How to present your best side on a site tour
For a company doing a site tour, it means going on stage. Visitors get the opportunity to experience rather than to simply hear or read about the company - 'to kick the tires,' in the words of Betty-Ann Heggie, corporate relations vice president for the Potash Corporation of Saskatchewan. It is a given in the world of IR that a positive corporate image cannot be established by official statements alone. However, the IR tactic that takes this idea furthest is the site tour, when a company invites analysts, brokers and investors to visit operations and have contact with local company personnel.
Site tours resemble stage productions in another respect. 'They create excitement,' says Elizabeth Smith, vice president of investor relations at Texaco. 'It is exciting for the visitors, and it is also exciting for the local employees to have their work followed with so much interest.'
Site tours also build relationships. Analysts and other members of the investment community are always hungry for new information about a company to help them determine its financial prospects and a site tour recognizes their desire to make their own observations and draw their own conclusions. From the point of view of the company, a site tour can help it to achieve a reputation for credibility and openness. For a small, under-analyzed company, a site tour can be the breakthrough needed for its shares to start being noticed.
While there is clearly value in maintaining what the NYSE calls an 'open door policy' with analysts, a visit doesn't guarantee favorable judgements. A company that extends invitations just to get analyst support has to be prepared to get the same results as at the Echo Bay Mines in Alaska. There, after tours by 37 analysts in 1991, reaction was strongly divided. 'Our experience,' says Echo Bay chairman Robert Calman, 'is that people who are negatively inclined toward the project tend to find things to reinforce their skepticism, and people who are believers tend to find things to reinforce their optimism.'
There's always the danger of offending someone by leaving them out of the site tour, too. To appreciate the danger, look what happened to Sleeping Beauty when the old, difficult fairy wasn't invited to celebrate the birth of the princess. Of course, it could be argued that although this made the fairy angry, she was always angry anyway. Same goes for some analysts.
Preparing the message
Before deciding to arrange a site tour, IROs should do research and analysis to compare the possible benefits with different alternatives. Site tours are best suited to the times when a company has a story to tell, something to show off, like a new or renovated facility. As Texaco's Smith points out, a site tour can be effectively used 'to communicate a technology change in the industry.'
Once the decision is made to do a site tour, there are many preparatory steps before it can be implemented. The company may need to modify an existing policy, like disclosure guidelines, or to develop new policies. Consideration must also be given to the company's message, the role of personnel, and the practicalities of the tour.
Though many messages will probably be communicated informally during the course of a visit, a primary message should be carefully planned beforehand. This structured message could make reference to such topics as financial performance, profit margins, market size, competitive climate, personnel and new product development. Strategy briefings are also popular topics in these situations.
The key message should be presented in a meeting room situation rather than while visitors are observing the site, and not just for comfort and convenience. Greg Wilkinson, head of communications at Nova Chemicals in Calgary, sees it as building necessary variety into a tour. A speaker can tell visitors what to look for, then there can be a period of observation, a follow-up discussion, a coffee break, another speaker, more observation, and so on.
The Q&A session can be the most important part of the whole day, even next to the razzle-dazzle of products and facilities. Here the company is most open to digging from the investment community, and care should be taken that the necessary operational personnel are present.
On a site tour, the company should be represented as much as possible by the local management, with people who know the site and the operations serving as guides. This way analysts are treated to a change from the company representatives they usually deal with. Anyone chosen as a speaker should be coached to communicate in clear and concise language and to respond constructively to difficult and even embarrassing questions.
Theoretically, it could be worth proceeding with a tour consisting of only one important analyst. However, to other potential supporters in the investment community, not to mention regulators, this could seem like favoritism. Usually the maximum size of a tour is twelve, with few exceeding 15-18. Then there are the blockbuster tours - like the 150-strong contingent invited to Disney's new Animal Kingdom in April.
Considering how busy analysts are, ideally the whole event - including travel time - should not take more than a day. When travel time to the site is short, a day is long enough to include some off-site activities of a recreational nature. However, Nova's Wilkinson insists that these activities should be scheduled last, for participation on an optional basis. Of course everyone will probably be on hand for lunch, and for analysts and brokers to share the fare of company personnel can be part of the experience of being on-site. A fancy supper at an off-site restaurant, however, might be a different matter.
Should a company take care of travel plans for invitees? It is not unreasonable, according to Potash Corp's Heggie, to expect analysts to get to the nearest large city on their own, so they don't feel that they're being 'bought'. From there a plane or bus should be lined up by the company. During the time that the analysts travel together as a group a company representative should always be present.
A written itinerary or schedule for the tour should be given to visitors on or before their arrival. Company personnel involved with the tour also have to be aware of the itinerary. Their copies should be 'customized', showing where they fit in and what they are expected to do.
Just as any big show must have a rehearsal, in the case of a site tour, a 'dry run' might mean taking the required trip, practicing and timing the on-site (and off-site) activities, and checking out restaurants and hotels. Thorough planning and preparation is the way to avoid the worst case scenario for a site tour: that it will seem like a waste of time to the very people the company is trying to impress. 'Keep the program moving,' advises Heggie. 'Make use of every minute.' Cautions Nova's Wilkinson, 'Avoid dead time for your visitors.' The efficiency with which a site tour is conducted is seen as a reflection of the general efficiency of the company.
After the site tour is over, evaluation is necessary to determine whether it should be repeated as a regular item on the IR agenda and, if so, whether it should be modified in any way. An evaluation form can be distributed to visitors to complete at the end of a tour asking for feedback. Elizabeth Smith of Texaco says an IRO can evaluate the success of a site tour by the 'buzz' among the analysts afterwards.
Of course, the ultimate measure of the day's success is whether it generates tangible results, such as an investor increasing a holding, or an analyst initiating or raising a recommendation.
Site tours for analysts can be an integral aspect of investor relations. They can create excitement, build relationships, and advance a company's reputation. A well-planned visit communicates a company's story, at the appropriate time, to the people who want to know.
The memory of a successful tour can also be kept alive. Betty-Ann Heggie recommends that a company take photographs throughout the day that can later be framed and sent out to the analysts who attended the tour.
It is all part and parcel of the business of showing off - and the showing off of the business.