How many IR professionals get to the very top of their game? How many make a career out of balancing internal engagement with the demands of the buy side, the sell side, the growing cohort of other stakeholders and the increasing demands on the IR role? And what happens when that person decides to move on or retire?
We talk to IROs at the very top of their game to find out what they look for in a successor, how important previous IR experience is to that process – and how they go about finding their new head of investor relations.
‘Succession planning can be challenging for companies,’ states Lynn Antipas Tyson, executive director of IR at Ford and former IR lead at Dell, PepsiCo and Yum! Brands, to name a few. ‘At Ford, we are required to have succession plans at the senior leadership level. I have to think about what happens if I get hit by a bus – as well as mapping out a more orderly transition.’
An important question going into that is: how does the company view IR? The answer will influence the types of candidates you might consider, Tyson adds, including whether you tap someone internally or conduct an external search.
She points to other questions that sway you on one candidate or another: ‘Is this a position that reports to the CFO? Is it a senior-level position? Is it on the leadership team? Is the IRO a springboard to another role in finance or general management? These factors impact the type of candidate you are looking for.’
IR Magazine’s Global Practice Report 2023 finds that 66 percent of IR departments around the world report to the CFO, while just over a fifth (22 percent) report to the CEO.
who headed up investor relations at Roche for 20 years before retiring from full-time IR work in 2022, agrees that the reporting line makes a difference. ‘Where the position is placed is your first consideration,’ he says, though he also stresses the importance of being able to ‘open doors’ throughout the organization, given the company-wide scope of IR.
‘[As head of IR], you are the spokesperson of internal matters to the outside market, but you’re also the spokesperson to management, sharing what you hear from the market,’ Mahler continues. ‘So first you find out whether a person suits your organization through interviews and meetings with people in various departments. Then you think about whether the candidate also fits the external market. But he or she has to fit both.’
Dr Mahler points to roadshows as an example of just how important compatibility with management is. ‘When I was head of investor relations, I traveled 460,000 miles in 2019,’ he recalls. ‘And most of that was travel with the CEO or the CFO. So frankly, if you don’t have a good harmony with the people you work and travel with, it’s a disaster. You travel together for seven, eight hours and the next day, you have to do a roadshow together.’
The skills you need
Cole Lannum, acting CFO at MDVisit and former IR lead at Zimmer Biomet, Mallinckrodt, Covidien and more, points to four skill areas he looks for across all succession candidates: the first three are impeccable communications skills, top-decile intelligence & creativity and a deep understanding of finance. His final criterion comes with added emphasis and echoes comments by Tyson and Dr Mahler: ‘They must have an emotional/intellectual compatibility with senior management and the board of directors.
‘Finding someone with the right set of abilities is often limited by that last item – compatibility with the specific senior management team. That means a lot of really talented IR professionals might still not be right for the specific role being filled; that can make the process quite long. Too little time and you risk having to settle for the ‘good enough’ candidate, which is never ideal.’
Across the desk
With this in mind, Lannum points to a range of people typically involved in the interview process, which includes ‘at a minimum, the CEO, CFO and chief communications officer. I often also get people from the senior management team, but outside of finance, to share their insights on areas I might miss because I am so finance-oriented,’ he says.
‘I sometimes use a trusted board member or two for the same reason and I always ask interviewers to give me the biggest reason someone shouldn’t be hired, which can be insightful.’
On the other side of the desk, Lannum says that in the interview process, he wants ‘to hear how the candidate thinks and for him or her to give me specific examples of his/her creative process’.
For Dr Mahler, this broad spectrum of involvement in the interview process is also a reflection of the role itself. ‘Because this person has to work with many people in the organization, the interview process involves many people in the organization,’ he explains. ‘It also reflects the way IR as a profession has changed, become more complicated and more influential.’
Previous IR experience
This leads us to a key question: how important is previous IR experience? While Lannum and Dr Mahler rate other skills higher than investor relations experience – Lannum says it’s something he can teach, while in complex sectors like pharmaceuticals, Dr Mahler says the science comes before the finance – Tyson’s experience has been different.
‘[Prior to my appointment], Ford had, for a time, rotated internal people through the lead IR role,’ she explains, noting that her immediate predecessor, who had both finance and operating experience, has gone on to lead one of the largest segments of the business from a profit perspective.
‘I think the leadership of the company at the time understood that the sector was going through major transformation and it wanted somebody who had experience in a senior IR role at a company that had been through disruption – having a background in tech was a plus, as was leading a global communications function. In this case, IR experience was important because of the level of impact the company wanted from the IR function.’
Again, it comes down to company specifics. ‘For a company like Ford, having somebody in the role who has IR experience is important because it means he or she can hit the ground running and may already have established relationships with the buy side, in particular,’ says Tyson.
The growing complexities of the profession are another factor. ‘In this day and age of regulation, changes around disclosure requirements, shareholder activism and all of those things, having somebody who really understands the playing field is helpful for a company,’ she adds.
The internal or external question
Lannum, Dr Mahler and Tyson each prefer an internal candidate over an external hire when possible.
‘I always like to think everyone on the team should eventually be able to become the lead person at some point,’ says Lannum, explaining that he essentially looks for as many of the attributes in a team member as in a head of IR position.
‘I have always preferred, and have had success with, an internal candidate as a backfill,’ agrees Tyson. ‘Understanding the corporate culture and having a rapport and proven credibility with senior leaders like the CEO, CFO, CCO and even the board is a plus. It’s not only how people interact with the capital markets that matters, it’s also how impactful they are internally. Have they earned a seat at the table? Do they have the stature to be able to influence? Because that is a huge part of a high-performing investor relations function: providing counsel internally around capital formation and value creation.’
Tyson and Ford operate a rotational program through IR, which she says offers wide benefits, including ‘developing a pool of people who could potentially rejoin IR and scale to the [head of IR] role.’ Another internal pathway involves ‘ensuring there is a strong number two on the team,’ she adds. ‘Someone who can seamlessly move to the number one position. This was the case, for example, when I left Dell to return to PepsiCo.’
Part of the motivation behind the preference for an internal candidate is simply that the role can be so difficult to fill, with Lannum advising companies to think of the process as something ‘measured in quarters and years, not weeks and months.’
There is another dimension, too, which Dr Mahler describes as ‘expert vs financial’. It used to be that you would typically take your head of IR from the finance department, he says. But as the capital markets have become more technical, so too has IR.
‘An analyst covering pharmaceuticals or life sciences might well be a physician or a former chemist,’ he explains. ‘You have to understand the product to have an opinion and be able to predict whether the product can grow.’ This means that on the IR side of a complicated company, ‘it’s better to have an expert you can train in the financials than a financial expert you need to train up on pharmaceuticals, healthcare or diagnostics.’
So where do recruiters fit into the process? If you’re considering both internal and external candidates, Dr Mahler advises asking recruiters for an overview of your sector. ‘They will give you a list of candidates, you check who might be suitable and you arrive at a short list,’ he says. ‘You do the same internally and that list goes to a small committee led by the person ultimately responsible for IR – and he or she will decide on the process once all the candidates have been seen.’
For Lannum, it again depends on the situation. ‘It is always better to go through people you have specific experience with first – and that almost always can be done without a recruiter,’ he notes. ‘But for some positions the specific requirements may exceed the pool of candidates one personally knows and there are several very talented IR recruiters that can be used to help drill down into that broader pool.’
Like IR succession planning in general, though, Tyson says high-level IR recruitment can be a challenge. ‘There are probably just a handful of executive recruiters that truly understand what IR does at the highest level, and they maintain relationships within the IR field including talent in the number one and number two positions across sectors,’ she says.
Outside of those few, it can be difficult to find the right candidates. ‘Recruiters know how to do this for CFOs or chief accounting officers, but I think it’s a little bit harder with investor relations,’ she adds.
Handing over the baton
Stepping into the shoes of someone like Lannum, Dr Mahler or Tyson might be a daunting prospect for some, but any likely candidate should already have a wealth of experience and the confidence to do the job. While Dr Mahler notes that in most cases, a transition period isn’t possible, some crossover in the role can be helpful – as long as it’s not too much.
Lannum says a ‘quarter (or two) at most’ allows for a basic knowledge transfer, while Tyson agrees that an overlap of around six months is ‘reasonable’.
‘That gives the market time to transition,’ she explains. ‘It gives the company time and the leadership team time. And it also gives the person coming in a little bit of a safety net. Then you need to get out of the way because, at this level, your replacement should already have those proven executive leadership skills.’