Find out what the new and improved, multi-skilled IRO looks like
Once little more than meeting managers and information regurgitators, IR specialists are being called upon by management to widen their skill set. Executive search firms report a new litany of descriptors in the briefs provided by their corporate clients. These include a flair for numbers and financial modeling, an understanding of capital markets and regulation, line management experience and sufficient credibility to stand in for CEOs and CFOs.
Not that this is anything new. Besides a baseline competence in interpersonal and communication skills, the ideal job candidate has always possessed such characteristics. What’s changed in recent years is the intensity of the desire to attract such individuals – and management’s willingness to pay for them. Driving the change is an increase in expectations on the part of investors and tighter regulations around the world. The globalization of financial markets and heightened competition for cash by companies of all market cap sizes is also changing the skill set for IR.
The IRO as corporate adviser
‘The new profile of a strong IR executive is someone who can understand the company’s financial strategy and has the influencing skills to persuade analysts and investors of the soundness of that strategy,’ says Noel Le Grand, a consultant in the New York office of Gow & Partners. ‘Until about four or five years ago, most companies were just looking for a mouthpiece. Candidates frequently used to come from the PR world. Today, most IROs are people who have a deep understanding of the business and industry as well as strong communication skills.’
‘Management teams today are seeking individuals who can be much more of a business and corporate advisor than was the case five years ago,’ says Smooch Reynolds, CEO of the Repovich-Reynolds Group (TRRG), a California-based executive search firm. ‘They want someone who can bring intelligence from the financial markets to help management make better decisions.’
David Moyer, principal at Moyer Sherwood Associates in New York, sums up the situation by saying: ‘When I look at successful IR candidates, MBAs are all over the place.’
In Europe, circumstances are much the same. ‘I’ve seen a dramatic rise in the sophistication of IROs in the past four or five years,’ says Oskar Yasar, executive director of VMA Group, a London-based IR recruiter. ‘CFOs are under more pressure, with regulation and shareholder activism taking up more of their time. Research analysts and fund managers are far more demanding than they once were and more discerning about which companies they invest in. CFOs don’t have the time to speak with all stakeholders, however. Consequently, they are looking for people who can actually talk the talk, who are comfortable answering detailed and analytical questions and who don’t need to pass on questions to the CFO.’
Know thy numbers
Yasar points out that UK IROs used to come up out of corporate communications and were assisted by an external financial PR agency. ‘But when an investor would ask a detailed question about the balance sheet, and because the corporate communications person didn’t necessarily understand the balance sheet, those questions would be referred back to the finance team,’ he says. ‘That led to more work for the finance department as well as a negative perception of the IRO and the company. Consequently, CFOs are looking for technically oriented people with an accountancy qualification who can understand and communicate balance sheet information.’
‘Until recently, IR was driven by PR people,’ notes Heather McGregor, director at London-based executive search firm Taylor Bennett. ‘To fill the position, CFOs looked for someone who could organize a roadshow and draft the slides. Now there is a strong emphasis on finding someone who can give the position credibility both internally and externally. That means proven financial qualifications. CFOs are looking for CFAs, sector knowledge and, above all, capital markets experience.’
David Mounde, a consultant with Benchmark Search, a member firm of the Gow & Partners Network, agrees. ‘Only two or three years ago, people would have said IR was a talking-head function and that it wasn’t key to be financially literate,’ says Mounde, who leads Benchmark’s corporate affairs and investor relations practice. ‘Today, post-Spitzer, companies have the opportunity to get solid sell-side analysts on board who can formulate a coherent report for their peers and help with financial modeling without going through the finance department. Analyst salaries have been cut, their workload has increased, and there are plenty of analysts out there who feel they can further their careers within a company.’
Flair counts
Still, Mounde cautions that although analysts are the ‘it’ people in the job market, they are not necessarily guaranteed to fit the bill. ‘In the UK and Europe you need an IR person who is not just highly number-competent but is also highly literate and can tell the story, so that the company doesn’t become a bland, statement-based organization,’ he says. ‘You need someone who can help analysts with the numbers and also the theory behind them. You don’t always get that from the analyst community.’
For example, Mounde notes, a New York-listed company that wants a European IR presence doesn’t necessarily need a former analyst but rather someone who simply understands the market: ‘There are different investment rationales here, and different terminology is used. Often, a candidate with a financial PR background is ideal.’
One way or another, it is exceptionally hard to find people possessing all these skills – which, of course, helps keep headhunters in business. ‘These people don’t grow on trees,’ says McGregor. ‘People with a communications background who want to progress in their careers had better think about getting educated in financial analysis.’
And that’s just what Karen Keyes, London-based head of investor relations at IT consulting firm LogicaCMG, did. With a background in government relations, communications, marketing and business development, Keyes took time off to get a master’s in finance because she was specifically interested in moving into IR.
‘I felt I needed a better background in management accounting, corporate finance and capital markets to do good IR,’ she says. ‘IR can take up all of those areas and more – it depends on where the company is based, the level of the company’s development and, pragmatically, the strengths and skills of the people who work in other functions. One of the most frustrating things in IR is that it is difficult to be good in all of these areas.’
Melding skills
Often, depending on factors including the size and sector of the company, IROs are asked to take on the corporate communications function as well. Judith Cushman, president of Washington-based Judith Cushman & Associates, believes this is often a mistake in terms of reporting lines and skill sets. ‘So-called ‘convergence’ is not what CFOs want or need,’ states Cushman. ‘CFOs are traditionally concerned with the analytical side of things and are not trained to deal with soft stuff like image and branding. They usually shouldn’t be overseeing corporate communications because they end up supervising an area they generally don’t have much experience in.’
Cushman notes that while consolidating everything under the same roof can certainly help keep messages coordinated, it takes an unusually talented person to pull it off. ‘The skills needed to succeed in IR are different from those needed in corporate communications,’ she says. ‘IR people are analytical and have specific performance markers. Corporate communications success is less quantifiable. You need to be a ‘right brain/left brain’ kind of person to fill the dual role, and they are rare.’
As the nature of IR work changes, it poses both opportunities and pitfalls for IROs and the companies they serve. While the pace of day-to-day tactical work has increased, staffing levels have remained stable. ‘Just keeping on top of regulatory compliance can be a full-time job,’ notes Cushman. ‘Doing that while at the same time trying to think strategically and compose and communicate a coherent message to your audience is driving many people to exhaustion.’
Nevertheless, besides the job of staying in touch with issues and events in the investment community and their industry, IROs are being asked to keep abreast of regulatory trends as well. ‘CFOs are looking for someone who can be an advocate – who, when they see something coming down the regulatory pipeline that may adversely affect their company, can recognize it and give the company an opportunity to put their two cents’ worth in,’ says Isabel Meharry, president and CEO of Financial Executives International Canada. ‘That was always a good quality, but we are seeing so many changes these days that it has become far more essential. The same holds true in terms of seeking an IRO who can take on a strategic focus. Things are changing so fast that you really need someone who sees the big picture and can figure out what is and isn’t important.’
‘The best advice I could give an IR job applicant would be to step back and reflect a bit,’ concludes Moyer. ‘We are living in such a fast-paced society that some people never put down the Blackberry, stare out of the window for half an hour and think.’