Best Practice Report - IR strategy
In a highly regulated industry where judgment rather than luck determines success, there can be little doubt that behind every effective IR team lies...
<sup>Best Practice Report</sup>
Setting and achieving your
IR strategy
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Introduction
Where to start?
Introduction
Where to start?
In a highly regulated industry where judgment rather than luck determines success, there can be little doubt that behind every effective IR team lies an impactful IR strategy at the heart of its operations. But what does a such a strategy look like? And amid the changes to investor engagement served up by the Covid-19 pandemic, how are those plans evolving?
A compelling IR strategy is critical to raising your company’s profile and increasing shareholder reach, but determining where to start can be tough. When shaping your overall strategy, going back to basics and working out your overarching goals and what’s vital to the success of the IR team is a logical place to begin.
Trey Campbell, vice president of IR at Luminar Technologies, outlines the three fundamental factors underlying his team’s plan: ‘Great communication between Luminar and investors that contributes to a fair valuation, building trusting and candid relationships with current and potential shareholders, and accountability, transparency and high integrity are all key. The strategy and mission are consistent – the tactics can fluctuate.’
Strategy is about choices we make around where to put our time and resources
Adapting to the environment
Jeff Siemon is vice president of IR at General Mills. Outlining his approach to developing an IR strategy, he comments: ‘In my view, strategy is about choices we make around where to put our time and resources. The structure of our IR strategy looks the same year to year: first, deliver clear and compelling messaging – that is, optimizing the ‘what’ we say. Second, execute best-in-class external outreach, leveraging modern tools and communication vehicles: taking our message and conveying it to investors. Third, execute compelling internal outreach: taking what we’re hearing from investors and the market and ensuring our board, senior management and broad employee base understand those perspectives.
‘Within that strategic structure, we adjust our priorities and plans each year to adapt to the current needs of the market and our enterprise. For example, for messaging, we’re currently working to further enhance our ESG messaging, with a focus on bringing to life how we are a leader in advancing regenerative agriculture within the food industry.
‘For external outreach, we’re currently focusing on expanding our international shareholder base as those shareholders tend to be longer-term-oriented and more aligned with how we manage our business for the long term. We’re doing that by increasing our in-person touchpoints, proactively reaching out to targets through leading sell-side networks and crafting our messaging to be more impactful with an international audience.
‘For internal outreach, we’ve identified specific functional and business teams within General Mills and we’ve created a presentation on investor perspectives building shareholder value that we’re presenting to those teams.’
Jill Sawyer, Prologis
At Prologis, Jill Sawyer, vice president of investor relations, has her own approach. ‘Our strategy puts the customer first, by which we mean our investors and analysts,’ she says. ‘For analysts – given we have more than 20 providing coverage – we divvy them up and each member of our team is assigned as the main point of contact for that analyst for all things such as non-deal roadshows, modeling help and other questions.
‘For investors, we take every single call request and try to get back to them as quickly as possible, even if it’s just to tell them we are tracking down the answers and will get back to them as soon as we can. For our executives, we send short and concise updates when warranted to keep them in the know, but also respecting their inboxes. For events, we try to keep them differentiated and memorable for our attendees.’
Setting priorities
But how far in advance should IR teams set their IR calendar? How should they decide what events to prioritize?
‘Most of our strategy is flexible and my advice would be to start early, but don’t get too fixed and keep reviewing your strategy,’ suggests Richard Williams, executive vice president of IR at Unilever. ‘We agree our plans and objectives as a team for 2023 after the summer and then do a rough-cut view about four months before the end of the year for the following year. We then review it every month from then on throughout the year.
‘We have set events we know are high quality and then we research other potentials, in part by seeing who attends. Our plans are agreed with the chief executive and CFO and then the board is informed.’
The importance of internal input and alignment is also highlighted by Sawyer. ‘We gather feedback from our CEO and CFO, who feed into this process outside of our team,’ she says.
‘We also work collaboratively with the rest of our executive managers and ask for feedback from all of our colleagues on information and delivery. I would advise IR professionals to foster as much collaboration as possible between IR and internal teams, with consistent touch points and feedback loops.’
Our strategy puts the customer first, by which we mean our investors and analysts
Determining your calendar and budget
What and when to consider when prioritizing resources
Determining your calendar and budget
What and when to consider when prioritizing resources
Budgeting for activity within an IR strategy can be a tricky business, with many teams facing a ‘chicken and egg’ scenario – what comes first, the plan? Or the budget that allows its realistic delivery? This can be a delicate balance, especially considering the financial constraints in today’s business landscape.
‘We need to have tight budgets, as all others do,’ says Richard Williams of Unilever. ‘We agree the budget after we have outlined our plan. Our IR budget is mainly people costs, so any significant cost reduction would involve cutting people, and it is not a big team.’
The key challenge is to determine how best to measure ROI on our activity, which is always tricky
Describing his approach to setting his resources and schedule, General Mills' Jeff Siemon says: ‘Our budget framework has stayed fairly consistent over time, with key budget areas including investor outreach, events and the ‘blocking and tackling’ of investor relations, such as contact management, stock surveillance and the IR website.
‘We try to be scheduled out roughly six months in advance and then have a framework for key activities that are between seven and 12 months out, even if we haven’t committed to speakers, sell-side partners, and so on.
‘We prioritize events based on investor reach and quality of investor connections, geographic breadth, time of year (how it fits into our messaging schedule) and – of course – a desire to engage with all of our sell-side partners on a regular basis.’
Our IR budget is mainly people costs, so any significant cost reduction would involve cutting people, and it is not a big team
When allocating budget, it’s important not to overlook associated costs, notes Jill Sawyer of Prologis. ‘Our executive team values the work our IR team does, which includes a lot of face time in the post-Covid and post-Zoom world,’ she explains.
‘We are allotted the resources we need, within reason, and we do weigh opportunity costs (inclusive of our time and that of and our executives) when planning travel.’
General Mills has boosted its IR budget in recent times for more targeted activity, Siemon adds.
‘Recently, two areas that have required differential investment have been increased video production and greater ESG messaging and events,’ he says. ‘The key challenge is to determine how best to measure ROI on our activity, which is always tricky to do concretely in the IR world.’
Richard Williams, Unilever
Measuring strategy effectiveness
Use data, investor feedback and targeting to your advantage
Measuring strategy effectiveness
Use data, investor feedback and targeting to your advantage
So what can IR teams do to assess the success of their strategies? What key performance indicators can they use to determine what works and what doesn’t?
‘This is always the most challenging part of investor relations work,’ says Jeff Siemon of General Mills.
‘We try our best to use measurable data, including changes in our relative valuation, frequency and breadth of our interactions with current shareholders and targets, diversification of our shareholder base (number of new holders and percentage of shareholdings from international investors), breadth of outreach within our internal employee base and other tangible metrics.
Jeff Siemon, General Mills
‘One concrete example of this is that we start each year with the list of our top 100 actively managed shareholders, and we segment them into three tiers. For our top tier, we work to ensure our CEO interacts with them regularly. For our second tier, our ‘minimum’ interaction should include our CFO. For our third tier, IR-only interaction is sufficient.
‘We do the same thing for the annual list of our top 50 investor targets: institutions that have little or no holdings but for which we'd be a good fit based on their current portfolio.’
Sharing his perspective, Richard Williams of Unilever adds: ‘Feedback from investors is the best source of measurement, both informally and via perception studies. If the strategy has targeting within it, then we look at how well that has succeeded.’
Feedback from investors
is the best source of measurement, both informally and via perception studies
Tackling potential challenges
As with formulating and executing any strategy, there will always be challenges to overcome when setting an IR plan. This is especially true when it comes to deciding on the plethora of events an IRO might not only plan to host, but also potentially attend.
‘One of our biggest challenges is one I know we share with many IR peers: having a relatively small team and determining how to allocate our scarce resources across a wealth of exciting opportunities where we could make a signifiant impact for General Mills,’ says Siemon.
Sometimes, with limited resources and a finite budget, thinking outside the box can reap rewards, he adds: ‘We recently piloted a ‘backpack assignment’ program internally where we had a high-potential finance employee join IR for a short window of time before she moved into a new role in the organization. We used that resource to jump in on our Q4 earnings process as well as advance a few other projects that we haven’t been able to move forward due to limited resources.
‘It was a win-win – we benefited from a high-impact employee who helped us get some quick wins on a few key projects, and she got valuable exposure to investor relations without needing to wait for one of our limited full-time roles to open up.’
Williams says his team’s IR strategy achievements have included investor perception shifts, successful targeting and changing some aspects of the makeup of the company’s register. But what about challenges the team has had to overcome? ‘Working out what not to do,’ he says. ‘Especially when it comes to conferences and events.’
We’ve worked to tackle market and investor biases that may exist because of incomplete knowledge
Adding her experiences, Jill Sawyer of Prologis remarks: ‘We’ve had to overcome challenges that include tailoring our messaging to each investor segment and emphasizing different elements to reach different target audiences.
‘We’ve also worked to tackle market and investor biases that may exist because of incomplete knowledge.’
The post-pandemic landscape
The value of in-person events with the efficiency of virtual
The post-pandemic landscape
The value of in-person events with the efficiency of virtual
It seems like a long 36 months ago since many IR plans came to a grinding halt as businesses across the globe had to quickly get to grips with Covid-19.
The impact for many IROs was a total shutdown of face-to-face interaction, with digital engagement becoming the function’s new main tactic. Despite a return to relative normality today, there’s no escaping the after-effects of the pandemic, but how are IR strategy plans evolving in its wake?
For Richard Williams of Unilever, it’s a mixed bag of in-person and virtual events on the IR calendar. ‘We’re back to face-to-face conferences, but other investor meetings are still probably about 8 percent online,’ he says.
At General Mills, Jeff Siemon says the firm has adjusted its approach to guidance. ‘We have shifted the ‘what’ of our messaging to focus on how we are managing through a volatile and unprecedented environment, while continuing to tell the story of our company’s Accelerate strategy, long-term goals and progress on how we’re reshaping our portfolio,’ he details.
‘Tactically, we adjusted our guidance practices early in the pandemic by removing our annual guidance initially in 2020, then bringing it back in 2021 and widening our usual guidance ranges to account for greater volatility.
‘Along with the rest of the world, we initially shifted to virtual outreach and, over the past year, we have been using a hybrid approach as we execute investor engagement. I expect we will continue to operate with a mix of in-person and virtual outreach in the future.’
‘We continue to identify the areas that make sense to be in person rather than virtual,’ adds Jill Sawyer of Prologis. ‘As conferences continue to come back onto the calendar, we work through our priorities on where and when we should attend.
‘Covid-19 introduced the efficiency that can come with virtual events, and we continue to use them as we see fit.’
The way ahead
Deeply understand your network, company and equity story
The way ahead
Deeply understand your network, company and equity story
A well-defined strategy is clearly just the starting point for the IRO, setting the blueprint for a compelling communication narrative with investors to raise the company’s profile and attract and retain shareholders. After the plan is in place, the hard work arguably begins: translating strategy into action. With this in mind, what closing top tips do our expert IROs have to share for successful strategy and implementation?
‘Strategy is really all about making thoughtful choices about what to do and, importantly, what not to do with your limited resources,’ says Jeff Siemon of General Mills.
‘As IROs usually have much more they could do than they have resources to accomplish, the key is to be able to ruthlessly prioritize those things that will have the greatest impact on the company’s long-term value.
Strategy is really all about making thoughtful choices about what to do and, importantly, what not to do with your limited resources
‘Additionally, make sure to think about all of your constituents and how you can impact and influence each of them – for instance, IR’s ability to impact and influence our board, senior management and broader employee base is often underappreciated, I feel.
‘Finally, remember that this is a constantly evolving function, and there are wonderful opportunities to learn best practices from our peers through formal and informal ways. I find that keeping a mindset of curiosity, constant learning and continuous improvement is a great way to approach this job and keep yourself and your team sharp.’
Build the capabilities you require through people, processes and tools
The driving force for the success of any IR strategy is good IR itself, says Trey Campbell of Luminar. ‘Know the company inside out – no IRO will be taken seriously without comprehensive business acumen,’ he advises.
‘Have and grow trusted and candid relationships with current and potential shareholders and research analysts. Don’t just be a cheerleader: be honest about successes and miscues. Get outside-in perceptions and expectations of the firm from those relationships so you can bring them back to management and address them.
‘Build trusted relationships and networks inside the company and influence business direction as appropriate. Don’t be a spectator – contribute to influencing better outcomes and speak truth to power on tough topics. Finally, build confidence in the leadership team and in the strategic plan that will deliver long-term shareholder value.’
Trey Campbell, Luminar Technologies
And don’t forget your people, recommends Jill Sawyer of Prologis. ‘Build the capabilities you require through people, processes and tools,’ she says. ‘Streamline your efforts by clearly conveying the company’s strategy and goals and relaying investors’ feedback to management.
‘Tailor your equity story to investors that can be persuaded to appreciate and respond to it. Finally, create opportunities for continuous learning and iteration in support of ongoing value creation.’
Know the company inside out – no IRO will be taken seriously without comprehensive business acumen
Sometimes, thinking about IR from a different perspective can be a useful tool when taking a step back to look at how the function works within the wider operational landscape, says Siemon.
Assessing effectiveness
Prologis’ Jill Sawyer’s measurement tips
Generating a full multiple on the company’s stock price.
Attracting well-aligned long-term capital.
Ensuring the market understands the company’s strategy and plans to execute it.
Providing the sell side with as much information as needed to provide an accurate and reasonable view on the company.
Tying engagement to ownership or to investor behavior and, ultimately, back to the relative multiple.
Taking feedback from the investment community, learning from it and letting it inform further outreach. This allows two-way communication that helps investors feel plugged in and informed.
Gaining feedback from the board to incorporate into materials and processes whenever possible.
‘As a food company, we are at our best when we deeply understand our consumers and bring them products that deliver on their needs and help solve their problems,’ he explains.
‘I think IR operates in the same way: we are at our best when we deeply understand our ‘consumers’ – primarily institutional investors, but also retail shareholders, financial media, our employees and many other stakeholders – and deliver communication, both the ‘what’ and the ‘how’, that meets their needs. That is at the core of our IR strateg: if we’re relentlessly focused on our ‘consumers’ and what they need, our IR efforts will be successful. If we lose that focus, we will not be at our best.’
What really works?
General Mills’ Jeff Siemon shares examples of IR strategy accomplishments
‘From a content standpoint, we’ve really stepped up the way we incorporate ESG into our regular investor communications and outreach. Similarly, we’ve leaned into our portfolio, reshaping the story across our key investor touch points. In each case, we are now getting much more credit from investors for the work we’re doing, and I believe that is leading to better investor perception of General Mills and, ultimately, a more attractive valuation for our company, though it’s difficult to measure that directly, of course.
‘We made some meaningful changes to the process of how we issue our quarterly earnings that better addresses the issue of our investors’ need for earlier visibility of our results and prepared remarks and more time to digest them before we kick off our Q&A webcast.
‘Through intentional outreach and engagement, both in person and virtual, we’ve seen some small but steady increases in our international shareholder base. And we’ve greatly increased the external orientation and understanding of investor perspectives within our management and broader employee base.’
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Setting and achieving your IR strategy
By Samantha Senna, director of IR at Q4, Inc
Setting and achieving your IR strategy
By Samantha Senna, director of IR at Q4
As the end of 2022 approaches, investor relations teams are beginning to reflect on their accomplishments for the year. This rapidly shifts into reviewing the IR strategy and developing plans for the upcoming year. Ideally, this effort is also tied to the company’s strategic planning cycle so that internal financial models driving perceived valuation can be revisited.
The role of IR professionals in helping the company with its corporate strategy is two-fold: IR teams are tasked not only with developing a clear and consistent messaging of the company’s strategy and business model to the investment community, but also with bringing investor feedback into the corporate and investor relations strategic discussion. Providing investment community perception to the management team and board of directors can reinforce the company’s strategic direction and help identify or resolve any deficiencies.
Confirming IR strategy, goals and messaging
The ultimate goal of the IR strategy is to achieve fair valuation. IR teams contribute to that by ensuring investors and capital market participants have appropriate information in order to analyze the company’s value proposition. In determining, constructing and communicating the company’s key strategic messaging, IR teams contribute to setting expectations of the investment community.
The IR annual plan takes into consideration the existing shareholder base and opportunities to target new investors
Although IR teams do not create the company’s value proposition, they have an active role in analyzing changes in the industry, competitive landscape and capital markets, along with consolidating feedback from investors and analysts. The analyses that come from a comprehensive understanding of the company’s value drivers relative to competitors and the industry are the foundation of the IR strategy, which should be intrinsically aligned with the corporate strategy.
Once the company’s strategy has been confirmed or revised, investor relations priorities can be aligned and goals can be set. IR teams then begin to work on the key messages and goals for the year. A compelling investment thesis is the heart of the IR strategy and can be crafted by looking at how the street perceives the company, its management team, its financial performance and its relative valuation. The company’s strengths and weaknesses versus its peer group will determine the investment thesis. The qualitative or quantitative IR goals are the outcome of the strategy and should be measurable and achievable in the desired timeframe. With the investment thesis validated and goals established, the focus will shift to building out the IR plan.
Creating the IR plan
The IR annual plan takes into consideration the existing shareholder base, opportunities to target new investors and efforts to increase exposure to certain current investors. Building or maintaining a strong relationship with sell-side analysts, engaging with buy-side investors through participation in industry conferences and events, hosting headquarter visits or investor days, creating or updating the company investor overview deck and maintaining the IR website are all parts of a comprehensive IR plan. It is also helpful to review best practices related to IR websites and compare IR decks for best practices of peers or other benchmarks, which helps in crafting positioning and telling compelling stories.
It is critical to confirm management support for participation in IR meetings and events with both existing holders and targeted shareholders
Building out the IR calendar
With a plan and goals complete, most IR teams will shift focus to their IR calendar, which will provide the roadmap to achieve their IR goals. A program-wide calendar will include all required internal business activities, such as quarterly reporting dates, quiet periods and board and annual shareholder meeting dates.
With those mapped out, IR teams can then turn to planning the timing of meetings with the investment community, prioritizing the conferences, non-deal roadshows, office visits and headquarter meetings that maximize their efficient use of management time. This ensures events that conflict with their quiet periods or other business needs are avoided. It is critical to confirm management support for participation in IR meetings and events with both existing holders and targeted shareholders. This often must be done a year or more in advance to secure time on management calendars.
Getting it done
With all components of the plan established, IR teams will budget for the execution of the plan, considering all the planned outreach, travel and service providers necessary to implement the plan and measure the IR team’s performance versus the plan.
This should all be part of a comprehensive IR program that integrates best practices in assessing stock performance relative to peers, monitoring relative trading volume and valuations, capturing competitive results and key topics influencing investor sentiment and tracking investor engagement and ownership.
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About Q4
Q4 is a leading capital markets communications platform provider that is transforming the way publicly traded firms, investors and investment banks make decisions to efficiently discover, communicate and engage with each other. The Q4 end-to-end technology platform facilitates interactions across the capital markets through its IR website products, virtual events solutions, capital markets CRM solution and shareholder and market analytics tools. The firm is a trusted partner to more than 2,650 public companies including 50 percent of the S&P 500. Q4 is based in Toronto, with offices in New York and London.
