A recent LinkedIn post I wrote about demystifying the current role of investor relations sparked some heated global debate. IR is not for the faint of heart and that’s what makes it so challenging and rewarding. As advocates of company value to the outside world, the profession has changed dramatically over the last few years from the rise of ESG and sustainability to the Herculean challenge of delivering news (good, bad or indifferent) in a noisy and at times painful and unpredictable market. Larger forces, too, such as the rise of technology and retail traders, have categorically changed investing dynamics and redefined the scale, scope and complexity of the job.
Increasingly analytical, IR can now influence and leverage external knowledge with potentially far-reaching implications. While the skillset has become more sophisticated, its core purpose has changed little. IR still acts as the connective tissue between the C-suite and the Street. With a resilient blend of analytical and personal skills, it’s no wonder the role has led to continued healthy pay hikes, as noted in the recently released 2022 NIRI and Korn Ferry Investor Relations Career Trends Survey Report.
IR wears numerous hats, especially at small-cap firms. Not only is it driving interaction and communication with existing and potential shareholders, but it is also managing alignment of ESG programs and assessing risks between long-term corporate vision, strategy and performance. Many newcomers from the sell side are cranking up analysis and flexing their muscles in ways previously unseen.
The growing list of deliverables as evidenced in current openings on job boards confirm not only IR’s expanded role but also its elevated visibility alongside the executive leadership team. Now, just about anything that influences perception or impacts credibility falls under the purview of IR. Adjusting market expectations in line with the company’s (lower or higher) earnings? Yes, IR is responsible for that. Debt story? Absolutely, because calling out land mines and correcting course is standard practice.
Performance measurement is important – and exceptionally difficult to accurately measure. Companies that only think about the role in terms of stock price or company valuation are clearly behind the times. Some believe a company’s valuation is its raison d’être. This, they argue, correlates to how effectively IR has made the investment case. Critics maintain that this an oversimplified view and that there are numerous forces outside of IR’s control that can impact valuation.
But both agree that measuring activities can yield multiple benefits, including the ability to:
- Identify and expand upon best practices
- Benchmark processes against the performance of peers and adjacent industries
- Ensure resources are used efficiently and effectively
- Align activities to the strategic plan.
Although there is no perfect set of KPIs, companies should experiment with realistic and achievable qualitative and quantitative metrics that evolve over time. The biggest challenge is not the collection and analysis of data, but the interpretation of results and making decisions based on that information in an inherently dynamic environment.
To weigh results objectively, it’s critical to adjust KPIs quarterly to reflect current market conditions, especially during a time of significant change in IR strategy. Add to this shifting market sentiment, and the metrics agreed to earlier in the year might be completely inaccurate or even irrelevant by the end. What’s key is adopting a flexible framework that can provide deep insights and actionable intelligence for thoughtful decision-making.
While the role of IR today is larger in scope, bolder in nature and, at its core, more transformative, one thing is certain: leaders must have one finger on the pulse of the marketplace with an eye toward the future.
Lisa Micali is managing director at Harbor Access