Whether you're about to go public, have recently IPO'd or have been trading on exchange for years, Investor Relations ("IR") is a crucial function for engaging shareholders, delivering your company's strategic messaging and ensuring your stock captures its full valuation potential.
Many IR functions are built as "takers": they rely on other teams and leaders to get them the information they need, and they, along with other leaders, deliver that information externally.
It's no surprise teams are set up this way. Typically, IR is given a headcount of just one or two, making it nearly impossible to operate beyond the bare minimum. Sell-side research analysts and investors reach out on a daily basis with questions about different business lines and how global events might impact those businesses. You have SEC filing deadlines and quarterly earnings calls that can't wait and need to be prepared for well in advance. There are Board members and leaders pinging you to understand what's happening with the stock price on any given day, at any given hour. And you're on the road - at conferences and on roadshows - building relationships and answering questions. As a sole operator or team of two, this can become very reactive, very quickly.
IR doesn't have to be that way. It can be a strategic function within the organization, acting as "makers," rather than takers, of incremental value, accountability, strategic decisions, value propositions and disclosure, culture and opportunity.
IR made me. It shaped my career and contributed to the leader I am today. It helped me learn how companies work, how investments work, how the stock market works, the importance of building trust with all of your stakeholders. I think it's one of the best ways to learn a company, an industry, and to prepare to be a CEO later on. But that was entirely because of the significance of the function we built within BlackRock, how much value IR added to the organization and premium valuation relative to peers, the relationships I built with leaders across the business. We were a steady hand, a trusted partner and had all the answers. Other teams took from us.
So, how do you transform your IR function from being reactive to proactive? How do you go from a team of takers to a team of makers?
Recognize your unique position within the company.
IR teams are in an incredible seat. You're not in one business unit dealing with one group of stakeholders. You have the C-suite's vantage point of a company. It is your responsibility to understand how all of the pieces of the firm - business and operations functions - work together to create value. This automatically gives you a strategic advantage. Use it. You also have access and responsibility to the Board of Directors. You have the external investor's perspective of the company, the ability to gauge which decisions and directions make the company more or less attractive in the eyes of portfolio managers who are looking to generate returns for their clients. It is your role to establish this feedback loop: send information out and return information to leadership and the Board on the views of the investment community. There are very few people within an organization who have this "perspective advantage."
Prioritize data and analytics.
Build analytical heft into your team. Numbers demonstrate what's actually happening in the business and financials and stories bring those number to life, give them meaning, provide insight into what will happen next. Simply taking these numbers from the finance team is not enough. IR teams benefit from having their own "cuts" of data - you know best what the sell-side and investors are curious about, the angle at which they are looking at results. Create data infrastructure, views, trends, that enable you to better serve your stakeholders. Get intimate with the numbers. I have built the trust of many a leader by finishing their sentence when they couldn't remember the numbers to support their message. When leaders know you have their back and deliver precision, it builds much more respect for your team.
Make yourself available to business leaders
We've all been there, preparing for an earnings call and needing to better understand the business drivers, the non-recurring one-offs, needing to pick up the phone and call a business leader to really understand what happened in the quarter. But what about the other way around? The more available you make yourself to business leaders: to share the external view of their business, to help them understand the relative value vs. other parts of the business, to provide some competitive analysis, to suggest messaging and a way they can talk about what they've done - the more you'll gain the trust of business leaders. Soon, they will be calling you before they make large strategic decisions, launch new products, alter pricing. Your perspective can help them be more successful, and their trust in you can solidify a seat for IR at the strategic table.
Get the buy-in of your C-suite.
Fortunately for you, you're a professional at articulating value propositions and you're going to use these skills to convince your CFO, COO and CEO that this "strategy" - IR as a strategic function - will deliver better financial results for the company.
One of the most important jobs of a CEO is to ensure their leadership team is delivering. There are quarterly business reviews that hold leaders accountable to internal teams, and external earnings calls put CEOs and CFOs in the hot seat, but including a broader bench of business leaders in IR events can help create accountability of these leaders not only internally, but to external counterparts. This also prepares these leaders to step into C-suite roles later on. Investor Days are a great way to serve a dual purpose: encourage business leaders to work on "external-ready" strategies and create opportunities for the C-suite to hold leaders accountable.
Ultimately, running IR as a strategic function will require advocating for more headcount, which can be hard when you're not a revenue-generating function. But just because you're not a revenue-generating function, doesn't mean you're not a value-creation function.
A strategic IR team can differentiate a company relative to its peers, help your firm garner a premium valuation, and position you and your team members to take on many different strategic roles later on. BlackRock's market cap increased from $35 billion to $150 billion during my tenure in IR. A lot of that was driven by growth in the business, but the role that IR played definitely bolstered it.
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