Outsourcing IR:
What You Need to Know Before Hiring a Consultant
Investor relations is one of the fastest-growing
of all communications disciplines. As a result, the demand for IR practitioners
has accelerated. At the same time, the supply of qualified IR professionals has
failed to keep pace, thereby driving the cost of average annual compensation packages
for experienced professionals well above the $100K level.
This has caused many public companies
to consider hiring IR consultants who work either on a project or retainer basis.
If utilized properly, these hired guns of the IR world can have a positive impact
on shareholder communication and corporate valuation.
The challenge is to determine exactly what you need from an IR consultant and
then select the firm most appropriate for your company.
To make this call, it's important
to first understand the core role of IR professional. It's not, as many companies
mistakenly assume, an accounting role. While the IR pro often works most closely
with the CFO, it's not necessary and may even be undesirable for him/her to be
a CA, CPA or have a CFA designation. Hiring an accountant or analyst as IR practitioner
can often be akin to hiring a lawyer as corporate speechwriter.
Rather, the IR person is first and foremost a communicator whose core competencies
include strategic message development, writing, speaker training and media relations.
This may sound like the resume of a public relations professional, but what separates
IRO pros from their PR counterparts is a keen understanding of capital markets
and investor attitudes. IR practitioners must be able to understand the impact
of corporate strategy, financial performance and communication programming on
share values and recommend the proper approach to build investor confidence. This
is markedly different from reaching out to employees, customers or governments,
who are the key audiences of public relations and public affairs people.
That said, what should you look for in an IR consulting firm?
- Above all, the firm should have demonstrated financial writing talent and
experience in creating IR strategies and programs. Surprisingly, many so-called
IR firms are really re-purposed graphic arts or multimedia design shops whose
core competencies relate to but do not embody financial communications. When it
comes time to determining corporate positioning, developing a communications package
to sell a merger or inform investors of an earnings shortfall, multimedia programmers
aren't much help. Along the same vein, watch out for large PR firms who set up
an IR department. In many cases, IR is an afterthought aimed at keeping large
PR clients rather than a strategic focus of the firm.
- Make sure the firm can help with all aspects of your IR program. There are
many specialists in road shows who know nothing about ongoing IR programming.
Similarly, there are specialists in investor research who have never written a
quarterly conference call script in their lives. An all-round practitioner is
best.
- The firm should facilitate investor communications, but be careful not to
cross the dividing line between IR and stock promotion. Professional IR pros have
access to investor/analyst databases and aren't afraid to use the phone to set
up meetings with potential followers. But they do not make a living 'flogging
stock' or attempting to usurp the role of financial intermediaries such as institutional
and retail brokerage firm sales departments. If you are looking for someone to
be your official investor spokesperson, to meet with and "smooze" investors, your
search should stop with the CEO.
- The firm's principles should listen as well as they talk and be committed
to understanding your situation. They should also be sensitive to your corporate
culture. At the same time, they should be willing to speak up and provide the
objective value as a third party that you are paying for.
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