Measuring IR success: Is there a magic metric?
13 August 2019
By Chris Deans
In our current data-driven era, IRO’s likely need, and have increasing access to, various data and metrics. But even given this wealth of available information, our industry still seems to struggle with how best to measure the success of our IR programs. In fact, if you ask a dozen IROs, you might get 12 different answers to the age-old question: “what does IR success look like?”
While some continue to search for an elusive and objective standard of measurement contained within these data points and competing metrics, most in our field agree that there really isn’t a magic bullet (or unit of measurement) that works for every company, in every situation. In lieu of any such panacea, IR specialists must identify the best measures of success for their own industries, companies and teams.
To help sift through the possible metrics and get to the best measure of performance, we’re gathering a panel of industry experts at the upcoming Q4 Power Up IR conference in September. During this interactive session, a group of IR veterans will share insights and lessons learned around defining and measuring success.
No one-size-fits-all solution
No two IR programs will – or frankly should – look exactly the same. So how should you evaluate the effectiveness of yours?
A NIRI report based on a survey of IR pros conducted in 2016 indicated that of the NIRI Corporate Members surveyed, 93% had at least one goal for their IR program regardless of company size, market cap or industry and the mean was 2.3 goals. And interestingly, the number of goals per IR department “varied by and was positively correlated to company size.” For example, micro-caps expressed, on average, just over two goals per department, while mega-caps mentioned almost three goals on average.
The report also shows that the most frequently used IR goals reported were quantitative in nature but found significant differences in types of goals based on company size and market cap. Digging deeper, researchers were able to uncover that micro-cap companies most frequently cited an IR goal “to increase/improve/diversify the shareholder base/top shareholders,” while in mega-cap companies it was “to improve shareholder communications/analyst coverage/analyst quality/ensure understanding of the story.”
Identifying your best measures for success
With a virtually unending list of both qualitative and quantitative metrics available, what should you be focused on? Should you and your team be looking at the decidedly quantitative metrics like the number of analysts following your company’s stock? Analyst stock ratings? Valuation P/E multiples? Shareholder composition? Maybe it’s something unique to your company and specifically tailored to your strategy?
Or should you be considering incorporating some more qualitative areas like the quality of your investor meetings or message pull-through within analyst coverage, or even management satisfaction with the program? But how do you begin to measure against some of these “softer” elements?
And beyond the idea of quantitative and qualitative, what if outside forces make it difficult to assign credit (or blame). Even when we can fully measure definitive outcomes like changes in the stock price or percentage of institutional holders, can we clearly and directly tie these results to our efforts? Or did forces beyond your control muddy these waters? And, how much? Should IROs consider and include this potential impact in reporting progress to management?
To help navigate these sometimes overwhelming seas, we’ve gathered a group of specialists who have worked with companies of various sizes across several different industries to share what success and failure has looked like for them when it comes to measuring IR efforts. Session attendees can gain insight from these experts, including an IRO building out the company’s program following its recent IPO and IR agency specialists who bring unique perspectives having worked with companies across a broad spectrum of market caps, industries, and situations.
We’re thrilled that these industry veterans will bring multiple viewpoints around measuring IR program success through the good, the bad and the ugly that comes with the territory. Bring your questions to Power Up and we hope you’ll take away actionable advice that comes from the battles these folks have waged and come out the other side – possibly a bit worse for wear but hopefully smarter.
Christopher Deans is an Investor Relations Manager at Q4 and a Chartered Professional Accountant with 10+ years experience in corporate finance and investor relations. His daily responsibilities at Q4 are to act as an advisor and extension of his clients’ IR teams.