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Judith Cushman & Associates Retained Executive Search in Communications
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The Cushman Report To subscribe to the email version of The Cushman Report, please send a note to info@jc-a.com with "subscribe" in the Subject line. Click here to view past editions. The Cushman Report Breaking News, Trends and Information about the Communications Marketplace July 2001 This issue focuses on Investor Relations as a strategic and evolving function while the rules change under our feet. With Reg FD requiring fair disclosure and leveling the information playing field (material information must be released so it can be reviewed by everyone who wants access to it), IR professionals must adjust their practices. I’ve talked extensively with senior IR executives about the strategic role of IR and what factors must be in place for a manager to assume that role. Those comments follow. Judy WHAT IS THE MARKET DOING? -- A QUICK COMMENT STRATEGIC INVESTOR RELATIONS -- ARE WE THERE YET? THE IR FUNCTION -- A NEW TRACK STRATEGIC IR PRACTICES -- THE CRITICAL ELEMENTS FOR SUCCESS STRATEGIC -- A WORD ABOUT THE WORD TECHNOLOGY CONFERENCE COMING TO SEATTLE WHAT IS THE MARKET DOING? -- A QUICK COMMENT I see glimmerings indicating the market is beginning to stir. My sense is we are still several months away from any significant market upturn. Several of my clients are still on "hold" and in a few selective situations requisitions are opening up. For example, a small company (under 300 million) in business for 7-years will be replacing a Senior PR Manager but growing the team will probably not happen, just yet. If I am correct and we do not start to see a more robust surge by early fall, I expect the fourth quarter will be sluggish with management waiting for the New Year to plan for growth. One bright spot is in the area of biotech/bioinformatics and healthcare/pharmaceuticals. STRATEGIC INVESTOR RELATIONS -- ARE WE THERE YET? This year the talk at NIRI (the National Investor Relations Institute) was about Reg FD mandating fair disclosure and bringing IR closer than ever before to the corporate communications function. We are experiencing a sea change in the practice of IR. The year before the theme of the program was, “How can IR contribute at a strategic level?” Traditionally that has not been its role in the corporate hierarchy. Examining this question now is particularly timely in light of the challenges and opportunities the IR community faces.
The
Investor Relations function had its origins as a highly specialized,
well regarded but ultimately tactical function in publicly traded
companies. It was, at its
heart, the point of contact between the analyst community and the
company. Most often
reporting to the CFO, the job has required a sophisticated understanding
of financial fundamentals with an MBA in finance always desirable. In young or small companies the role often reported to the head
of marketing. Rarely did it report to the President or CEO. Another track has been developing for IR professionals at the VP level -- reporting to an ExecutiveVice President/Administration (or equivalent). This role, as a peer to the Vice Presidents of Corporate Communications, Marketing and the CFO, places the function at a strategic and value-added level. However, this is not where IR generally fits. Despite the need for broad, conceptual thinking and problem solving, the role has not yet achieved “strategic” status. It takes many factors coming together for the function to reach that level, critical among them is the vision and talent of the IR executive him/herself. (I discuss those factors later on -- see “THE IR FUNCTION -- A NEW TRACK.”) If the IR professional sees the role as advisory, analytical, one-on-one consultative (as in liaison with analysts), then s/he will not tackle the marketing, messaging, positioning and branding opportunities that take the role to a higher level. It takes a powerful, conceptual IR leader with strategic capabilities and high level skills to transform the function at a moment when the organization is ready. THE IR FUNCTION -- A NEW TRACK
One
of the important unintended consequences of the growth in the numbers of
the public dot com and biotech/bioinformatics startups is the linking of
the corporate communications and Investor Relations functions. Both industry segments have not had the resources to create
two high-level functions and have combined them, where possible. In a startup, the first priority is publicity and visibility. As the company sets a timetable for an IPO, the head of communications has the opportunity to either assume the IR role him/herself or manage it with outside resources. For those willing to take on that responsibility, it creates the opportunity for a career track with a dual expertise, rarely available in the marketplace until just recently. Corporate communications focuses on supporting marketing efforts, media relations and positioning the company for competitive advantage. The IR responsibilities require in-depth knowledge of the financial strengths of the company, its competition, and how to present that information appropriately for potential stock appreciation and higher valuation. The combination of skills, I contend, is what is required for strategic IR work. For biotech start-ups, more frequently the need first develops for the IR expertise in an effort to raise capital through an IPO. But the IR program quickly becomes a broader positioning effort that also requires corporate communications skills. Critical to the success of an IR program is managing expectations, where execution more than profitability is the goal. And in fact as a company moves a product closer to FDA approval, it requires more capital, and loses more money. Activity increases (with the cost of Phase 3 clinical trials) while there is no revenue (since the drug has not yet been released). Shareholders must be willing to invest in a sea of uncertainty where information (reporting on execution against plan), relationship building and vision are critical factors to maintaining investor loyalty and confidence. With the dot com marketplace contracting dramatically, talented and broadly thinking professionals are rejoining more mature companies with a new viewpoint and the ability to solve problems cross functionally. The biotech/bioinformatics companies (a growing segment) continue to hire and develop these highly specialized professionals -- adding to the available talent pool. STRATEGIC IR PRACTICES -- THE CRITICAL ELEMENTS FOR SUCCESS I’ve distilled the highlights of conversations with several of the most successful Vice Presidents of Investor Relations in the country. Here are the issues we identified that enabled them to succeed. It was a combination of external/company factors and the vision they brought to their roles. Unless all the pieces are in place, the most brilliant and effective IR professional will not make a difference or influence corporate practices. When is the right moment for an IR leader to impact strategy? When does that synergy happen? First -- There must be a perceived need requiring the corporation to seek new answers for challenging issues. Second -- The Company’s officers have reached consensus that the business issues must be addressed now and cannot be put off. Third -- Corporate leadership at the CEO/President/CFO level is ready to listen to new solutions from any of its senior officers (beyond their normal area of responsibility). Fourth -- The VP of IR (or equivalent title) must have already earned the respect and trust of that senior team as one of the “inner circle” with a deep understanding of and instinct for recommending what “fits” the company. Fifth -- The VP of IR must internalize knowledge that goes beyond an understanding of numbers and investor perceptions. S/he must have a deep grasp of the business and objective knowledge about how the company is perceived vis a vis the competition. S/he must know the company’s strengths and weaknesses as well as those of the competition. It is also essential to know the market and the factors that could impact the company’s value. Sixth -- The VP of IR must anticipate potential issues and remove them from the discussion before they become issues. Seventh -- The VP of IR must be forthright, objective and honest when preparing senior management to respond to every question, no matter how difficult. Eighth -- The VP of IR must earn management’s respect (over time) and have the ability to influence decision-making. Trust comes from the quality of the work delivered and from peers who have watched how the IR executive behaves in a variety of situations. The IR professional exerts no direct control over peers or officers. Ultimately it is the caliber of ideas offered and the value-added counsel that earns credibility. All of these elements must be in place for a VP of IR to initiate a successful strategy, mobilize a team and become one of the leaders in the implementation process. To account for success by saying, “I was lucky -- I was in the right place at the right time” reflects a lack of understanding about the forces at play. That response also reflects another common trait -- a lack of understanding of what qualities an IR executive must possess in order to assume a leadership role. The Personal Qualities that Lead to Success Asking leaders why they have been so successful is a question that elicits the most irrelevant answers. I have come to understand why. It is the same as asking, “Why are you, you?” How can you answer that question? Success comes from the fundamental drivers and values that make up your personality. If the question were, what are your core values? What drives you to succeed? Could you reply? To me, these questions get to the heart of the issue. Here are the qualities that I believe account for success. The VP of IR is driven by a passion to achieve a clearly defined goal. It is a goal so strongly held that it is more important to achieve it than garner personal recognition. The VP is not afraid to fail or to risk a job for his/her beliefs. At the end of the day, there must be personal rewards -- learning, having fun, being “engaged,” and growing. A positive attitude pervades everything s/he tackles. The passion to concentrate on the goal (and not be sidetracked) helps the entire management team remain focused as well. The ability to inform management about how the market perceives the company -- candidly and clearly without creating resistance to the message -- is critical. Expressing opinions that s/he believes must be stated, not waiting to be asked and never being afraid to tell the truth, are essential traits. Honesty is a core value The courage to ask questions is a non-negotiable. As a member of the management team, the VP of IR will not accept recommendations (where there are concerns) without questioning them no matter who the source. S/he is convinced of the need to express opinions without equivocation. The focus is on today and looking ahead; there is nothing to be gained from second-guessing. Other qualities that are essential:
STRATEGIC -- A WORD ABOUT THE WORD My pet peeve, a word about the word “Strategic” We all know the right word to alert the world to how relevant and how important our contributions are. Is there anything we tackle that isn’t a STRATEGIC contribution to a company’s STRATEGIC goals? Does anyone admit to doing tactical work anymore? Trade press relations and publicity are now described as strategic programs to enhance the long-term goals of an organization. I call that nuts and bolts PR.
I
think it is refreshing and the exception, for example, that a PR agency
with a specialty in publicity describes itself as superb at executing
the basics. That’s just
what many Chief Executives hire agencies to do. It may not be what the head of the agency prefers to build a
reputation upon as s/he chats with peers. Let’s try to keep our feet firmly planted in the real world and take the hyperbole out of what we say we do. When we do strategic work (based on feedback from our management and clients), let’s use that word -- sparingly. That will establish our credibility more than anything else. TECHNOLOGY CONFERENCE COMING TO SEATTLE Great news -- I proposed to the Puget Sound Chapter of PRSA that the National Technology Conference scheduled for March 3rd and 4th, 2002 take place in Seattle. The Chapter enthusiastically supported the idea and was selected to host the event, with me as chair. You will continue to hear about the program, participation, sponsorships, etc. Right now we are in the brainstorming phase and invite as much input as possible. We will be creating a plan starting first with overall vision and goals. Let me know if you can help or have suggestions about programs and speakers. |
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Judith Cushman & Associates 15600 NE 8th St., Suite B1, PMB 178, Bellevue, WA 98008 s (425) 392-8660 Fax (425) 746-8629jcushman@jc-a.com s www.jc-a.com The Judith Cushman & Associates web team would appreciate feedback concerning this site. Please e-mail your comments, questions and suggestions to heathers@jc-a.com. |
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Copyright © 2007 JJG&R Communications Services, Inc. |
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