Why some IR teams are cozying up to their corporate communications counterparts
With investors now privy to more information about companies than ever before, many are looking far beyond the financials when making investment decisions. BlackRock, which has more than $4.65 tn in assets, has already owned up to using employee sentiment alongside more conventional financial metrics when assessing potential investments.
Henry Diamond, Take-Two Interactive Software |
‘We look for companies that have solid employee rankings. We want to buy companies that show improvements in employee opinions,’ said Paul Ebner, a portfolio manager and member of BlackRock’s scientific active equity group, in a recent Reuters article. ‘Happy and engaged employees lead to more wins and more sales opportunities.’
BlackRock’s 77-member quantitative team adds data from social media websites, including employee sentiment data from employee conversations online, into its models for evaluating holdings and investment prospects. As it stands, 20 percent of the data used by BlackRock to analyze companies is ‘unstructured’: it does not come as line items in analyst reports or regulatory filings.
And it’s not just employees on social media who might give executives cause for concern. A joint survey of 300 C-suite executives, carried out by Deloitte and Forbes Insights, flags reputation with multiple audiences, including customers and competitors, as the highest-impact risk area for business strategy. At the same time, finance stories about such issues as bonuses and corporate tax arrangements have become headline news stories for the general public.
Case study: Take-Two Interactive Software Henry Diamond, senior vice president of corporate communications and IR at Take-Two Interactive Software, has been in his current role for four and a half years. ‘I have a vice president of corporate communications and public affairs who reports to me,’ Diamond says. ‘I spend most of my time on IR and he spends the vast majority of his time on media relations, public affairs and corporate communications.’ Diamond began his IR career in 2002 at Cendant, where IR and corporate communications reported to the same person, before working at two other companies where that wasn’t the case. ‘I’ve always worked in companies where media and IR work tightly together so it wasn’t alien to me for them to be separate,’ he explains. ‘But having seen it from the other side I think it’s highly beneficial to have both roles reporting to the same person.’ When it comes to measuring the effectiveness of IR and corporate communications, Diamond and his team assess quality rather than quantity. ‘One way we measure our effectiveness in IR is to look at the quality of our shareholder base,’ he explains. ‘From a corporate communications standpoint, one of the key things we look at is the quality of coverage. Are we getting good placements in high-quality media outlets? Are we getting good TV media appearances?’ Diamond sees close functioning between IR and corporate communications as critical. ‘It’s important to have IR and corporate communications reporting to the same person, or at the very least to ensure there’s tight co-ordination between the two,’ he says. ‘The reason for that is pretty simple: you want to make sure the messaging to all your stakeholders is consistent, whether you’re communicating with shareholders, employees, customers or business partners.' |
There have always been times that necessitate close working between IR and corporate communications, the run-up to the reporting season being an obvious example, when the IR team of any bank will work closely with corporate communications to explain to a skeptical media how the bonus pot is determined. But now the stakes are arguably higher. At companies large and small, a greater preoccupation with reputational risk is driving the issue of corporate reputation to the fore, so it’s perhaps not surprising that some companies are choosing to integrate corporate communications and investor relations more closely.
Combining IR and communications departments is one obvious way companies can do this. But this has traditionally been more of a feature at smaller companies. According to IR Magazine’s Outsourcing IR report, which was published last year, responsibility for IR and corporate communications is more likely to be shared at small-cap companies. Moreover, traditionally the IRO and the corporate communicator have been quite different beasts: IROs are most likely to have a background in finance, while many corporate communicators have a background in PR and/or journalism.
And yet there is some back and forth between the two: 14 percent of IR professionals who took part in a recent IR Magazine survey describe themselves as working in marketing or communications immediately before IR.
Joining forces
In the UK, several senior heads of IR with financial backgrounds at major FTSE 100 companies have also been handed the communications remit in recent years, notes Oskar Yasar, managing partner at Oskar Yasar Partnership. ‘There has been a convergence in the relationship between the investor relations and communications teams, which means IROs are now being more exposed to the communications function,’ he explains.
Many agree that it’s easier for financially literate IROs to make the jump to head of IR and corporate communications than it is for corporate communicators with no financial background to make the equivalent leap. Ultimately, however, it depends on how responsibilities are divided up within the team. For IROs who are becoming leaders of jointly managed IR and corporate communications teams, the challenge comes in the form of new stakeholder audiences.
Päivi Antola, Amer Sports |
‘The initial challenge of taking on a combined role is gaining a better knowledge of how to tailor communications to non-investor audiences,’ says Henry Diamond, senior vice president of IR and corporate communications at NASDAQ-listed Take-Two Interactive Software. ‘But it’s a much easier transition from investor relations to corporate communications than it would be the other way round.’
Diamond is joined in his team by an experienced corporate communications professional who handles the lion’s share of the corporate communications work. While he retains strategic oversight of IR and corporate communications activities, as well as public affairs and charitable giving, he spends virtually all his time on investor relations.
Winning combinations
When it comes to advantages, most agree that consistent messaging is the biggest plus. ‘I see only benefits in having the same person heading these two functions,’ says Päivi Antola, head of corporate communications and IR at Helsinki-based Amer Sports. ‘IR and corp comms should be delivering the same message, irrespective of whether the audience is internal, media, investors or other stakeholders.’
Perhaps unsurprisingly, most who work in combined departments are reluctant to be drawn on any disadvantages of such an arrangement. But Yasar notes that sometimes IR professionals with a purely financial background are not always aware of some of the ‘creative nuances’ used by expert media relations practitioners. ‘So their delivery tends to be much more black and white – which in most cases probably isn’t a bad thing,’ he says, adding that the presence of a media relations expert in the team would mitigate this.
He also notes that some CEOs are reluctant to have someone heading up corporate communications and IR who doesn’t have media relations experience. ‘But in nearly all the cases where an IRO has taken over a communications function, there is an existing media relations team,’ he points out. ‘So as long as the IRO absolutely understands and creates a strong key message, I think the delivery is the easy part.’
Source: IR Magazine: Outsourcing IR
Has social media made the impetus to be consistent even greater? Diamond isn’t certain. ‘I would say it’s as important as ever to be consistent now,’ he comments. ‘I think consistency was just as important before the rise of social media but wider trends such as social media have increased the number of touch points.’
Before you thrust this article in front of your CEO and demand a promotion, however, bear in mind that the traffic isn’t only one way. Yasar notes that while some larger companies are merging IR and corporate communications, many companies are also splitting the positions. ‘While we’ve seen a number of organizations merge these roles at larger companies, we’ve also seen an increase in the number of organizations now splitting them up,’ he says. ‘Ultimately, there’s no single and proper way of running an IR and communications function.’
Case study: Amer Sports Päivi Antola, head of corporate communications and IR at Finland’s Amer Sports, heads up a department of four (or five if you count a shared assistant with the CFO). She has had a career in investor relations and communications stretching back to the late 1990s, only taking up her current role in April 2011 – but she is confident the combined role makes her more valuable to the company. ‘ In both functions, it’s very much about promoting the company,’ she explains. ‘Having the same person heading the functions makes the co-ordination very easy. The external channels we have and the content we produce is for all our audiences.’ Her position allows her to be knowledgeable about many different aspects of the company, she adds. ‘In terms of corporate communications, it’s good to understand how investors see the company,’ she says. ‘And in terms of IR, in my position as the head of corporate communications I work closely with the marketing teams on our various brands, which helps me be up to speed with the latest developments in terms of trends, products and end-consumers.’ Antola estimates that nearly three quarters of her time goes on IR, even though she has primary responsibility for IR and corporate communications, and the team outsources the shareholder ID, annual report design and some other corporate identity, online communications and events. ‘Both are equally important, but time and resources are limited,’ she explains. ‘And of course roadshows and IR meetings take up a significant amount of my time.’ |
This article appeared in the summer 2015 print issue of IR Magazine