A paradigm shift is occurring in the IR role and IROs can continue to define their positions narrowly and become marginalized or they can meet the challenge of telling the company story “holistically.” Looking beyond tactics to the underlying fundamentals, raises new questions about how corporations will reshape their “story telling.” It is time to take the “story” out of the “box” and redefine how an organization thinks about messaging across all the corporate functions: from IR to corpcom, marketing, branding, legal, customer service, governance, sustainability, human resources.
Valuation—A Fundamental Concept
Is the investor relations function about finance? As the current leadership reaches retirement age, will we see not only a change in personnel but in the practice of IR?
Investor relations is a relatively new business function. The founders are still in leadership positions at corporations and consulting firms throughout the US; however that is changing. Many are starting to move aside leaving their demanding jobs and finding new roles. As leadership positions are assumed by the next generation of professionals, it will create opportunities for outstanding performers most likely with 20-30 years of experience. Not only is this a personnel shift, it is a paradigm shift in how the IR role is defined.
The Evolving View of Valuation: Metrics
Examining the issue of how corporations are valued today, I believe we are in the midst of a shift in the metrics used to establish the worth of an organization. These criteria have become more complex and require input from multiple disciplines within the company to effectively communicate the company “story.” Combined, these factors determine the value of the stock price and investor interest.
Corporate communications has traditionally taken on responsibility for media relations and influencing how the company is perceived by key constituencies. Supporting the brand (and all that implies about reputation, community, internal communications, etc.) and marketing initiatives are examples of what falls under the corporate communications umbrella. Corpcom does not “own” all the functions that deal with corporate reputation and valuation. For example, corpcom generally does not have responsibility for government relations, public affairs and customer relations.
Evolving metrics, now being recognized as legitimate, center around corporate governance (being accountable, fair and transparent with all stakeholders) and sustainability (evolved from establishing formal codes of ethical practices and CSR to incorporating business practices built around social and environmental considerations). Additional metrics are public affairs (aligning the organization with values in communities through foundation, community affairs activities, etc.) and government relations/regulatory affairs (to make the case to elected officials in support of the organization’s goals—in the context of sustainable, socially responsible growth).
Establishing alignment with corporate communications is one step along a path that could conceivably lead to a broad corporate restructuring of multiple support functions. Initially this could take the form of a task force to define roles by the concepts they own—not the tactics they execute.
The Complexity of the Concept—A Need for Structural Realignment
Determining what constitutes the company’s “valuation” story becomes a multi-layered messaging challenge. Addressing that fundamental shift (away from strict financial metrics) has rarely been defined as a strategic goal requiring a realignment of functions and responsibilities. Instead, companies have dealt piecemeal with adjusting to market changes.
IR leaders, whose ideas about their role were shaped during the formative years of IR as a profession, should be questioning their assumptions about the scope of the function. Today, I do not believe any one functional area “owns” the valuation story. Then what is the legitimate role of IR? Is it the financial “piece” and more? Should the IR team own the process of assembling and integrating the messaging—around several functions—such as governance and sustainability? Is there a need for corporate communications to broaden its role?
In my opinion there is a valuable and tactical role for the IR director. However as the discussion broadens about what constitutes the company “story,” so too must the IRO redefine the scope of the function, or s/he will become marginalized into a narrow and specialized role.
Getting out of the “Box,” rethinking functions and job descriptions.
There is a great deal of comfort in defining jobs and filling in org charts. That linear world is manageable and supports the idea that if you can define it, you can control it. It is time to abandon those concepts and describe positions as works in progress “owning” challenges and objectives not specific “to dos”. It is time to recognize the fluidity of structures and the overlaps that exist. Social media have created an expectation of transparency. That visibility leads to confusion as differences across the enterprise surface. Sometimes they can be fixed quickly but at other times, they cannot. We are very early in the process of addressing these challenges. The IRO has an opportunity to make a difference or not.
Judith Cushman is president of Judith Cushman & Associates, a retained search firm specialized for over 25 years in filling investor relations, corporate communications and related positions.