You’re not going to get far in IR if you consider the job to be a one-way information flow. That should be one of the first lessons learnt by any investor relations officer.
Time and again you’ll hear those practiced in the art say that you should act as both a giver and receiver of information: the job involves managing the expectations of the financial community but is equally about feeding information from the market back to management. In both respects you’ll probably experience the best and worst of times from your audience.
But the information flows needed by a top-notch investor relations officer are far more complicated than just a two-way affair. You can’t go about managing the expectations of the Street or the City if your IR pistols aren’t loaded up with ammunition about what’s going on in your company.
Imagine the scene: ‘Just what is the expected lifespan of your new and fabulous product then, Mr. IR Officer?’ Answer: ‘Erm, well I’ll have to get back to you on that.’ It happens to everyone, of course. And no end of preparation can foresee every picky question from an inquisitive analyst. Still there’s no doubt that those IROs who actively seek to stay one step ahead of internal developments will have the edge out on the Street. It may sound obvious – you can’t give out information until you possess it – but the ability and desire of IROs to grab information from their colleagues varies enormously. Indeed, those who put little effort into the task will likely find their communications with the financial community suffer as a result.
Movers and shakers
Tom Myers, director of IR at Cleveland-based TRW Inc, says that any IRO worth their salt should be ‘aggressively engaged’ in the collection of information from within their company. If you’re not then you aren’t going to be able to do your job. He likens it to a fireman trying to fight a fire without access to hoses, ladders and fire engines. And Myers uses any and every opportunity to gather information on his own firm, the competition and the market, all of it feeding into a more complete picture with which to speak knowledgably about his company’s operations. ‘You just have to know so you can speak with confidence on behalf of your chairman or president.’
In TRW’s case, Myers has to ensure he is up to speed on the automotive, space and defense industries. But being ahead of the game is not about being a rocket scientist. It’s just using your nose to obtain information. First there’s the downright obvious: internal written documents which form the basis of printed shareholder literature (financial results, strategic and operating plans by business, monthly business updates and the like).
Next up come the other formal aspects of the information-gathering job: regular meetings with senior management to discuss business performance. Then there’s the more informal side of things where the good IRO can make a difference: casual conversations, internal e-mails being fired off left, right and center. Myers points to presentations by division heads to analysts and fund managers as part of an operating tour as being particularly useful. That’s where you can glean the sort of in-depth information that doesn’t come easily in the everyday run of things.
Conversely, trawling through analyst reports on the competition can help highlight areas which haven’t necessarily been looked at to date. ‘Wall Street will, of course, trigger additional inquiries,’ he adds, saying he hopes to have 98 percent of inquiries covered but there will be the odd 2 percent which need further research. ‘But that’s furthering our knowledge as well.’
Call time
Gerry Foster, senior vice president of IR at Schering-Plough Corporation, is of a similar opinion. She favors the telephone over and above any other source for grabbing those up-to-the-minute facts and figures from around the company which keep her on top of the information pile. Oh and, of course, there’s reading too. Lots of it. And a lot of deeply scientific stuff being a pharmaceutical corporation. ‘We read anything and everything in the IR department,’ she says, adding that information overload is never a problem for the team. ‘There’s no information that is too much information. Investor relations is all about getting information.’
Informality is the key for Foster. Forget about all the stuff and nonsense of having to wait for the weekly meeting with the CEO to get an update. ‘If I want to talk to the CEO I just go on over to his office and say, Can I see you for a moment. At Schering-Plough it’s very informal – there’s a lot of telephone calls, a lot of e-mail messages. If you want to know something you just pick up the phone. Somebody from research is just as likely to call us up as we are to call them.’
Foster is lucky, she has the aid of Lisa DeBerardine in her department, who has a pharmaceutical background. She helps Foster in getting to grips with the new products and research. Yet Foster is one of the best IROs in the business. So is it necessary to have a professional background in your company’s industry to be truly adept at information gathering?
Myers doesn’t think it’s crucial by any means. Not in most cases, anyhow, although there may be one or two examples in technically complicated industries where a bit of background knowledge and training makes life bearable in IR. ‘Generally speaking, the techniques of IR are transferable across industries provided you are willing to do the homework,’ he says.
In essence, you don’t have to know how to make the product, just be willing to dig around enough so you can explain what it does, its benefits, the expected demand, the product life, the revenue it’s likely to generate, what it means to the competition, why it is key or not key to the company’s future, and so on and so forth.
One place, one vision
Tony Hughes, vice president of IR and financial communications at Philip Morris, believes he is in an enviable position in another sense. The tobacco, foods and brewing company has structured all of its business and financial communications – including IR – into one department. That structure in itself means a tremendous amount of data is flowing into the department.
‘We’re very wired into the process of gathering data,’ says Hughes, adding that just producing the annual report means pulling in and scrutinizing figures from all the businesses. Of course, having a 15-strong financial communications staff implies there’s a lot of eyes and ears out there trawling for information, attending meetings, talking with other staff by the coffee machines and then reporting back their information gathering to the department. ‘We spread these tasks around,’ he adds. ‘One person might sit in on a meeting and then come back to everyone else with a briefing session.’
What you might call strictly defined IR work is handled by Hughes and two other colleagues. But being part of the wider financial communications department means they get to see and hear a whole lot more than they would otherwise. Such observations aren’t underhand, but are simply so they can then decide what is available for disclosure and keep the financial community informed.
Techno help?
Keeping fund managers and analysts up-to-date has been significantly aided by new technology but feelings seem mixed about how it aids internal information gathering for investor relations. Foster remains committed to the phone as the primary tool at her disposal but acknowledges that internal e-mail is useful for chat notes or to register that, say, the company has just entered clinical trials for product X.
Myers is more of a convert in the internal e-mail regard. ‘You can ask a question that colleagues can reply to when it’s comfortable for them to do so. It allows them to respond at leisure and provides a documented answer.’
Hughes comments that being based at headquarters means that ‘all the data is here’ and an intranet would not necessarily help in information gathering. Sure, he and his colleagues use internal e-mail but where technology really comes into its own is with the internal television system. ‘When we’re working on an earnings release we can connect via the television with the food company in Chicago. And we’re taking that internal videoconferencing, enhancing it and making it more interactive.’
Informal chats via videophone may well be the way of the future. And, who knows, teleportation could be just round the corner. Now that would really make information gathering a lot easier.
