There are many keys to success in investor relations, without which your IR program will not earn the return on investment of which it is capable.
Whether your company is large cap or small cap, manufactures and markets in one country or 50, has sales of $50 mn or $50 bn, is in a basic manufacturing industry or on the outer fringes of the internet revolution, these ingredients must underpin your IR program if it is to succeed. They include the following.
- A long-term strategy for the function, owned and supported by management.
- A clear picture of the program you aspire to have, versus the one you may now have, and the strategic shifts you are going to have to make to get from where you are now to where you want to be.
- A clearly-stated IR mission or reason-for-being, long-term goals and measurable short-term objectives.
- The target audience you want to reach. Investor relations efforts are wasted if directed to the general public. The more specific the targeted public, the more effective and cost-effective the execution of the program becomes.
- The overarching strategies and supporting tactics you want to use to reach these target publics, employing a broad range of communications media.
- A means of measuring every step of the way whether you are being successful in achieving your objectives, and the ability to adjust and make mid-course corrections when circumstances change.
- Corporate performance and its alignment with the expectations you create with the investment community. The Street and the City hate surprises.
Differentiation is all
Most important to the success of the IR program, however, is devising and building a competitively-advantaged positioning for the company that sets it apart from others in the same industry.
You can have the clearest of goals and objectives, target the most appropriate of audiences, employ strategies and tactics that are right on the mark, and measure your accomplishments specifically; but if you do not have a message that sets you apart, and makes the investor want to buy your stock, your IR program will be doomed to failure.
I call this corporate positioning. It is the essence of the corporation and it must dwell in the heart of its communications with the investment community, as well as the company’s other stakeholders.
Corporate positioning begins with a company’s corporate identity, which consists of various attributes, characteristics or qualities.
For example, it is the overall corporate culture; how the company is perceived by its many internal or external stakeholders; the visual elements surrounding the company’s logo and name; and how it displays itself. It is the company’s beliefs, values, policies and strategies; its words and actions, and how they are perceived; and the ‘sum’ of the company’s employees and their collective contribution and actions.
To describe it another way, a company’s corporate identity consists of the following.
- Corporate philosophy: the constitution of the company, its values, beliefs, aims, mission, goals and key strategies; what the company is. I call that thinking.
- Corporate behavior: the manners of the company, and how it acts and performs. That is behavior.
- Corporate communications: the communications culture of the company, its internal and external communications, policies and actions. Essentially, the way the company communicates.
- Corporate design: this is the company’s visual appearance, its name, logo, overall visibility; essentially, how the company looks. I call that its appearance.
One could say that a company’s corporate identity is the sum of how it thinks, walks, talks and looks. While that identity expresses itself in each of these four different dimensions, if it is to be consistent, it has to reflect the four dimensions in an integrated fashion.
Every company has a corporate identity. It can choose to control it to a significant extent, or be controlled by the corporate identity its publics give it in the absence of focused corporate communications.
Corporate positioning, on the other hand, is the result of all the messages the company consciously communicates to its internal and external publics, which should be designed to get them to perceive the company in a favorable way and to take actions that are supportive of it achieving its strategic goals.
Corporate identity, and its by-product, corporate positioning are, I believe, the primary key to achieving your IR mission. That mission is to build and communicate a positive, competitively-advantaged identity for the company with the investment community, get investors to perceive the company in a favorable light, and to recommend or purchase its common stock.
The goal of all this – although some of our colleagues will deny it – is to achieve an advantaged market valuation and price-to-earnings multiple for the company’s stock. This should be consistent with its performance and compared with the securities of companies that are viewed as its competitors, both for investors’ attention and in the marketplace for products and services.
Your company’s corporate positioning must reflect corporate reality, past, present and future. You really can’t make a ‘silk purse out of a sow’s ear’. So if you happen to work for a company that is analogous to a ‘sow’s ear’, position it as the number one sow’s ear in the world – the best of the best. And if you’re lucky enough to work for a company that could be compared to the ‘silk purse’, so much the better. But understand that there are lots of silk purses out there competing for investors’ minds and dollars.
Creativity at a premium
Also be aware that you are trying to build a distinctive, advantaged corporate positioning in an external environment in which thousands of companies are each striving to create a unique visual, strategic and philosophical identity and positioning for themselves, creating enormous communications ‘clutter’. This puts a premium on your creativity.
Many of your competitors are prepared to spend substantially greater amounts of money than your company to build their own identities through corporate advertising, sponsorships and aggressive media relations programming. So you have to be especially clever.
And you may work in an industry – tobacco and chemicals are two examples – where there is public distrust and negative perceptions, based on a broad number of social, economic and environmental issues. You have to find a way to overcome these.
Just how do you develop the competitive positioning you need to have a successful investor relations program? First, you do not do it alone. You develop it in concert with senior management, and with your colleagues in other communications disciplines, including corporate public affairs, human resources and marketing.
All of you are searching for the same thing, and all of you need to be consistent in how you communicate your company’s positioning if you are to be successful. The investment community is only one of many stakeholder groups the company is dependent upon for success. All of these groups are interrelated, and the investor relations message must therefore be coordinated and in alignment with the company’s messages to employees, customers, suppliers, communities, governments and the public at large.
The truly ‘world-class’ companies – Coca-Cola, Merck, Daimler-Benz and Nokia – speak with ‘one voice’ and have one overarching message. They realize that the recipient of their message may wear numerous hats, such as an employee who is also a stockholder, customer, citizen of the community in which the company is located, and a volunteer government official in that same community.
You also have to know your company – where it has been, where it is now, where it is going and how it is going to get there. You have to ask yourself strategic questions like the following:
- Who are we, and what do we stand for?
- What do we want our stakeholders to believe about the company? Does that fit with reality?
- What makes us different and unique from all of our competitors? What sets us apart? This will include corporate culture, the dynamics of your market and your position in it, your approach to the marketplace, and the quality and uniqueness of your products and services.
- Where are we going, and how are we going to get there?
- How are we performing, and how do we expect to, perform, against that vision and strategy?
You also have to understand how you are currently perceived by your internal and external stakeholders. Every company – whether it likes it or not – has a corporate positioning. You had better understand yours before you set off to build on it or change it.
Let me share with you the results of this kind of thinking. A global leader in the pharmaceutical industry went through the soul-searching I’ve described, ending up with the following corporate positioning: XYZ Corporation’s corporate purpose is to create, discover, develop, manufacture and market throughout the world safe, effective medicines of the highest quality which will bring benefits to patients through improved longevity and quality of life, and to society in general through economic value.
It then developed a range of supporting investor relations messages, including:
- It is dedicated to enhancing shareholder value.
- Its greatest strength is its science base, a significant area of competitive advantage.
- It seeks to be a leader in every category it competes in.
- It is among the most global of companies, doing business in over 150 countries.
- It has a history of success. It also has the financial strength, long-term focus and commitment to investing to fulfill its mission.
- It is a rapidly-changing company, responsive to changing customer and societal needs. Led by a dynamic management team, it is working to lower the overall cost of healthcare through its medicines. It has increased the speed of its response to market needs through its research and development activities. It has developed a spirit of enterprise in new and emerging markets.
The result of all this is a company that is widely admired as one of the best in its industry, whose stock price has tripled in the three years since the positioning work was completed.
Conscious change
Dow Chemical, on the other hand, is an example of a company, that consciously transformed its corporate positioning from very bad to very good. In 1985, management acknowledged Dow’s negative image, which research showed resulted from the public’s perception of the company as arrogant and insensitive. It was widely seen as unwilling to respond to environmental concerns, the recipient of continually negative press, with historical ties to napalm bombs used in the Vietnam War and to air pollution. As a result, the company had lost influence in the public domain; its stock price had plummeted; there was low employee morale; and customers were beginning to question their relationships with Dow.
Management assigned a cross-functional team, including investor relations, and empowered it to develop and implement a long-term corporate positioning strategy designed to build a strong and positive corporate image. The company wanted to be viewed by its stakeholders as being open, honest, responsible, successful and a contributing corporate citizen.
Management agreed that, to be successful, the corporate positioning strategy had to do the following:
- Be proactive, rather than reactive.
- Clearly link actions with communications.
- Be sustainable over at least five years.
- Have significant dollars and human resources assigned to it.
- Have active management support and participation.
- Be based on aggressively seeking and maximizing any opportunities for leadership.
- Be implemented globally.
- Be measurable.
- Utilize a broad range of communications techniques, including the media.
Wide recognition
Implementing the corporate positioning strategy resulted in Dow Chemical transforming its bad image into a strong, positive reputation. And it is a transformation which has been recognized by all of its important stakeholders, including the financial community and individual shareholders. Since the turnaround, the company has been widely recognized for its openness and honesty, its leadership in environmental and other public policy areas, its innovative efforts in improving the well-being of the communities it operates in, and its success in improving the working lives of its employees.
The result is that Dow is now perceived to be a very different kind of company than it was in the 1960s, 1970s and 1980s, ranked near the top of the chemical companies as a ‘most admired corporation’. It has received accolades from opinion leaders, environmentalists, government, and dozens of consumer and special interest groups.
That positive corporate positioning has had a significant impact on Dow’s business results and its share valuation. It has also helped the company weather the negatives created by its joint venture, Dow Corning, with its ongoing breast implant litigation.
There are many advantages to having a positive and strategic corporate positioning beyond good investor relations. It focuses the minds of management on value-added decision-making. It builds an aligned employee workforce. It creates customers who want to buy your products and services because they admire your company. It ensures that outside opinion leaders – in the community, government and the public policy arena – are aligned and supportive.
And of course, there is a growing body of knowledge that indicates that proper corporate positioning leads to an advantaged corporate reputation, which in turn leads to a superior price-to-earnings multiple and share price in the market.
And we all know the good things that those can bring to a company.
Philip J. Webster is president of The Webster Group, Inc, Philadelphia-based global management consultants in investor relations, corporate communications and public affairs.
