Time Flies and IR Can Be Its Pilot: Be Sure Not to Miss Your Flight!
Among all the resources available to any of us, time is the unconditional equalizer. We all have the same amount afforded to us each day, and no amount of wealth or skill can create more of it – every day and forever. No exceptions. How we manage and utilize our time can make a tremendous difference in our productivity and happiness. It’s so important to us that we spend a significant amount of time and effort learning how to efficiently and effectively manage our time.
How much time should you ask your CEO to spend on IR activities? The answer may surprise (or disappoint) you, but it should empower you.
Where and how CEOs are directly involved in activities affects their legitimacy and it signals priorities for others. A CEO who doesn’t spend enough time with colleagues will seem insular and out of touch, whereas one who spends too much time directly involved is a micromanager and risks eroding alignment. A CEO schedule is a manifestation of how s/he leads and it sends potent vibes throughout an organization.
Boards may want their CEOs to limit the time spent with investors and make more time for customers.
This is where IR comes in. You hold a unique position of influence with the CEO that lends itself to forming an organizational regard for investor relations. If you have earned a seat at the table and the company views IR as having strategic importance in line with other functional support roles such as HR, finance and legal, this is a career gift. Imagine how much easier it is for the CEO to dial up your direct engagement, sending you to represent the organization at the next broker conference. If you have the respect of your covering analysts, then you can headline the next non-deal roadshow, either solo or with the CFO.
When IR is viewed as strategically important, you are the front line. The Board and management team know that when you ask them for time, there is a rationale underpinning the request. Ideally, you are able to assure the CEO and CFO you will never ask them to meet anyone with whom you haven’t interacted previously. The responsibility is on you – not on a broker or a banker or an erroneous profile. You have done your work: screening, vetting and organizing the highest quality meetings for your CEO. And you’re measuring the outcome of these efforts.
Executing an IR plan is critically dependent on more than one person. Too much time away from direct interaction with investors isn’t good for the perspective and performance of your CEO, or you. Writing quarterly scripts, editing sustainability reports or organizing the next AGM are all highly visible and complex tasks, but a CEO engaged directly with intrinsic (see below) shareholders learns first-hand the degree of impact on the Street. The same will be true for you. Are you perceived as a booking agent, an ‘HPPP’ (high-priced PowerPoint producer), or are you an executive?
Here is the fact I expect will disappoint IROs:
CEOs included in an award-winning McKinsey/Harvard Business Review time management study conducted over several years spent, on average, only 3% of their total work time with investors.
The CEOs themselves found this surprising; they tended to believe that they spent upwards of 25% of their work time with investors. The nuance is that they do spend more time on IR but a lot of it is inward-facing – prepping for the quarter, reviewing a news release, and so on. All in, leadership experts recommend that 10% of a CEO diary be allotted to investor relations activities – weighted in the run-up to disclosing quarterly results and post-report.
While more time with customers should always be sought, the same is not true with investors. Too many meetings with investors can easily become a time sink and can draw the CEO into trying to manage the stock price rather than focusing on business fundamentals. Keep in mind the time commitment is almost always higher when the market cap is lower. Large and mega-cap CEOs are supported differently, and investor activities are aligned accordingly.
The sweet spot for a credible CEO should be staying in touch with top investors at least quarterly, with top prospects a few times per year, doing quarterly calls (maybe), and hosting an annual investor day. That may be all a CEO needs to do – unless, of course, the company is in the midst of a transaction, dealing with unrest or activism. Many experienced CEOs conclude over time that they probably got caught up early in their tenures in too much investor relations.
On average, 72% of a CEO’s workday is crammed with meetings. Don’t request one unless you include the why and the why now.
The amount of time CEOs spend communicating with investors can vary based on several factors, including the company’s growth stage, industry, market cap and other circumstances.
If you are tapping the markets for capital, for example, you will typically need to spend a significant amount of time communicating with investors. You will need your CEO and CFO for this, in order to build solid, priority relationships.
While investor communication is crucial, CEOs must strike the right balance to manage their time strategically. Spending too much time on investor relations can detract from operational goals and growth targets. Lean into that as a key gatekeeper.
“One of the least effective things in the business world is big group dinners.” – Large Cap CEO
Recommend that your CEO not engage in direct correspondence with investors. Just forward the request to you and the IR team. Quarterback the IR function: own it, don’t just serve it. Ensure meetings don’t get on your CEO’s calendar that do not reflect priorities. Push back on meeting requests to ensure that CEO attendance is appropriate and the reason for the CEO’s participation is clear. Have you met with the investor previously? Is the investor a fit from a targeting perspective? What intel or briefing can support your rationale? Manage external meeting requests tightly and decline often. The one factor that will trump all others, if you do your job well, is the CEO simply asking you: ‘Is this a good use of my time?’
What gets measured, gets done. Now that you are trusted to manage your CEO’s IR time appropriately, it’s important to maintain and deepen this confidence by effectively measuring the time spent against your aspirational goals, be it new buying, a larger position, or strategic insight.
The Limitless Horizon of a Founder
When your CEO is also the Founder, this is a bit of a different beast. The visionary, scrappy customer advocate doesn’t view investors through the same lens. I worked for a Founder who was CEO for 30 years, from zero employees to hiring his best friend (who was CFO for 25 years) and scaling to a workforce of 20,000, before moving to Executive Chair and handing the day-to-day operations off to a first successor, ensuring the culture was absolutely rooted and unshakeable. He would start every investor meeting with a disclaimer: his definition of a shareholder was someone who invested his or her own money, and not an intermediary, such as whatever buy-side institution we were meeting. That’s awkward.
It was even worse (for me and them) if we were meeting with a hedge fund. The hedge fund representatives would get the long-form disclaimer, which included the CEO’s views on risk tolerance when playing with someone else’s hard-earned money. His opening salvos would end with “…so I’m sure Lorne considered all of this before putting together our schedule”. Gulp!
Recent case in point: former Starbucks CEO Howard Schultz didn’t spend a lot of time with investors during the last decade of his tenure – other than the statutory quarterly calls, annual capital markets day and the AGM. This changed under his successor, Laxman Narasimhan, who spent an increasing amount of time with the Street. This did not spare him or the stock from quarterly performance described by one analyst as a "stunning across-the-board miss on all key metrics." SBUX stock is down 22% this year, and by almost a third over the past 12 months, while CEO-investor engagement is up over 50%. That’s not the correlation you want to highlight at your budget presentation.
A company becomes more than a stock symbol when an investor understands the story, the journey and the leadership. Intrinsic investors place a lot of decision weight on not just the CEO, but the leaders they trust to gauge suitability for investment. People buy from people, with the CEO often becoming the face of the symbol that investors connect with. The IRO shares in this responsibility. Having a structured plan to consistently engage and remind investors of your company’s accomplishments and the people behind them will minimize volatility and noise, allowing valuation to be driven by performance.
More About IR focus