INVESTMENT COMMUNITY PERSPECTIVE

When the facsimile (fax) machine came into being, it time-stamped a change in communication that was nearly as important as Alexander Graham Bell’s invention of the telephone. Documents could now be sent almost instantaneously, signatures attached, and the document returned; contracts completed. The world ‘sped up.’ And yet today the fax machine often sits idle, as it cannot compare to the speed of email. Add to this mix the prevalence of cell phones and texting, and you have a world where nearly all forms of communication are virtually instantaneous. It is a fast world.

With these changes came a subtle change in human behaviour: much more impatience. We now expect, even demand, immediate response. Anyone with teenagers will attest to impatience when it comes to communication – except with teenagers, this reaction tends to be a one-way street (you answer me, mom, and I will likely just ignore your requests). In general, though, it is getting easier and easier to contact anyone at any time. The only prerequisite is that the recipient be ‘plugged in’, which includes pretty much everyone all the time.

Jumping the Queue

In today’s world of communication, more than ever, people are able to bypass the ‘normal’ (or historically ‘traditional’) channels of communication. Just think about how you do this yourself, or try to do this, almost daily, and likely without even giving it a second thought.

No Different than Sidestepping IR

Now that we have set the stage, consider why, perhaps, investors ‘bypass’ a company’s IR department and head right to the top, or a department head, or the CFO, or company Directors. Two reasons come to mind: because they may already be acquainted or have a close connection, or because they can, since the new world of communications allows easy access.

Does this Matter?

An IR department’s job is hard enough without facing this issue – and it is further complicated by the sidestepping, queue jumping, line crashing, bypassing, direct dial, impatient world of investors. And some of these investors are rather powerful, under intense competition for incremental fund dollars, and dealing with pressure to perform quickly in a world where they drink from a firehouse of instantaneous information. If you were in their shoes, wouldn’t you do the same? When gathering information for your company, do you not do this as well? Of course we all do, whenever we can. We are all guilty.

What Do You Do About It? Or What Can You Do About it?

You can have all kinds of company rules on communication, but you know there will be instances where the rules will break down. If some huge investment fund portfolio manager who owns a lot of your stock calls the CEO directly, the CEO is not going to say, ‘you know what, let me put you in touch with the IR department first.’ The same goes for company Directors and other very senior executives. Some important communication is going to happen without the IRO.

Internal Education First

Let’s be pragmatic and assume that a certain degree of bypassing will always happen. The best approach to manage this is excellent internal communication and education. It amazes me how frequently many hours of hard work are put into preparing a corporate presentation and yet it is not delivered internally the first time. Ponder this. If you want everyone to ‘be on point’ and to deliver the same message, you should ensure everyone within the company hears the message, and even invite Directors to a practice run. (At a minimum, circulate the completed presentation to Directors prior to public delivery.) Make a dry run a corporate event, team building, or whatever, but make sure that an internal audience is there, and if the CEO is a presenter, attendance will be high.

Accomplish Three Tasks in One Sitting

Presenting internally first, to a friendly crowd, is a great opportunity to iron out the kinks, find errors and likely generate some good feedback. A dry run is worthwhile, no matter how well the presenter knows the story.

Second, the correct messaging at the internal presentation can elevate the IRO’s role internally. Your peers will get a firsthand look at what you do and how you used information gathered. This will encourage colleagues to send more calls your way, especially if the CEO directs that this be done.

Third, if you want people in your company to all pull in the same direction and have a shared sense of pride, let them in on the process and the final product. It may amaze you to know how many people in the organization understand only their own role and have no real concept of the whole, how they fit into the whole picture, or how the company is viewed by the investing world. If you educate your own people about their company, that surely is in itself an important goal. Help build your corporate culture through ongoing education. If your employees are not already shareholders, they certainly are important stakeholders, so treat them as such.

Aim to Manage Communication

Although the IRO would love to be able to control corporate communication with the outside world, and years ago that was potentially possible, in today’s world the IRO is likely better off trying to manage communication. The first goal should be to ensure that everyone at least sings in chorus. If the process is managed very well, even those above the IRO on the corporate ladder will see the common sense of keeping IR involved. And this approach helps to build corporate awareness and a more inclusive corporate culture. If you can first sell your company internally, it will be a lot easier to sell it externally.

Dirk Lever is Managing Director, Institutional Equity Research, AltaCorp Capital Inc.