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What Makes for Effective Investor Relations Sites? Part 40: Key Performance Indicators

There is an old saying in business, “If you can measure it, then you can manage it”. KPIs

The corollary to this is that if management thinks it is important enough to measure closely then investors ought to know about the measure so they can make their own assessment about how important it is to their ownership of the stock.

Unfortunately, this is rarely the case. There is a whole raft of business literature about using key performance indicators and dashboard techniques to run your business, but when you go looking for them on company websites, they are few and far between.

I am not advocating that investors need to be informed of every operating metric the company generates. This, in addition to being overly intrusive, would result in information overload, as the best companies produce many key performance indicators at all stages of their business. Further, too much detail would result in the revealing of proprietary information to competitors. But often there are five or six key data points that a company watches extremely carefully. These are the criteria that they often base performance reviews and compensation upon. And people will do what they are compensated and rewarded to do.

Standard Chartered KPIs

One company that does discuss key performance indicators in their online annual report is Standard Chartered. They do this first with an overview of the areas they wish to highlight, which I’ve set out here (click image to see a bigger view).

When you click on one of the sections such as “Building long-term, deep relationships with our clients and customers”, it opens up to specific KPIs, a portion of which is copied below. The result is a good, quick look at both the measures Standard Chartered thinks important and how they are performing against those measures.

Standard Chartered KPIs

Now if we can just get companies to do more of this and feature it someplace where it is easy to find, investors will more readily understand the way the business is being run.

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What Makes for Effective Investor Relations Sites? Part 42: Periodically Hit the Refresh Button

Every now and again, something happens that drives home to me generational differences. Usually, I wind up feeling really old when they occur, and just as usually it is my children that make me feel that way. And trust me, they are merciless in reminding me that I am no longer the slim, dark haired go-getter I remain in my mind’s eye.

Today, however, I was brought up short by one of my students. We were discussing a case in class and how to improve a company’s visibility with investors when one of my students suggested that one thing the company could do was to improve its web site. As the case occurred in 1993, I suggested to my student that most companies did not have web sites back then. She looked at me as if I were from Mars. The concept of a company not having a web site was utterly foreign to her.

Generational differences are fun to poke fun at, but I bring this up to make a slightly different point. That is, things can go from being considered an uncommon luxury to being to commonplace and essential in a very short period of time. So it is with investor relations web sites. Those of us that began our careers before the growth of the world wide web tend to think of such sites as adjuncts to ‘real’ information, which comes on pieces of paper or by talking to somebody. Consequently, the web site is often pushed down the chain of command as almost a clerical function or it is outsourced and forgotten about. Either way, the information content tends to languish.

However, if you have almost always relied upon the internet to feed you data, it’s your first default option to get information and it’s sure real to you. Everyone below the age of 25 that I’ve talked to feels this way. And these will be the analysts and portfolio managers of tomorrow.

So today’s thought on how to make your investor relations web site more effective: to look at the information you are providing to investors on your site with a critical eye at least once a year. The scope and pace of change on the internet is such that good companies have to regularly take a fresh set of eyes to the information they are providing to investors to make sure they are meeting the expectations of internet savvy younger investors.

And trust me, they’re getting younger every day (or at least it sure looks that way to me).

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What Makes for Effective Investor Relations Sites? Part 41: Dealing With Shareholders’ Frequently Asked Questions

In the old days, before the internet, investor relations departments operated with the telephone and paper based communications. (You remember getting letters with stamps on them, don’t you?)

If you were a large corporation with a significant shareholder base, this meant that at certain times during the year, the volume of phone calls and letters would spike. Usually these increases would be around the issuance of dividend checks (When are they coming? Why haven’t I received mine? How do I replace a lost check?), and the annual general meeting (When is it? Where is it? Can my Aunt Sophie come too?), but certain other types of calls would occur with great regularity as well.

Around tax time, for example, many calls would come in trying to find out how much the shareholder had received in dividends over the past year as they had mislaid the tax reporting form mailed to them in January. Or the shareholder needed to figure out the tax cost basis of the stock they sold in the prior year. Or they had lost their stock certificate. The list goes on, but I will spare you.

The resulting quantity of calls and letters meant that the investor relations staff was stretched, response times slowed down and shareholders were not given the prompt attention they would normally receive. Authorizing more payroll to fix the problem was not considered a good fix as companies do not staff to meet peak demands. So we muddled through and breathed a sigh of relief when things calmed down.

Fortunately, the advent of company investor websites means that it is now possible to allow shareholders to look up much of this information for themselves. Further, they can do this whenever they want to, as opposed to being forced to call during business hours. Well designed Frequently Asked Questions sections (FAQs) can be very helpful in getting information to shareholders before they get frustrated. Set out below is a nice example of a FAQ section by Kingfisher, the home improvement retailer. They appear to have looked at their incoming questions from shareholders and attempted to design a page that answered many of them. It is a good example of using the web to help shareholders help themselves if they want to, but you will also note that at the very top of the page, shareholders are given a link to company contact information.

A lot of heartburn by both shareholders and investor relations departments can be avoided by following this example.

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The Five Pillars of Investor Relations

pillarsA little less than a year ago, I began writing about the intersection of academic theory and the everyday practice of investor relations.  In this post I will pause in my examination of specific disciplines and try to give an overview of why I’ve chosen five specific key disciplines.

When you are an academic, if you really want to make it big, you need to come up with a snappy way to sum up your thinking on your area of expertise.

For example, in strategy, Porter has his Five Forces  – supplier power, buyer power, competitive rivalry, the threat of substitution and the threat of new entry. Similarly, in marketing, Kotler has the four Ps: product, price, promotion and place. So it occurred to me that investor relations should have a way to neatly encapsulate what it does. Seeing this as a hole in the literature on investor relations, I have decided to step into the void and propose (with apologies to T. E. Laurence and the Seven Pillars of Wisdom), the Five Pillars of Investor Relations.

I choose the wording of pillars because they are the skills needed to form a strong support base for an investor relations program (also, I couldn’t come up with a clever acronym or make everything begin with the same letter).  Plus, this allowed me to create a clever visual slide for my class featuring Greek columns to drive the point home. So, without further ado, here is a brief description of what I consider to be the essential skill and knowledge requirements to do investor relations well—the five pillars of investor relations.

  • FINANCE – It is essential that a good investor relations officer have a thorough understanding of the components of his company’s income statement, balance sheet and cash flow statement, as well as the accounting treatments they derive from. On the theoretical side, the IRO needs to be comfortable with the different valuation models used by Wall Street to value his company’s stock and the role of investor relations in the efficient markets.
  • MARKETING – How to segment the investment universe, target appropriate investors and position the company story to appeal to those investors are basic marketing skills that are critical to good IR. At a deeper level, using marketing techniques to more efficiently use limited resources to focus on the most important investors can help IR have a bigger impact.
  • COMMUNICATIONS – Crafting a memorable message that resonates with investors is a critical communications skill that is used in IR. This is closely followed by figuring out what disclosures, above and beyond those mandated by regulations, will assist investors in understanding the intrinsic worth of a company. All of this presupposes a solid understanding of your company and industry. Finally, the skilled use of multiple communications channels is becoming ever more important as new means of communication such as social media proliferate.
  • LAW – Everything in investor relations is circumscribed by laws, regulations and case decisions. While this will vary by jurisdiction, generally legal requirements will cover everything from what you say (or at least the minimum of what you must say) through periodic reporting requirements and other mandated disclosures, to when and to whom you say it and, to why you say it. Understanding the ins and outs of the legal requirements is critical to doing things right in investor relations.
  • CAPITAL MARKETS – Knowledge of how the stock markets work is an essential skill of the investor relations officer. If you don’t think so, try telling your CEO that you don’t really understand what the markets are doing the next time he sticks his head into your office and asks why the stock is trading down. Understanding liquidity, volatility, auction markets and the other things that impact the way your stock is traded is essential for investor relations. Knowing the key players in the market for your stock, how they may interact and how to access information about them quickly are necessary tools for an IR department.

Well, there you have it: The Five Pillars of Investor Relations. With luck it will give you a framework to think about investor relations in its entirety.

Five pillars slide

What Makes for Effective Investor Relations Sites? Part 39: What Makes You Unique?

company profileWhen most people are children, they want to be someone special when they grow up; nobody ever wants to be just another anonymous person. So growing up and even later in life, we all foster a belief in our unique combination of talents and characteristics that make us a special person (at least to our spouses, children and dogs).

And so it is with companies as well. Every company strives to be unique. In business school they give it the fancy name of differentiation, but the concept is clear: your product or service offering needs to stand out from the competition. Even if your product is simply a ‘me too’ offering, there needs to be something that makes it more attractive in some aspect, whether that be price, delivery mechanism or simplicity of use, that will cause the customer to part with their money.

To take this analogy one step further and apply it to investing, if investors can be shown that a company occupies a unique position in the marketplace, they are more likely to understand the underlying investment thesis of the company and buy the stock.

Burberry's Company Profile
click the image to enlarge

Take for example Burberry, the British apparel company. The firm has traditionally been thought of as a manufacturer of traditional trench coats, but more recently has pushed into fashion. How is an investor supposed to think of this?

Burberry addresses this in their corporate profile page, which I’ve set out here. After reading the page, an investor has a pretty good idea of why Burberry thinks of themselves as unique, and how they plan to use that attribute to grow the company.

So the takeaway here is clear: by telling investors why your company is special, you can help them focus on the reasons to own your stock.

In this series:
Previous post: Investment Case
Next post: Key Performance Indicators

What Makes for Effective Investor Relations Sites? Part 37: Help Your Visitors Find What They Are Looking For

I suffer from what some people think of as a typical male problem: I hate to ask for directions. Fortunately, in the case of travel directions, GPS technology has cut down on the number of times I look like a complete idiot by getting lost. Unfortunately, I haven’t overcome my aversion to asking for directions when it comes to looking up information on a computer.

There are perhaps a number of reasons for this, including preferring the thrill of the hunt in chasing down the exact piece of information I’m searching for and, the belief that if I have to work for the information, I’m more likely to remember it.

However, I think there are probably more deep-rooted psychological reasons at work as well. In my youth I had to devote a lot of time and effort learning how to comb through card reference cabinets in libraries using the Dewey decimal system. Not only that, but when I got to college, they changed the library reference system to something called the Library of Congress classification system and I had to spend more time and effort learning that system. So I have a lot invested in the manual search method and even though it’s now forty years later, I intend to get a return on my investment. Besides, in the old days, where you could get help in your search was at the reference librarian’s desk, and the reference librarians that I dealt with always seemed to be rather imposing ladies with thick glasses who I was afraid would look down their noses at the things I wanted to look up.

So I continue to be weighted down with the baggage of my youth when I search for information about companies on their investor sites and would rather spent fifteen frustrating minutes searching for information than let a computer do it for me.

Fortunately, younger people who have grown up with computers (and people less bull-headed than myself) are not so handicapped and will gladly use a search function. So placing an investor specific search function will help site visitors find what they want quickly. Many websites have general search functions for the entire web site that can be helpful, but often they will return far too many results and you find yourself no better off than if you had pursued the manual search method. A better solution for finding financial information is a function that focuses only on the investor area of the web site.

click to enlarge

One site that has an investor specific search function is Dell, which I’ve set out here.

One of the interesting things the Dell search function does is to allow you limit your search by content type, report type and year. If you were looking for something very specific, such options would allow you to home in very quickly on what you were looking for.

Even an old-timer such as myself might be lured into using it.

In this series:
Previous post: First Impressions
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