JOHN Palizza, who has worked as an IRO and as an analyst, returned from the NIRI conference with the observation that IR shouldn’t be a rotational position. There’s just too much IROs need to know — and it cannot be learned quickly by someone passing through an IR department on a two- to three-year rotation.
In a post on his blog, Investor Relations Musings, John writes that he was struck at the conference by the “broad spectrum of information investor relations officers are expected to know if they are to do their job right.”
He lists the knowledge IROs are supposed to have:
- Having to be an expert on their own company.
- Detailed knowledge of the industry and the macro trends that affect it.
- Being good at financial analysis and having a passing familiarity with the relevant accounting and tax issues.
- Understanding the financial markets and how they work, and
- Knowing how federal securities laws affect everything you do.
All of this needs to be mastered, says John, before a company’s message and outlook can be delivered with confidence.
Fundamentally a communications position
To John’s list I would add that you also need a unique set of communication and marketing skills to be able to “deliver” all of that knowledge and information broadly. To me, IR remains fundamentally a communications discipline, one with a special set of information that has to be communicated.
Communication theory is taught in universities but important aspects of communication come only with time and experience. Communication isn’t something just anyone can pick up, although some people do seem born with a natural gift for it.
If career IROs are to be uniquely qualified in anything, then it must be in their ability to understand a broad body of knowledge AND then be able to communicate it to a broad audience of interested stakeholders who have varying degrees of ability and knowledge.
In his blog post, John says: “There should be a commitment by companies to keep people in the position for at least 5 years. You wouldn’t put someone in charge of relations with your most important customer and say, ‘This is a learning experience for you until we move you on to more important things.’ Yet this is what we see time and again with respect to investors, the owners of the company.”
Five years is better than two or three, but ultimately I think companies need to ensure that they have career investor relations people in the top positions in their departments. IR is undoubtedly a vital discipline for promising executives to be rotated through, but these people should be learning, not calling the shots.
However, to attract people willing to call investor relations their careers, companies will need to recognize IR as a profession that deserves a seat at the executive table.