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AT A GLANCE Proving your worth IR measurement isn’t just about assessing how well you’re hitting your own goals – it can also be a useful means of highlighting your skills and effectiveness to senior management. We asked more than 600 investor relations professionals how they do this for our latest Measuring & Demonstrating IR research report. Perceiving management needs IROs give the importance of investor relations an average score of 7.7 out of 10 in the eyes of the C-suite. We also asked them which areas of investor relations activity they believe matter most to senior management – with meetings, roadshows and events involving the investment community coming out on top. What the C-suite really wants How does that compare with what senior management actually considers to be the most important areas of IR? It seems IROs are pretty close to management views, with our 2015 senior management survey showing that 75 percent see investor engagement through meetings, roadshows and events as ‘very important’. |
The first report in our Measuring & Demonstrating IR series focused on how companies measure the success of their IR program. For the second installment, it’s what senior management wants to see from IR and how IROs can best prove the worth of the program to those at the top that comes under the spotlight.
Globally, more than half of the almost 600 respondents to our IR survey this year say the ability to report back to management the views of analysts and investors about the company’s strategy is what they look for most from investor feedback. This is followed by using feedback to find out how well IROs are achieving their own goals and to help formulate future IR strategies and goals.
When asked to rank what they most want from investor feedback from four options, just 4 percentrate ‘the ability to demonstrate IR’s progress to senior management’ as number one. So while senior management is clearly key to IROs’ use of investor feedback, the primary function of investor feedback is rarely to demonstrate actual progress of the IR program to the C-suite – simply because other uses are considered so much more important.
This result is somewhat confused by the findings from a second, open-ended query, however.
Responding to the question: ‘What is the best way to demonstrate the effectiveness of IR to senior management at your company?’, IROs say investor feedback is the most effective weapon of defense when looking to prove your worth to the C-suite. In fact, in the 302 open-ended responses collected through our research, the word ‘feedback’ comes up 82 times.So while investor feedback is not seen as theprimary way to demonstrate value to management, it is still clearly of high importance.
What IROs think matters most
Some IR departments see far more of their senior management than others. Senior management at Asian small-cap companies, for example, spend an average of 90 days a year on IR; those at North American small caps attend 68 percent of investor one-on-one meetings, according to the Global IR Practice Report 2016. At the other end of the scale, the North American mid-cap C-suite dedicates just 21 days to IR while those at the top of an Asian large cap are involved in only 29 percent of one-on-ones.
We asked IROs to tell us how important they think investor relations is to their senior management, on a scale of one to 10. The overall global average comes in at 7.7. We then asked IROs how important they feel a selection of different IR areas are to their senior management. Meetings, roadshows and events with the investment community come out on top, followed by the speed of response to investors and analysts and the composition of the shareholder base.
Only two metrics rank below a 7-point global average: the number of analysts covering the company and P/E relative to peers.
And what management really wants
So how does this compare with what the C-suite actually deems important in terms of IR? Well, it’s actually more or less spot-on. We know this because in 2015 we surveyed senior management teams, asking them to rate the importance of several factors in measuring the quality of their company’s investor relations, included in the aptly titled Senior managementand investor relations research report (published in the summer 2015 issue of IR Magazine).
That research shows that for senior management it is indeed speed of response to investors and analysts alongside investor meetings, roadshows and events that are considered the most important factors when it comes to measuring IR.
That research sees three quarters (75 percent) of respondents give investor engagement through meetings, roadshows and events a score classed as ‘very important’ (8+), with 19 percent giving a perfect score of 10. Prompt responses to the investment community are valued as very important by 69 percent,with 21 percent giving a score of 10 – the highest number of perfect scores received by any category.
For senior management, the third-most important area for measuring IR is analyst coverage, either in terms of quality or quantity (whereas IROs this year were asked only about analyst quantity), and the fourth is feedback from the investment community, either in general or through more formal investor perception studies. The factor considered least important by senior management measuring the quality of IR is the company’s P/E relative to its peers.
