Togetherness: where IR and PR meet, and where they don’t
*This article first appeared on the IPRA website as a Thought Leadership Essay here*
A siloed approach to external communication may have PR promoting a narrative that shares little in common with the story that IR tells analysts and portfolio managers. By George Allen.
The roles of the two are sometimes disputed, but Investor Relations and Public Relations are both communication functions. Their audiences differ, depending on the market and the company, and their core materials and channels are different. But harmonisation of the two is critical for a coherent and impactful message to resonate with key audiences.
While there are a host of opportunities for integration and collaboration, conflation poses risk. And there is the question that has lived for as long as IR (the ‘younger’ of the two) has existed – which takes precedence?
The case for collaboration
When it comes to communicating corporate narrative and equity story, the two functions must be aligned. Too often, we see a siloed approach to external communication, with PR telling a narrative almost unrecognisable to that told by IR to analysts and portfolio managers.
By bridging the gap, issuers ensure that the same messages are heard by all, even if presented differently. Messaging workshops for a strategic communications programme should feature decision-making participants from both functions, and Corporate Comms should attend and listen in to earnings calls, analyst briefings and capital markets days to better understand the expectations and needs of the investment community, then tailor messages for media and social media accordingly.
If concerns exist around the ability of ‘PR professionals’ to sufficiently understand the intricacies of the financial and operating model of a business, and the ability of ‘IR professionals’ to deliver a sufficiently powerful story, then learning and development opportunities can be provided to both (perhaps by one to the other). Upgraded capabilities will be to the advantage of the organisation and its people.
While IR and PR both serve to transmit information to a business’ audiences, they also serve as listening posts – a source of intelligence for executive management and the Board. They are gatekeepers for corporate reputation, with the gate opening in both directions.
A collaborative approach to reporting by the two functions (or people) allows a more comprehensive picture to be painted for the c-suite. In its daily interaction with the buy- and sell-side community, IR gathers crucial information on the perceptions and concerns of institutional stakeholders; while PR listens to reporters and social media commentators (including retail investors) who may offer very different views.
Both are valid, and both will play their part in driving share price up and down. Both need to be understood with the same level of intimacy, and both need to be addressed.
The benefits of integration
The most obvious byproduct of better integration between the two functions is trust. It is generally accepted that the investment case for any company or instrument fails if the investor – whether institutional or retail – can’t trust the organisation and its management.
Trust is earned, and it can’t be earned unless the arguments on which it is built are a) communicated and b) understood. That means they need to be consistent across all channels of communication, and they need to be made forcefully and convincingly.
Where IR might be equipped to make compelling arguments to analysts based on detailed evaluation of financial statements, simulated financial modelling, peer group analysis, and through consensus management; PR may be better equipped to communicate messages around sustainability, social responsibility, talent acquisition and retention, and management quality and integrity.
When it comes to the proliferation of ESG as a stock screening method, perhaps the most measurable set of criteria for how far a company can be ‘trusted’, there is intersection that requires the expertise and storytelling nous of both teams. Both need to contribute to the process.
Another benefit is amplification. How can companies ensure the messages they are communicating are absorbed more widely and more deeply?
Again, both departments play their role. It is often a reality, and a limitation of IR, that it focuses the bulk of its energies on institutional investors and the sell-side. Together with the regulator these are, broadly speaking, IR’s most important audiences.
Institutional buyers and holders might be expected to take a long-term position on a stock and in so doing contribute to fair value. But retail investors are often overlooked, and this is somewhere PR can contribute meaningfully to the IR programme.
Among the many lessons learned by capital markets participants in the last 12 months has been the pent-up power of retail investors to create (or destroy) value when banding together. In the world of mass communication, a digital-savvy PR team can add a great deal to the IR programme by repurposing investor communications for consumption on social media, measuring engagement and sentiment, acting quickly to manage crises or turn themes to advantage.
The risks of conflation and the question of precedence
There are no rules. However, with the caveat that markets and company structures vary widely, as do the people who staff them, it is generally better not to conflate the two functions.
When it comes to people, as has been discussed above, skillsets vary. An investor relations professional will often be a finance professional who has developed or been trained to be a communicator too. This is, in most cases, an easier transition to make, although it is not without limitations. By contrast, a corporate communications practitioner might not have a financial background, and while much of it can also be learned in later professional life this is typically a harder transition.
At departmental level, the purposes of the two functions are different, and much of their work needs to be carried out independently. While both should look to work together on a wide range of activities, and both should have equal access to executive management, this doesn’t mean they should be rolled into one.
When it comes to precedence, at the cost of irritating most readers of this diatribe, it does in my opinion belong to Investor Relations. Again, markets and companies differ, but the rationale for this position is simple: risk.
For IR, the risk of regulatory breaches through miscommunication are high and can have a negative impact on the company that goes well beyond a fine or a slap on the wrist from the capital market authority. This means that IR does need to have a handle on corporate-level communications issued by the business, in a way that PR doesn’t need to have the same level of oversight on investor communications.
Corporate reputation means a great deal. It can make or break a company, and this is why the two must work so closely together, and they should do so with a high level of mutual respect. In a rapidly changing investor landscape, there is a strong argument that IR needs PR more than ever, as it grapples with the challenges of activism and volatile retail investor behaviours. For the latter, at least in this context, a vital supporting role is played.