and soundness of the financial system. Under this heading we refer to all public policy regulation designed to minimize the risk of bank runs that goes under the name of the government safety net . In particular, this safety net encompasses two main features – deposit insurance arrangements and the lender of-last-resort function.

Financial Intermediaries and Information Costs Information costs make direct finance expensive and thus difficult to obtain. This generates the role of indirect financing and financial intermediation. Much of the information collected by intermediaries is used to reduce information costs and the effects of adverse selection and moral hazard. To reduce adverse selection, potential borrowers are typically carefully screened. To minimum moral hazard, all borrowers are carefully monitored and the penalties are imposed on borrowers who violate their financial obligation. Banks reduce information costs in the following ways: Screening and Certifying to Reduce Adverse Selection Before getting any type of loan, a potential borrower must fill out an application. Typically this application will require information, like a social security number, which can be used to gather your credit history and credit score. This credit score tells a lender how likely you are to repay a loan. The higher the score the more likely you are to pay back the loan. Once this information is verified, a borrower with a higher credit score will have access to larger and/or lower interest rates. Banks also use other types of information beyond your loan application. Many banks look at patterns in your checking or debit card accounts. They can learn a gr eat deal about your habits and gauge certain types of risks for the bank. Banks gathered tons of information, have specialist who can interpret this information, and can effectively minimize adverse selection problems. Monitoring to Reduce Moral Hazard To minimize moral hazard problems, banks also use specialists to monitor individuals who take out loans and firms who issue stocks and/or bonds. Many times the bank will actually take part in the same investment strategy of the borrowing firm, (or use a venture capital firm to do the same thing). In this way the bank can more closely monitor the activities of the firm and monitor where it is that they use their borrowed funds. Finally it should be noted that the market system itself can help to limit moral hazard problems. If a firm is mismanaged and the stock price falls, a new company can take-over and remove the managers. Because of this, it is generally in the interest of the managers to satisfy the desires of the stockholders of their company.\  

INFORMATION ASYMMETRIES AND INFORMATION COSTS Information is a central element to efficient markets. When the costs of obtaining information are too high, some potentially beneficial transactions do not take place and markets tend to stall. Information costs sometimes make financial markets the worst functioning markets. In most all transactions, the issuer of a financial instruments, borrowers, know some information which the buyer, saver, does not know. This is a situation know as asymmetric information. There are two information problems which form obstacles to smooth running financial markets. The first problem is called adverse s election . This problem arises before the transaction ever occurs. Simple fact is that lenders need to know how to differentiate between good risks and bad risks. Unfortunately for them, that is information only the borrower has. The second type of information problem is called moral hazard . This problem occurs after the transaction has taken place. Lenders need to find a way to tell whether borrowers will use the proceeds of a loan as they claim they will. We should look at some examples, their details and implications of these problems and their implications. Adverse Selection One of the best documented situations in study of asymmetric information is the Lemon’s Problem. This problem was revealed by 2001 Nobel Prize winner in Economics George Akerlof in his analysis of markets with asymmetric information. His contribution came from a 1970 paper titled “The Market for Lemons” in which he explained why the market for used cars, some of which are “lemons”, does not function well. Suppose two cars are for sale, both of the same make and model. One is in good shape and was owned by a previous owner who maintained a good maintance record and drove very little. The second car was owned by someone who sparingly changed the oil and loved to drive in the fast lane. The owners of the cars know whether their own car is in good repair, but the buyer does not. Let’s say the potential buyer is will to pay $15,000 for a well-maintained car and $7,500 for a lemon. The first car owner knows the car is in good shape and won’t sell it for less than( $12,500. The other owner knows that the car is in poor shape and would be willing to sell for as little as $6,000. Without knowing anything else about the car, the risk-neutral buyer would only be willing to pay the expected, average, price for these cars wh ich would be $11,250. That is less than the first owner is willing to sell for, thus the only car we can buy is the lemon. In this type of world no one with an above average car would ever put their car on the market. Thus, the market is full of lemons. Due to this asymmetric information, Several entities exist that help solve this problem. Consumer reports can be established about the sellers of used cars. Many people now offer warranties on used cars and buyers can use mechanics to help verify the true state of the car. As a result we should find the prices for good and bad used vehicles closer to their true value. When it comes to financial markets, this adverse selection problem exists just as it exists with used cars. Potential borrowers know more about the projects they wish to finance than potential lenders. In the same way that adverse selection can drive out the good cars this situation can drive good stocks and bonds out of the financial market. For instance, two firms, one with good prospects and one with bad prospects, as a potential stock buyer, since you cannot tell which firm is which, you would only be willing to pay the average stock price as a risk neutral investor. The stock of the good company would be undervalued. Since managers of this company know that their stock would be undervalued, they would never bother issuing it in the first place. That leaves only the firm with bad prospects in the market. This would be known by investors and the market would have a hard time getting started. The same thing can happen in the bond market. Risk requires compensation and if you cannot tell the high risk bonds from the low risk bonds, the lender will demand the average premium on all bonds. This drives companies with good credit out of the market unwilling to pay the inflated interest rate. Since lender are not interested in buying debt from bad companies, the market would not function. Solving the Adverse Selection Problem The adverse selection problem creates situations where good companies will pass on potentially valuable investments. Since these investments are lost, the best companies are not necessarily the ones that grow as rapidly as they should. At the same time, poorer companies may take on investments which they should not be doing. So, it is important to identify the good companies from the bad companies. There are two basic methods for solving problems of adverse selection: Create more information for the investors Disclosure of Information the most straightforward solution to adverse selection Since it creates more information. This can be done by government regulation or through other market forces. Most publicly traded companies are required to release a lot of information through requirements set up by the Securities and exchange regulatory authorities. Public companies are also required to release information which can influence the wealth of the company and any information that is given to professional stock analysts. The newly created accounting regulations are geared at closing these loop holes through which firms may be able to hide the true financial position of a firm. Guarantees Another way of solving this problem is providing guarantees in the form of contracts that can be written such that the owners of the firms face the same risks as the investors. The contract is written in such a way that lenders are compensated even if the borrower

FINANCIAL INTERMEDIATION The efficiency of an economy is much determined by not only how developed the financial system is but also by the effectives of its financial intermediation. A health economy requires a well run intermediation process. A financial intermediary is a firm whose assets and liabilities are mainly financial instruments. The goal of financial intermediation is to pool resources from savers and lend them to people and firms who need to borrow. These institutions also play a pivotal economic function of gathering and relaying information about the financial conditions of firms and individuals which helps in allocation of resources to their most valued use. The failure of intermediation process implies the fall of financial sector and this can cripple the whole economy for instance the failure of the banking sector in the 1930s helped to bring about the Great Depression. Similar arguments exist for the Asian crisis of the late 1990s. The Role of Financial Intermediaries Financial intermediaries perform five basic functions which are crucial in the economy These functions are listed below: 1. Pooling of resources from small savers 2. Providing safekeeping and services and access to the payments system 3. Supplying liquidity 4. Providing methods and avenues of diversification to reduce risk 5. Collecting and processing information to reduce information costs A keen observation reveals that the first four functions focus on reducing transactions costs while the fifth function deals with reducing information costs. An in-depth analysis of the three functions is given below:  Pooling Savings The most obvious function of a financial intermediary is to pool resources of a large number of small savers. By pooling these resources the banks can then make large loans to other people or firms. It is very unlikely that one person could finance a $200,000 mortgage or a multi-million dollar investment. However, a bank will pool together the asset of several individuals to accomplish this goal. To be effective, financial intermediaries need to attract a large number of savers. This is generally accomplished by banks who make savers feel secure in the fact that their assets are safe.  Safekeeping, Payments System Access, and Accounting Banks used to construct large, heavy safes which looked imposing. This safekeeping of valuables and assets is just one of several services provided by intermediaries. Banks provide services that give savers quick access to their assets through things like ATMs, credit and debt card, checks, and monthly statements. Bank are extreme efficient at financial transactions greatly reducing their costs. Many banks also provide bookkeeping and accounting services. They help customers maintain their finances and plan for the future. Providing Liquidity Financial intermediaries also provide liquidity to their customers. Liquidity is simply the ease at which assets can be turned into a means of payments and thus consumption. Banks allow their depositors to quickly and easily turn their deposits into money quickly and easily whenever needed. Borrowers also benefit from easier liquidity. They can make loans which require repayment in a extended fashion. Intermediaries specialize their balance sheet so that they can make sizeable quick withdraws for customers. Diversifying Risk Banks mitigate several types of risk. First, they take deposits from many people and make thousands of loans with these deposits. Thus, each depositor faces only a small amount of the risk associated with loans that would go default. No one depositor losses all their assets when a bank loan goes unpaid. Banks also provide a low-cost way for depositors to diversify their investments. Mutual fund companies offer small investors a way to purchase a diversified portfolio of several different stocks. Collecting and Processing Information One of the biggest problems that savers face is whom to lend their assets too. The fact is that the borrowers could lie about their true state and the lender has little ability to verify the truth. Finding out the truth can be a costly venture. The problem of information asymmetry sets in i.e the borrowers have information that the lenders do not. By collecting and processing information, financial intermediaries reduce the problems associated with asymmetric information. Loan applicants are carefully screened. They monitor loans for timely payments hence reducing this information problems. These information problems have huge implications on the financial systems.

HPR PAST PAPERS KNEC JULY 2016 HUMAN PUBLIC RELATIONS KNEC PAST PAPERS SECTION A State four financial publics of a company listed in the Nairobi Securities Exchange The table below represents the public transfer process. Fill in the missing information to complete the process List three limitations of using the bureaucratic style of management in a public relations department State three personal factors that may influence the formation of an individual’s attitude List three negative types of defense mechanism that may be exhibited by a frustrated employee Highlight three advantages of exhibitions as a media for public relations activities in an organization Give three reasons that make it necessary for the public relations professional body to enforce the code of conduct on its members Outline three responsibilities of the public relations department to the company’s distributors List three challenges that may be faced by modern public practitioners State the three components of personality as expounded by Sigmund Freud SECTION B a)Explain six ways in which the public relations department of an organization can facilitate the media to report accurately during a crisis (9 marks) b) Highlight four techniques that may be used by public relations practitioners to change the attitude of a target audience (8 marks) a) Explain six benefits of engaging a consultancy firm to undertake public relations activities for an organization (9 marks) b) Outline four personality traits that an effective public relations manager should possess (8 marks) a)Give four reasons that make it necessary for managers to vary the techniques for enhancing human relations in an organization (8 marks) b) Outline six characteristics that an informal organization may display (9 marks) a)Highlight six objectives of public relations that an organization may seek to attain (9 marks) b) Give four reasons that make the government an important public for all business organization (8 marks) a)Explain four uses of a photo library in a public relations department of an organization (8 marks) b) Explain six factors that may influence the choice of media for public relations activities in an organization (9 marks)   KNEC JULY 2015 HUMAN PUBLIC RELATIONS KNEC PAST PAPERS SECTION A List four elements that may constitute the corporate identity of an organization State three limitations of using consultants to carry out public relation activities for an organization Give three reasons that may make it necessary for an organization to call for a press conference Give three reasons that made it necessary to have a code of conduct in the public relations profession Outline three ways in which a manager may assist an employee who is going through frustration Give three reasons why it is important for employees to relate well among themselves in an organization Outline three factors that may make an employee develop a negative attitude List three theories of personality State three disadvantages of the bureaucratic style of leadership Give four reasons that make it necessary for an organization to clearly define its publics SECTION B (a) The management of Makwenzi Limited usually communicates the company’s financial information to the organization’s publics. Outline four objectives of such communication (8 marks) (b) Highlight six methods that may be used to determine the perception of publics towards an organization (9 marks) (a) Explain six factors that a public relations department may consider when planning to introduce a house journal in the organization (9 marks) (b) Highlight four duties of a public relations officer in an organization (8 marks) (a) Give four reasons that make employees an important public an organization (8 marks) (b) Explain six qualities that an effective public relations officer should possess (9 marks) (a) Explain six ways in which a manager may motivate employees in an organization (9 marks) (b) Outline four indicators of frustration among employees in an organization (8 marks) (a) Outline six factors that determine social stratification in an organization (9 marks) (b) It is necessary for managers to understand the attitude of their employees. Give four reasons why this is necessary (8 marks)   KNEC NOVEMBER 2015 HUMAN PUBLIC RELATIONS KNEC PAST PAPERS SECTION A Give three reasons that motivate people to work State four characteristics of a bureaucratic type of organization List three environmental factors that may influence the formation of an employee’s personality State three techniques that a public relations assistant may  use to assess the attitudes of the  publics in an organization Outline three positive mechanisms which an employee may adopt to cope with frustration in the work place Outline the phases of the evolution of public relations practice Outline three benefits that an organization may  get from clearly defining its publics List four qualities that an effective public relations officer should possess State three types of print media that may be used for communicating with employees in an organization List three limitations of using employees to implement an organization’s public relations programmes SECTION B (a) Explain six non-financial ways through which the management of an organization may motivate its employees (9 marks) (b) Outline four techniques that can be used to change the attitude of employees in an organization (8 marks) (a) Give six reasons that make it necessary for a public relations supervisor to understand the personality traits of employees (9 marks) (b) Outline four ways through which the level of education may create different social classes among employees in an organization (8 marks) (a) Explain six work related issues that may cause frustration among public relations staff (9 marks) (b) Outline four benefits that a practitioner may get from membership to a public relations professional body (8 marks) (a) Explain six factors that may influence the type of activities undertaken by the public relations department in an organization (9 marks) (b) Explain four benefits that an organization may obtain from using social media to publicize its activities (8 marks) (a) Give four reasons for evaluating the success of public relations activities in an organization (8 marks) (b) Outline six areas though which an organization may express its corporate identity   KNEC

TYPES OF GROUP WITHIN THE ORGANIZATION Refer to possible interaction groups within the organization. They include; Formal groups Informal groups INFORMAL GROUPS Refer to employees local arrangements within the work station for their own personal benefits and indirectly have little or no benefits to the organization .Example include Merry go round and Chamas. They aim at; Improving living standards of the members Boosting employees financial position Improving employee’s living standards through common pool of resources. Educating the members on empowerment Uniting the members through sharing common interest. CHARACTERISTICS OF INFORMAL GROUPS Mostly its formed to benefit the members Continuity of the group depends on the members. Group objectives are very flexible in case of making adjustments Leadership mostly depends on fame and majority likes and not education level. Mostly they are not registered hence not recognized outside organization.   FORMAL GROUPS Refer to official groups which every employee within the organization should join e.g. organization welfare, employee Unions, Committee membership etc. CHARACTERISTICS OF FORMAL GROUPS The group has governing rules and regulation outlined in the constitution. The group has specific objectives and deadlines which can only be adjusted upon agreement by committee. The group benefits is mostly to the organization in general and little benefits to individuals They are registered hence recognized within and outside the organization The group leaders have specific duties outlined to them Continuity of the group does not depend on dismissal/retirement of a member Leadership position depends on education level and experience. FACTORS THAT INFLUNCE AN INDIVIDUAL ON THE GROUP TO JOIN Financial position of an individual (i.e. employer or employee)-different groups have different financial obligation to honor hence an individual should join depending on financial ability Group objectives/benefits- different groups have different activities hence one should join the group that best satisfy individual expectation. Job position- An individual may be influenced by job position on the group to join because it influences individual fitness in the group in terms of contributing suggestions, interacting with other members, gaining respect etc Education level-for formal organization education level contribute especially on leadership where individuals may be appointed as a result of education level Size of the organization-well-paying organizations contributes to success of groups and vice versa.   BENEFITS OF BOTH FORMAL AND INFORMAL GROUPS  There is individual empowerment e.g. financially, skills ,experience etc Promotes unity through interactions, sharing common interest etc. Improves relations among members    DISADVANTAGES OF FORMAL AND INFORMAL GROUPS Informal groups consume organization working hours yet they are of little or no benefits to the organization. Informal groups may bring division within the organization especially between members and non- members. Depending on their objectives, achievements and challenges they may affects corporate image negatively. Formal groups are of little benefits to the members Financial losses to members due to mismanagement of funds by corrupt leaders WAYS FORMAL AND INFORMAL GROUPS PROMOTE HUMAN RELATIONS IN AN ORGANIZATION Sharing of information hence promoting togetherness. Promotes work morale because individuals are able to fit in the workplace. Interactions among the members on social activities promotes healthy environment within organization. Completing employee living standards which employer is not able to provide. Facilitates togetherness which reduces resistance in leadership of organization core duties.

PLANNING, IMPLEMENTING AND EVALUATING PUBLIC RELATIONS PROGRAMMES SUBTOPICS: Carrying out planning and implementation of public relations programme Factors considered when choosing implementers of public relations programme Method of evaluating public relations programme Introduction Research indicates that many PR practitioners cannot plan well They cannot measure the contribution of PR to a company’s overall success It is important to be able to evaluate how well various public relations programmes contribute to the success of any given company   Justification for Planning PR Programmes Skinner et all (2007) argues that the PR Plan is the benchmark for measuring performance. It is the blue print from which the PR team operate Frank Jefkins (1998: 39) gives 4 reasons for planning: To set targets for public relations activities Estimate working time and costs Set priorities to control the number and timing of different activities Decide on feasibility of carrying out set objectives   STEPS IN PLANNING PR PROGRAMME STEP 1: Gaining the approval of management You must seek the support of CEO; CEO must endorse the idea for planning. Planning involves preparation of strategic plan for public relations function in the organization Why is it important to get CEO support? CEOs reluctant to plan for PR because they think it is a waste of time Commitment to plan means allocating resources Senior management are reluctant too They often disagree on preferred corporate image and techniques to be used It is important to gain support of management to get their buy in Ensures adequate thought goes into planning for PR Gives opportunity for opinion research STEP 2: Situational analysis Involves appreciating the PR situation in the organization It helps to benchmark for PR activities Helps to understand the PR opportunities and challenges Helps to understand the target publics Helps to understand the media of communication Methods of situational analysis include: PR audit to understand the PR strengths, weakness, opportunities, threats, resources, etc Image analysis of the company PESTEL analysis- Political, Economic, Social, Technological, Legal regimes Opinion polls to gauge the perceptions of the publics Press clip analysis, content analysis and audience analysis Customer complaints and compliments analysis SWOT analysis- Strengths, Weakness, Opportunities and Technological Stakeholder analysis The situational analysis should describe the PR situation in the organization It should present the findings of the analysis It should also present the implications of the findings on the organization It should make suggestions on now these can be addressed STEP 3: Setting Objectives/ Articulating objectives You should know what you want to achieve Objectives must be based on overall corporate goals and objectives PR must know the corporate objectives Let CEO clarify them for you, if not sure Objectives must also reflect the findings of the situational analysis Objectives must be SMART. That is: Specific, Measurable, Attainable, Realistic and Time bound. Examples of objectives: To change the image of the organization To improve communication between organization and publics To gain public confidence To make known corporate goals and operations Prioritize objectives You must do so according to what is urgent and important You classify as short term and long term objectives STEP 4: Determining the target publics Segment the publics into internal and external publics Internal publics include: Staff, Management, Directors External publics include: Potential employees, Suppliers, Distributors, Consumers, Opinion leaders, Media, Government, Financial institutions-(banks and insurance), Shareholders, Community members Segment into primary and secondary publics Primary public are the target of the message. They must be reached directly with the message Secondary publics are people who can be used to reach out to the primary publics You can also segment according to level of interest, stakes and demographics You may not succeed unless you know the public You need to understand the following:   Needs Interests Stakes Demographics Communication habits Information preferences Perceptions of the company Level of understanding of the company and its operations Their attitudes towards the organization Their expectations of the organizations Clarify whether organizational objectives are in line with public needs and desires Understand the informational needs of the publics STEP 5: Selecting the media Understand the various media available to the various publics. Remember that various publics require different media The media include: The press, Radio, Television, Exhibitions, Printed materials, Sponsored books, Direct mail, Sponsorships, House journal STEP 6: Articulate the Message/ Developing the Messages Determine the messages you want to disseminate to each target audience Message must be specific to each audience Message must resonate with audience Message must be simple, clear and complete You may express them as slogans STEP 7: Set Activities/ Determining the Activities PR activities are the tools of communication. They must transmit the right message to the target audience They include: Facility tours, Symposia, Conferences, Workshops, Public speaking engagements, Media releases, Press conferences, Radio interviews, House journals Broadly, these activities may be classified under: (I) Oral activities (II) Written activities (III) Visual activities They should target the internal and external audiences STEP 8: Budget Prepare budget based on proposed activities. Budget for everything Budget for: Time 2. Materials 3. Expenses like hospitality bills 4. Budget for salaries, equipment’s, various activities done STEP 9: Monitoring and Evaluation Define indicators for monitoring and evaluation You monitor the implementation of the activities You monitor using the implementation plans, budgets Methods of monitoring include: Having staff meetings, Interviewing staff and publics, Scrutinizing budgets, Reviewing reports You evaluate by measuring effectiveness of the activities done. You monitor by conducting various research Monitoring helps to manage and control the activities Evaluation helps to document success and failure It helps you improve your PR programmes STEP 10: Develop an Implementation matrix The implementation matrix contains: Strategy or activity Objective Results (outcome and outcomes) Indicators Time Assumptions Responsibility Budget items and cost STEP 11: Allocating responsibilities You allocate responsibility for: Chief spokesperson (CEO) Spokesperson for marketing (marketing manager) Spokesperson for finance (finance director) Spokesperson for production (production manager) Spokesperson for PR (PR manager) STEP 12: Sell the Plan Internally Create awareness about the plan internally Internal publics must know the plan for

THE MEDIA AND PUBLIC RELATIONS ACTIVITIES SUBTOPICS: Definition of media Media used in public relations activities Factors influencing choice of media in public relations activities   MEDIA OF PR ACTIVITIES Media relation is relationship that company or organization develops with journalists/media houses while PR extends the relationship beyond media to general public. Media involves collective communication outlets or tools that are used to store and deliver information to the public. The major role of press relation is to achieve maximum publication and broadcasting of PR information in order to create knowledge and understanding. MEDIA USED IN PUBLIC RELATIONS ACTIVITIES: AN OVERVIEW RADIO Electronic means of communicating that uses audio features ADVANTAGES Its audio means commonly used since its readily available and cheaper compared to television. Programmes can be produced quickly and inexpensively Information can be available even in local languages. DISADVANTAGES The listeners may lack any idea of how the product being advertised look like Network problems in remote areas Radio is a background medium. Most listeners are doing something else while listening, which means that your ad has to work hard to get their attention Loud music can cause sound pollution. TELEVISION Its electronic means of communicating that uses both audio and visual features. ADVANTAGES There is complete information about the product i.e. both sound and the pictures. Its easily accessible in public areas e.g. hotels Delivery of the message is more convincing and appealing to the customers. DISADVANTAGES Production of TV programs is time consuming compared to radio It’s expensive Problem of changes in technology Not easily accessible in rural areas without electricity. BILLBOARDS Refer to display of information which is eye catching at strategic places e.g. at roundabouts. ADVANTAGES The information lasts for long. It’s cheaper compared to television adverts Involves words and pictures hence effective delivery of message. DISADVANTAGES The information is limited to one area only. Threats from competing industries e.g. by mutilating or destroying the billboards It accommodates less information compared to other mediums The passer-by may lack to pay attention to the information. E-MAIL (ELECTRONIC MAIL) It’s a means by which one person can exchange message with other people over the internet through use of computers or smartphones. ADVANTAGES E-Mail message can be sent to the recipient mailbox at any time at sender’s convenience. It’s a fast means of delivering the message. E-mail information can be kept for long compared to information from phone calls. Records of e-mail message may be kept in electronic form therefore reducing filing problems and administration cost. DISADVANTAGES Staff may waste time on non-productive e-mails Sometimes information that is more urgent may fail to reach the recipient on time due to delays as a result of internet problems. E-mails may not guarantee individual security on message due to challenge from internet hackers. EXHIBITIONS Involve creating awareness through demonstrations, films, video shows, road shows etc. ADVANTAGES Exhibitions are open to a large and sometimes different range of audience which provides a platform to promote products and services to a large population. Being involved in exhibitions can provide one with opportunities to branch out to business partnerships and create customer database Quick feedback is received on general opinion about the product through interacting with customers.   DISADVANTAGES Trade-shows and exhibitions require pre-arrangement on time hence are time consuming. Travelling and setting up expenses may be costly e.g. hiring vehicles, tents, public address etc. Stiff competition on demonstration from those offering similar services. Free samples and displays are costly. Targeting the wrong audience may be more expensive than expected benefits i.e. if the target audience does not reciprocate positively. BARRIERS TO EFFECTIVENESS OF DELIVERING PR MESSAGE Wrong choice of medium– All media have their merits and demerits hence unsuitable medium may fail to deliver the information appropriately. Physical barriers-e.g. poor roads, insecurity may hinder timely and efficiency of message delivery. Language barrier– It contributes to lack of common understanding between the sender and recipient of message. Psychological barriers-They results from social problems e.g. attitude, resistance to change, poor retention of message, closed mind etc. hinder efficiency of message. SOLUTION TO ENSURE EFFECTIVE DELIVERY OF PR MESSAGES Choosing appropriate channels that will deliver information effectively. Good relations with public which facilitate reduction of message resistance. Communication should be well planned in order to reach the targeted audience. Right choice of language in order to facilitate understanding i.e. avoiding language barriers Avoiding negative pre-judgement of message. FACTORS TO CONSIDER WHILE CHOOSING THE MEDIA TO USE Cost-one should consider the media which is more cost effective in order not to affect other activities negatively. The amount paid to access service from media should be less than the expected benefits. Media coverage-depending on the targeted population, one should consider effectiveness of media that will reach all the audience e.g. Local, National or International stations. More than one media can be used to facilitate maximum delivery of message. Urgency of the message-If the message is more urgent, the media that is fast to prepare the news should be used e.g. radio. Content coverage-The media to be used should be able to cover the content in details in order to facilitate clarity of the message. E.g. for an intake in progress its more appropriate to use newspaper than billboard. Competence of personnel working in the media-specific personnel influence attractiveness of the audience hence success in message delivery. Accessibility-one should consider the media that is accessible to the target audience. More than one media can be used depending on financial ability of informer in order to facilitate maximum delivery of message.

ETHICS OF PUBLIC RELATIONS SUBTOPICS: Definition of ethics Code of consultancy practice Code of professional conduct Functions of public relations department Functions of public relations officer Qualities of public relation officer   Definition of Ethics Ethics is code of acceptable behavior that facilitates good relationship between an individual and the general public(s) Ethics facilitating building of long term relationship, building respect, trust etc GENERAL CODE OF CONDUCT EXPECTED FROM EMPLOYER Provide good working condition to employees. Should encourage democratic leadership in order to minimize misunderstandings within the organization. Should be able to carry fair promotions without discrimination e.g. based on work experience, education level etc Should be able to promote team work within organization hence working towards achieving common goal. Paying employees on time in order to boost their work morale. Carrying the outlined duties with high integrity i.e. must be honest and transparent therefore not engaging in corruption. GENERAL CODE OF CONDUCT FROM PR STAFF Only correct information should be published or broadcasted based on evidence and from reliable sources. The personnel carrying PR activities should ensure they meet legal requirements. The information they pass should not injure reputation of another person e.g. giving wrong information that might tarnish personality of an individual. They should not publish or disclose confidential information unless when authorized by law e.g. revealing source of intelligence information which may cause insecurity to them. High reputation should be portrayed while carrying the duties in order to boost corporate image of the organization they are working under gain public confidence and trust Should not misuse information regarding his/her employer for their own self benefit financially or other gains. Respect other employees in order to facilitate togetherness and team building so as to work towards achievement of common goal.   PUBLIC RELATIONS PRACTICE PR can be practiced in 2 ways: Internal responsibility External responsibility Some organizations prefer: In house PR departments External PR consultancies Hybrid: combination of In house PR dept. and External PR consultancies INTERNAL PR DEPARTMENTS Refers to department within an organization that is in charge of PR function Headed by PR Manager who ideally reports to CEO   Advantages of In House PR Departments Offers full time services: Staff work for required time; Work as required by contract Enables the creation and sustenance of good lines of communication: PR staff know other staff, They know the organization well, Can respond appropriately to challenges, Staff intimately involved with the firm Provide continuity: PR staff get valuable experience and are better placed to attain goals such as handling the media. Can also handle people well by providing info on organization Value for money: PR staff are economical and do what consultants offer at no extra-cost thus there is minimal waste company resources Immediacy: PR staff got immediate access to the firm and to decision makers in firm thus able to address problems proactively and handle challenges on time Familiarity: PR staff are familiar with operations therefore can give better services as they have a lot of experience about the firm Quick service: PR staff can respond quickly to unfolding challenges and are readily available on demand and can respond to problems on their feet   NB/The above advantages depend on strategic position of the PR department in the organization In house PR better felt when PR department is strategically positioned PR Manager must have access to CEO   Disadvantages of In House PR Department Lack of impartiality: PR staff may lose objectivity because of: Fear of being fired, too much loyalty, Pressure from management, May not be critical as expected, may compromise professional integrity to keep job Narrow range of experience: PR staff may have limited span of PR activities to do and may have narrow experience in a few PR activities Lack of training: Some PR staff lack professional training and some have not been to PR schools. Most are journalists and may lack integral PR know how. In subordination of PR department: PR may be put under marketing department thus function may not be prioritized making PR subservient to other managers and departments Misusing PR staff: Some CEOs use PR as personal assistants because they don’t know what PR is and what it can do the organization   NB/• PR can only be effective if CEO and management know its strategic role in management PR staff must have clearly spelt out responsibilities Lines of communication must be clearly defined   EXTERNAL PR CONSULTANCY PR consultancy is not an agency Refers to professionally run businesses offering PR services to clients Run by experienced professionals Knowledgeable and skilled PR practitioners   Reasons for Appointing External PR Consultancies Lack of finances for in house PR Need for management counseling Lack of time by PR staff Execution of complex PR programs Provide specialized services Advantages of External PR Consultancies Objectivity – offers unbiased services Have excellent media contacts Strategically positioned to service diverse clientele. Gives them an edge over in house staff Have access and knowledge of service providers Have geographical scope of operations as they are located in various cities and continents They have ability to reinforce internal staff Disadvantages of External PR Consultancies Clients get only what they pay for Lack of intimacy Divided loyalties Lack of specialized knowledge Use of inexperienced interns May face internal opposition and hostility by in house staff Criteria of Hiring External PR Consultancies Scrutinize expertise and experience base Implementing consultant to be present during negotiations and presentations Understand your needs as a firm Understand the capability of the consultancy Subject it to tendering Avoid those servicing your rivals Scrutinize budgets Talk about retainer Internal or external PR department may be small or large depending on; The size of the organization The value placed on PR by management. Financial position of the organization The nature of the activities undertaken by organization. PUBLIC RELATION MANAGER Refers to the chief executive officer who manages the company public relations DUTIES/RESPONSIBILITIES To advice management on communication problems, solution and techniques. To inform the public

THE SCOPE OF PUBLIC RELATIONS MEANING OF PUBLICS Public is a social unit consisting of all those affected who recognize a common problem for which they can seek common solution The group has a common interest Publics are often latent or passive in communication Grunig identifies three factors that make latent publics become communicating active publics: Problem recognition The public must recognize that something is wrong and recognize the need for information Constraint recognition The public must see themselves as limited by external factors and that they can do something about it. They will seek information to make plans for action Level of involvement The individual members must see themselves as affected by the situation. They will communicate because they are affected. TYPES OF PUBLICS Grunig identifies 4 types of publics: All issue publics who are active on all issues Apathetic publics who are inattentive and inactive on all issues Single-issue publics who are active only on one or limited number of issues Hot-issue publics are active after media exposure The most common publics that various organizations interact with include; THE COMMUNITY: these are the neighbors’ near where the organization is located. They are not necessarily the organizations’ customers but they contribute to either success or failure of organization. Possible ways an organization can promote good relations with its community could include for instance; Provision of street light within organization area, construction of safe foot path, participating in community programmes e.g. harambee, schools, roads, hospital construction, involving some of local community members in some of the organization jobs though depending on their qualifications etc EMPLOYEES: Refers to workers within the organization. Even for computerized organization they can’t do without human labor DISTRIBUTORS: Refer to everyone concerned with bulk breaking, transferring the products near the customers etc . Depending on size of organization and its activities it can either have internal or external distributors or both. SUPPLIERS: publics that deliver necessary tools and equipment needed for organizations operation at a cost. Each organization should ensure good relationship with its suppliers in order to avoid unhealthy interruption of organization activities. This is done through paying them on time, communicating to them of any changes that might affect them etc. CUSTOMERS: Refers to the end-beneficiary of organization products and services. Organization should relate well with its customers so as to retain them, attract new ones, satisfy their desires and build good corporate identity. This facilitates maintaining them and not switching to the competitors. GOVERNMENT: Organizations should ensure healthy relationship with the Government through complying with the legal requirements e.g. offering quality services, paying the tax, paying business permits etc. The Government in Kenya can either be represented by the National or government FINANCIAL INSTITUTIONS: Are institutions dealing with receiving deposits from their customers and issuing the loans. Organizations should maintain good relationship with the bank by meeting their financial obligations timely TRADE UNIONS: are associations/movements formed to fight for the rights of workers. They exert a powerful influence on commercial, industrial and political bodies in order to fight for better services for its workers. INVESTORS: Are people who mobilize savings and put money into working capital in relation to organization activities. IMPORTANCE OF DEFINING THE PUBLICS It’s cost effective because the organization does not make unnecessary speeding targeting the wrong audience. It helps an organization to concentrate with its publics hence building a healthy relationship with them Reduces the risks especially while introducing/launching new products/services. The risks can be in form of loss, resistance, unhealthy competition etc Facilitating building of long term relationship with relevant publics Helps avoid wastage of resources i.e. time and money. CONSEQUENCES OF NOT DEFINING THE PUBLICS The results do not match with the set objectives because of targeting wrong publics. Wastage of resources on wrong audience. High resistance from the public especially when launching new products. Same message can be repeated to the same group. High possibility of losses due to targeting wrong audience. NB/ the organizations’ CUSTOMERS changes depending on institution activities e.g. in learning institutions they are called STUDENTS, in hospitals-patients, in transport-passengers etc.

THE FUNCTION OF CONTROLLING Introduction Controlling involves the measurement and correction of the performance of employees, and of other organizational resources in order to ensure that everything is going according to plan. Any manager charged with putting plans into action must carry out control. Controls help to point deviations from plans so that corrective action can be taken. Before controlling can be done management must ensure the two prerequisites of the control system: (a)        Controls require plans: Controls must be based on plans. Managers cannot determine whether their units are achieving what is expected unless they know what is expected in the first place. Managers must first set plans and these plans become standards against which performance is measured. (b)        Controls require a clear organizational structure: Organizational responsibilities must be clear and definite so that when something goes wrong one can tell at which position it did. Lack of a good structure means that managers may know something is going wrong but they cannot tell exactly where the responsibility for the problem lies. Without clear knowledge of exactly where things are going wrong, corrective action is impossible. The Steps in the Control Process The methods used for control of the various resources, techniques and procedures are basically the same regardless of where it is being done or what is being controlled. The process has three major steps:   Step One: Establishment of Standards: The first step in the control process is to establish plans which serve as the standards against which performance is measured. In establishing the standards for control purposes, critical points must be selected. These are the points at which if anything went wrong, there would be devastating effects on the organization. It is difficult to control every aspect of the firm. Standards is the measure by which performance is judged as “good” or “bad”, “acceptable” or “unacceptable”. The standards set may be of many kinds and among the best are the verifiable goals and objectives, which stipulate the desired results. These goals and objectives may be in physical terms e.g units to be produced, sales volume, products rejected, profits earned, customer complaints etc. Step Two: Measurement of Performance: This step involves measurement of actual performance in the light of the standards set. The objective of this step is to answer the question of “how well are we doing in meeting the standards set for our activities?” Where possible standards should be such that they can detect deviations before they actually occur so that appropriate corrective action can be effected Step Three: Correction of Deviations: Taking the necessary corrective action is actually what completes the control process. Deviations from standards can either be positive or negative. When positive, then performance is better than expected and even if this is good, it is necessary to evaluate the standards and check for their accuracy and adequacy. Correction of negative performance is the point at which control is seen as part of the whole system. Corrective action is the step at which all other managerial functions are integrated into the process of control. Devices of Control Broadly, all the devices of control can be classified into (a) Budgetary control devices: include budgets such as production budget, cash budget, sales budget, capital budget etc (b) Non-budgetary control devices: consist of managerial statistics, break-even analysis, internal audit, cost accounting, etc. Budgeting or Budgetary control A budget is a financial or quantitative statement prepared for a definite period of time. It states the policy to be pursued during that period for the purpose of attaining a given objective. It provides standards for comparison with the results actually achieved. Budgeting is the process of preparing budgets whereas budgetary control is a device or technique of managerial control through budgets. Thus, budgetary control is planning in advance of the various aspects of business can be controlled. Characteristics of budgetary control Planning of activities of each department, Co-ordination among various departmental plans, Recording of actual performance, Comparison between budgets standards and actual performance, Determining the deviations Finding out the reasons for deviations (if any) and taking of follow-up action. Essentials of Effective Budgetary control Effective Organisation: should be effectively organized and the responsibilities of each departmental managers are clearly defined and the line of authority sharply drawn. Quick reporting: The subordinates must send reports on performance without any delay. The managers on their part must analyze the report and take necessary action immediately. Support of top management: The top management must have a clear idea of the objectives of budgetary control and should implement the budgetary control programme seriously in order to infuse a sense of seriousness among the subordinates. Reward and Punishment: The employees whose performance is according to the budget plans should be suitably rewarded and the employees whose performance is not as per budget should not go unpunished. Appropriate Authority: The employees who are entrusted with the responsibilities of implementation of budgetary control should also be given appropriate authority to do so. If a person lacks authority to enforce his decision, it is difficult for him to fulfill his responsibilities Flexibility: If the circumstances warrant, the management should not hesitate to alter the budget figures. But at the same time, care must be taken to see that the budget figures are not altered too much or too often.   Classification of Budgets Budgets may be classified on the basis of purposes for which they are prepared. On this basis, we have the following types of budgets. (1) Cash budget: it gives the estimated receipts and payments for the budget period and indicates the position of cash arising from it. It shows the cash requirements at various times of the budget period and helps the management in planning and arranging cash for the business concern. (2) Capital Budget: gives the estimates in respect of the capital resources of the business. It also states the plans with the estimated cost for investment, expansion, replacement, etc. Thus the budget serves as a device for planning capital expenditure. (3) Sales Budget: gives a comprehensive sales programme