Take Inventory of the Damage
Goal: Understand how the economy is affecting your organization.
Tailoring investor relations to a slow economy begins with one
question: How exactly is the downturn affecting your business? Whether your
company is relatively recession-proof or has been hard-hit by the downturn, you
need to gain a comprehensive understanding of the situation before developing a
plan. Vague comments and ambiguous statements will only earn you distrust from
investors — now more than ever, all explanations must be grounded in
cold, hard fact.
Robert Berick, a managing director at Dix & Eaton
who leads the firm’s IR practice, suggests establishing an internal
risk assessment committee to determine the specifics of how the economy has
impacted your business. Large organizations may want to nominate a complete
task force, but smaller companies can scale down the idea and charge one or two
individuals with such an evaluation.
For the sake of efficiency, narrow down the scope of the
assessment to a few key questions:
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How has the economy impacted your company’s balance sheet?
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What is your company’s exposure to troubled financial
institutions and what will happen if these organizations fail?
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Will layoffs be necessary in the near future?
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What will likely happen if the economy continues to decline?
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How will the downturn affect your customers/clients?
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How is your company faring relative to your competitors?
Answering these questions will require a coordinated dialogue
between multiple departments, and the results of the assessment should be
circulated internally to upper management. Doing so ensures that the company
speaks with one voice, avoiding inconsistencies in communications with both
investors and the general public.
Big Idea
The Four Tenets of Good IR
Tough times call for tough tactics, but the fundamentals of
good IR remain the same regardless of your company’s outlook. The National
Investor Relations Institute identifies these core values as the gold standard
for investor communication:
Consistency: Mixed messages create confusion and
dilute credibility. To ensure that your company presents a unified front,
create a single point of contact for all IR-related questions and
announcements. Work can be delegated to multiple individuals as necessary, but
investors should be able to point to one person as their primary source of
information. Documented policies and procedures can also encourage consistency
by outlining a standardized approach to communication.
Responsiveness: If consistency is an important part
of investor relations, then flexibility is an absolute essential. There are two
types of responsiveness to keep in mind: responsiveness to individual requests,
and responsiveness to changes in the marketplace. The first is simply good
customer service — your investors gave you their money, so give them
the information they request in a timely and professional manner. The latter is
a key component of long-term success, since IR teams that can anticipate and
respond to internal and external change will be more likely to earn investor
confidence.
Transparency: This hot-button concept may seem like a
nuisance, but the bottom line is that transparency is one of the primary
responsibilities of every IR professional. On-site visits, access to
management, and regulatory filings are all aimed at providing the investment
community with the information they need to create a fair valuation of a
company.
Credibility: Without credibility, even the most
promising organizations are destined for failure. The fundamental goal of the
other core principles listed here is to promote the integrity of the IR team,
and by extension, the company as a whole. Do whatever is necessary to eliminate
any impropriety — or even the appearance of impropriety — because
once a reputation is tarnished it can’t be restored.
Re-Think Your Message
Goal: Position your company as a proactive player in a turbulent
marketplace.
Now that you have a grasp of your company’s status and
expectations for the future, the next step is to tailor that message for the
investment community. Don’t be surprised if the picture isn’t
overwhelmingly positive — few businesses are thriving in the current
economic climate, and odds are that your competitors are hurting too. “Everyone
is affected by this crisis,” says Jeffrey Morgan, president and CEO
of the National Investor Relations Institute. “If you go out there
and pretend that everything is rosy, you’re going to look out of
sync.”
Instead, develop a message that acknowledges the challenges of
the downturn while demonstrating a proactive strategy for dealing with them.
Starbucks did just that in December, unveiling a plan to cut $400 million in
costs by reducing labor expenses and streamlining the supply chain. The
announcement was made the month before the company was scheduled to release its
first-quarter results, preempting analyst grumbles about what Starbucks has
warned will be a disappointing performance.
Don’t forget to compare your company to its peers if
it is outperforming them in nearly any arena. Highlight the ways in which your
business is uniquely qualified to navigate the ups and downs of the market, and
be sure to mention past resilience during economic downturns if applicable.
As necessary as it is to respond to the slowdown, Morgan warns
against becoming overly reactive to short-term problems at the price of
sacrificing long-term strategy. The scope and course of the current financial
upheaval are not yet clear, so it is unwise to develop an outlook that cannot
be easily adjusted for new developments in the macroeconomic climate.
Danger! Danger! Danger!
Avoid Bunker Mentality
Also known as Ostrich Syndrome, Bunker Mentality occurs when
companies avoid communicating with investors at the first sign of trouble. As
tempting as it may be to adopt this attitude, it’s important to
remember that investors often assume that no news is bad news, particularly in
the current economic climate. Unexplained silence from IR teams is easily
interpreted as a sign of a major crisis, and investors end up relying on third
parties or their own assumptions to determine the extent to which a company is
struggling.
Make Your Case
Goal: Communicate with investors to update them on your company’s
strategy.
With a carefully composed strategy in hand, it’s time
to communicate your message via an updated microsite (see box) as well as
face-to-face meetings with investors. IR consultant Marilyn Lattin says that
teams should try to spend one extra day on the road meeting with investors if
the company budget will allow it. “At the end of the day, IR is
essentially a marketing job,” says Lattin. “You’ve
got to be out there talking to investors frequently in order to maintain a good
relationship.”
After the visit, be sure to share feedback from
investors with management. Their comments can be useful when reevaluating both
IR strategy and the company strategy as a whole.
Hot Tip
Build a Killer IR Microsite
The Investor Relations page of a company Web site is a vital
— and often undervalued — component of any IR strategy.
Robert Berick suggests positioning your site as a 24-hour call center that can
offer investors relevant information when the rest of the team is unavailable — a
comforting prospect in volatile times. He recommends incorporating the
following elements into your microsite:
- The landing page should link to at least three categories of
information: historical (regulatory filings, management presentations),
forward-looking (goals and guidance), and a section to discuss value drivers
like business strategy and quality of management. - Don’t just populate the site with press releases or
regurgitated boilerplates. Put yourself in the investor’s shoes — what
sort of information would create a compelling story? Include clear, accessible
descriptions of your company’s product lines or services, and create
separate pages for institutional and individual investors. -
Above all, be sure to include the name, e-mail address, and phone number
of the primary IR contact in an easily visible location. The resulting increase
in calls will be minimal compared to the benefits of demonstrating your company’s
commitment to transparency.
