IR: From silo function to strategic asset

Findings from IR Magazine’s global investor relations survey reveal that a third of professionals working in IR view their role as a stepping-stone to senior management. But while 16 percent of those ambitious IROs are reportedly looking to join the board or the executive committee, only a few of them will get an actual seat at the table. This fact is revealed in another study by UK recruitment firm EMR, which recently highlighted that only 3 percent of respondents qualify their job as being board level.

If IR has become more highly regarded and valued as a profession, its strategic aspect has yet to be fully recognized, notes Gillian Karran-Cumberlege, a founding partner of London-based executive search firm Fidelio. ‘One common pushback we’re seeing is that IR isn’t broad enough,’ she says. ‘Even though IR is representing the relationship with shareholders – arguably the most important stakeholders in the company – the function is often perceived as being too narrow and too specialized.’

The small number of IROs who are involved in top-level decision-making are either working for a smaller-sized firm or serving in an ‘IR plus’ role, she continues. It will usually be an ‘IR superhead’, somebody who has come up through IR and taken on broader responsibility, such as communications or corporate development, for example.

But Karran-Cumberlege believes IR sits ‘very naturally in the finance function’, adding that the converse model, where IR reports into a communications director, may prove somewhat tricky. ‘There’s a real danger of being too distant from the numbers,’ she explains. ‘And you need a good link to the CEO and the CFO: if you’ve got too many layers to go through, that makes it quite difficult to be credible in front of investors. There’s a real logic to IR sitting on the executive committee (ExCo). In Germany, for example, we see a number of IROs operating at a very senior level.’

Associate consultant Shu Zhang adds that companies from continental Europe are more advanced in terms of IROs developing these internal relationships with colleagues and the management team, and also ‘getting themselves out of their silo. If you look at the FTSE, there are only a couple of companies where IR plus communications sits on the ExCo, whereas in Continental Europe you would see more examples with a 'senior IR plus' structure,’ she says.

So the question is: how does one progress into a more strategic position? It’s a big challenge for IROs to communicate the value they’re bringing, and not only because measuring the value of IR is complex, if not controversial. Indeed, one of the traps IROs often fall into is doing their job really well but remaining relatively understated about their achievements, Karran-Cumberlege points out.

Her first piece of advice is not to hesitate to ‘blow your own trumpet. IR is really good at articulating the value of the organization and less good at articulating the value IR brings,’ she highlights. ‘And it’s a matter quite specific to IR. If we look across to communications, we see a much greater confidence in articulating the value that’s brought to the organization, and often a much stronger sense of the importance of networking and building external relationships.’

Moreover, the ability to influence both externally and internally is key. As IR usually handles investor feedback, it should ensure it has influence over how that is introduced back into the company. While most IR departments will have a structured approach to conveying investor comments, developing informal channels can be even more effective, advises Karran-Cumberlege.

‘We sometimes see – and this is where the political and influence skills come in – that experienced IR directors will also be able to deliver difficult messages to the company, and some of these might be through a less formal structure,’ she says, citing as an example some chairmen who have ‘gently dotted lines to the IR director. That is to my mind an indication of a very experienced IRO, someone who has these different [reporting] channels.’

She also advises IROs to think more broadly than their remit by looking beyond the immediate relationships they need to do their job: it’s not only investors, but also board members and colleagues who must be won over. ‘If their goal is to grow within the organization and to move up to ExCo or board level, IROs need to gain a broader picture but also engage with a much broader community and feel comfortable engaging with it,’ she explains.

Finally, although the traditional IR dilemma is the ‘finance versus communications’ dichotomy, career progression does not necessarily mean sticking to one of those routes, Karran-Cumberlege stresses. ‘We’re beginning to explore certain areas, for example non-executive director roles, that I feel very senior IROs are well qualified to develop into – provided they can convince [others] they have the breadth and perspective,’ she concludes.