Integrity. Literacy. Numeracy. Patience. A cool head. Intelligence. Charm. Honesty. Openness. Discretion. Affability. Accessibility. Flexibility. Sociability. Fearlessness.
These are just some of the qualities to be found in a first-rate IRO. Oh, and humor, of course. Withstanding the onslaught of queries from tiresome moms & pops, never mind bolshy analysts and inquisitive portfolio managers, requires a sense of humor perhaps beyond all else.
Why, then, is there such a dearth of jokes about IROs? A trawl of the staff of Investor Relations magazine, combined with a quick vox pop among members of the profession itself, could only produce one very tired old IR joke. (For those new to the business, who have otherwise contrived to avoid it, it’s from the light bulb family, viz, Q: How many IROs does it take to change a light bulb? A: I’ll get back to you with the numbers.)
There may be others (examples on a postcard, please, or by e-mail, phone or fax). But even if there aren’t, most IROs concede that without a sense of humor, the task simply could not be done. It’s essential on two quite different levels. First, you have to be able to react with a wry smile rather than hysterics when, against a backdrop of being consistently overworked and undervalued, investors, analysts and the CEO are all making impossible demands, expecting you to fix a problem that is neither of your own making nor within your scope to solve.
Second, and more manageably, a sense of humor is an essential tool in communications and relationship building, which are just two of the things that IR is all about.
What’s It All About?
But that is the problem. There are so many things that investor relations ‘is all about’. It’s all about building trust, some say. But it’s also all about understanding the numbers. And all about knowing your company’s industry and market. And all about winning the respect of senior management, too.
For Dennis Spring, a NY-based headhunter specializing in communications, what differentiates IR from various other functions is the financial know-how it requires. Increasingly companies want direct Wall Street experience – in equity research, investment banking or portfolio management – so they understand the figures and other factors affecting the share price.
But that’s not all companies expect in their IROs. Spring’s clients want a whole list of things. ‘Above all, we look for experience,’ he says. ‘The bottom line is, Have you performed this function before?’ That appplies to any position his firm, Spring Associates, is trying to fill. So does a thorough understanding of relevant audiences which, for IR roles, means shareholders, analysts and so on.
‘IR people really have to understand what makes a difference for shareholders,’ Spring stresses. ‘They have to be constantly trying to gauge the temperament and feelings of shareholders. IR people are not just there to run roadshows, massage the feelings of the chairman and put out releases. They have to be good at strategy; and they should be able to act as a guiding light for the senior executives, almost as a filter between the company and the outside world.’
The Art & the Science
These are all valid points, but investor relations is different things to different companies. For those in the pharmaceuticals or biotechnology sector, for example, a pharmacy qualification and/or knowledge of clinical medicine may be just as important as the other skills in the set.
Gerry Foster, senior vice president IR at Schering-Plough, has recently taken on two new staff members for her team at the New Jersey-based pharmaceuticals company. For one of these positions, she sought out Lisa DeBeradine from the operational side of the business. ‘Lisa is a registered pharmacist so she really understands the science,’ explains Foster. ‘We’re so research oriented now that we needed someone in IR who had a research background. In investor relations you really have to understand what drives the stock price,’ notes Foster, adding that in pharmaceuticals it’s undoubtedly the research pipeline that does that.
DeBeradine, Foster says, has already impressed sell-side analysts preoccupied with understanding the nature of, and prospects for, drugs in the Schering-Plough development pipleline. Crucial as it may be, Foster stresses that a scientific knowledge base would not be sufficient on its own. It still needs to be balanced by other skills.
In fact, DeBeradine is not only a scientist; she also has an MBA. And anyway she is helped by Janet Barth, another newcomer to the department, who is ‘very much a marketer’, according to Foster, and an ‘excellent writer.’ Both important attributes for IR, in Foster’s view. She herself has an investment business background so among them they can meet most demands, she says.
Pharmaceuticals is not the only sector that demands a depth of product knowledge from its IROs. Equivalent requirements are needed in other scientifically-based industries in which share prices depend heavily on the financial community having faith in new product development. Biotech and other high-tech areas are obvious examples; and these two also require high energy levels, cool heads and strong stomachs. That’s just one of the reasons why youth is often favored over experience in these fields.
In an area like retailing, on the other hand, or insurance, youth counts for less; experience and a depth and breadth of understanding of markets and economics count for rather more. But even in these more predictable sectors, there’s no room for died-in-the-wool Luddites any more.
All IROs need a pretty high minimum level of tech skills now; and a willingness to accept that the nature of their work is changing at a breathtaking rate. Witness the fact that only a couple of years ago mastery of spreadsheeting and wordprocessing was more or less adequate. Now any reticence about the Web will mark you out as hopelessly old-fashioned and likely to be left behind in the near future by the analysts and shareholders whose needs you serve.
‘Another thing you need in IR,’ adds Foster, ‘is fearlessness. When you’re dealing with the investment community, they’re always coming at you from a critical standpoint. You’d better be able to stand up for yourself. You need enormous self-confidence or else you can get burnt out very quickly.’
It’s a question of personality as much as anything else. Mickey Foster, former Niri president and IRO at Hanson Industries spin-off Millennium Chemicals Inc in New York, says some IR jobs may benefit from company-specific or industry-specific knowledge. ‘But having the right personality is more important. You can always learn about the business,’ he maintains.
Foster’s response to the question of which personality traits are crucial to a good IRO was as follows: ‘Flexibility is very important. And you must also have exceptional interpersonal skills. That’s not just for dealing with outside audiences but also internally.’
After pondering the matter a little longer, Foster came back with an extended list. Flexibility and exceptional interpersonal skills were still at the top, but by now it was pretty long, and the IRO was beginning to sound mythological. Here is his list of additional attributes:
- Integrity, honesty, credibility & trust;
- Entrepreneurial;
- Proactive & enthusiastic;
- Problem solver;
- Risk tolerant;
- Drive, high energy level;
- Articulate & resourceful team player;
- Superior business & financial acumen;
- Confidence.
This rather begs the question of why such a paragon is satisfied with the IR role when they could clearly be running the company, but maybe they are clocking up useful experience on the way to that.
Steve Webb, winner of the title Best IRO at the UK Investor Relations Awards last year, looks as if he’s on his way somewhere. But although he’s now called corporate development director, the new investor relations officer reports to him and he retains a close focus on IR for his company, Safeway Stores. ‘There are two prime requirements for a good IRO,’ Webb reckons. ‘The first is good interpersonal and communications skills. The second is that you have to be an analytical thinker: You must be able to grasp the strategy not only of your own business but also of your competitors’ businesses.’
These may be at the top but they are not the only skills and attributes on Webb’s list. He also underlines the importance of ‘being there’ for investors and analysts, which is easier for some IROs than others. ‘Companies that are not good at their investor relations are either companies that don’t trust the individual they’ve put in place to do IR; or they use the IR department to save having to deal with the investment community themselves,’ using it as a kind of buffer zone.
In terms of past experience, Mickey Foster says that headhunters looking to fill IR posts nowadays are principally concerned to find people who know how to relate to the investment community. ‘Analysts have always moved backwards and forwards between the sell-side and the buy-side, but now some move to become IROs,’ he notes. ‘And some IROs have become analysts.’
The requirement for IROs to have a real grip on numbers and an understanding of the mindsets of number-crunchers in the investment community, is being seen worldwide. In Europe, until a few years ago IR people were typically renegades from the press or PR departments. Today they’re more like their US counterparts.
John Kechejian, an American who runs IR at global engineering company ABB and is now based in Zurich, sees little distinction between the IR requirements on either side of the Atlantic.
‘I don’t see much difference between the US and Europe,’ he says. ‘A good IRO has to be a credible source, someone willing to be a champion of the investors’ cause within the company, and able to provide needed information,’ whether it’s numbers or information about business strategy.
In short, says Kechejian, ‘You need to be accessible, credible and informed. That’s the same whether you’re in the US, the UK, Sweden or Germany.’ Above all, Kechejian believes an IRO needs a service mentality. ‘Investors and analysts are my customers,’ says Kechejian. ‘My job is to represent them as well as I can.’
Same Difference
If there’s no longer any valid distinction to be made between Europe and North America, surely there is still a difference between IR on the corporate and agency sides. Well, maybe. But that no longer means you’ll be treated like a fish trying to jump out of water if you want to move from one to the other. Headhunters are more likely to be interested in people with experience of both nowadays, it seems.
‘I get more and more requests for people with both agency and corporate experience,’ confirms Dennis Spring. ‘In the 1980s the two were separate. Now people think it brings an added dimension, more breadth.’
So much for the views of people who do the job. What does their audience feel makes a good IRO? Portfolio managers and analysts have a hunger for information that no IRO could – or probably should – contemplate satisfying. But they are still the people whose needs count for most.
The key qualities – for the audience, at least – are Timeliness, Honesty, Accessibil-ity, Numeracy, Knowledge (of the company), and Shareholder-friendliness. THANKS, for short.
And undoubtedly analysts and shareholders will give you just that – not to mention awards – if you can provide all these things. Oh, and do keep smiling.
The full report of Rivel Research Group’s findings for the Investor Relations Awards is available @ $145. Please call Cheryle Hill: +1 212 425-9649.
Expert Judges
In a research survey we commissioned for our recent US Investor Relations Awards, one question Rivel Research Group put to analysts and institutional investors was specific to IROs. Their answers provide insights into what factors impress them in an IR professional. Take the comments made about Mark Begor at GE, who won for best IRO:
- He’s like an encyclopedia;
- He understands and appreciates shareholders’ needs for information;
- He’s very straightforward and honest;
- He responds to our questions in a thorough and timely manner;
- He has a quick response time.
- On Intel’s John Hull and Gordon Casey, who ran a close second to Begor:
- [Hull] is very straightforward;
- He seems honest. I don’t get the sense he’s trying to mislead anyone;
- I think he has the investors’ interests at heart;
- He knows the business;
- They are fairly diligent about getting back to me when I call them;
- Casey communicates clearly about Intel’s strategy and its plans for the future.
- GE and Intel are both huge companies with healthy IR budgets. The pressures may be different at companies lower down the market cap scale, but the investment community wants the same things from them. Michael Wargotz of HFS Inc and John Barker at Wendy’s International were joint winners among companies capitalized at less than $10 bn. Respondents’ comments on Wargotz included the following:
- He knows the company extremely well and can answer questions about it as well as anyone from senior management;
- He’s able to explain where the company may be going forward;
- He’s always accessible and returns calls no matter where he is. He’ll answer your question in a timely fashion if he knows the answer, and if he doesn’t, he gets it.
On John Barker:
- He is very accessible;
- The fact that we’re not dealing with the CFO or treasurer doesn’t bother me because John knows the numbers as well as they do;
- What I particularly like.is his response time in getting back to me;
- I get the impression that he gives me as much information as he possibly can.
