Real IR and Hugin have produced this special report on the convergence of IR and PR. Inside is an essential guide to the transparency directive, a panel discussion on changing roles of IR and PR teams and Marine Pouvreau on the challenges of controlling newsflow.
Ensuring corporate communications specialists provide a consistent message can be a taxing issue, says Allan Biggar, chairman of All About Brands.
Bridging the divide
How companies manage consistent communication with the financial community, the media, shareholders, employees, customers and other stakeholders, while tailoring their message to suit the interests of these groups, is exercising corporate communications professionals everywhere.
Convergence was the buzzword swirling around the world of telecommunications a few years ago; now the corporate communications industry is using it to pigeonhole the “merger” of traditional IR within the wider PR remit.
IR was traditionally the domain of the City boys: exbankers or stockbrokers who could read a balance sheet and knew how to talk to the finance director of a plc. It was a long way from the safer ground of corporate or consumer PR. IR people wore red braces to work, talked only to specialist business reporters and were, well, a bit snooty about PR “types”.
Against this backdrop, a IR agencies emerged, rushing to service the privatisations of the 1980s and the mushrooming financial media community. The large global consultancies also bought in to the action, bolting on financial PR to boost their marketability to the City and international clients.
Deceptive appearance
The downside was that it created silos that looked good in principle - separate profit centres and individual accountability - but gave rise to problems, such as no single point of contact, mixed messages from different areas of a company, and a view that stakeholders and shareholders were mutually exclusive.
Now, employees are quite likely to be shareholders, and vice versa. And, while the City might view a plant closure or redundancy programme at a FTSE 100 company as a positive development and price its shares accordingly, the employees losing their jobs are less likely to welcome the announcement.
How do you reconcile these two stories without damaging the company’s brand or reputation? The need for transparency, consistency and equal disclosure, coupled with the emergence of new technologies and regulatory pressure, are driving the convergence, not just of traditional IR and PR, but of crisis communications as well.
You simply can’t have a situation where the external agency reports to the marketing director, who in turn reports to the CEO. Nor can you have a financial PR consultancy that is answerable only to the CFO, while brand or consumer PR agencies report to a marketing or brand director.
Messages become blurred at best or confused at worst.How many public companies have clearly defined corporate communications reporting lines and practice what so many of them preach: to communicate with each other?
Co-ordinated approach
Mostly, integrating the various communications functions, and how those relate to external advisers, is a matter of internal co-ordination. But getting people to sing from the same hymn sheet is never as easy as handing out one sheet of paper and starting to play the piano.
Cultural issues play a part here. Some companies - and practitioners - persist in the view that IR people talk to analysts and financial journalists, while PR people issue press releases and organise events.
But co-ordinated communications aren’t just essential in crises, they can underpin business objectives as well. Consistent communications help build - and reinforce - a company’s brand.
Virgin is a case in point here. In its pursuit to become a global brand, the company has turned repetition and consistency in all its communications to its advantage. People know what Virgin stands for, because brand messages support the wider corporate strategy and vice versa.
Convergence is here to stay. IR and PR can no longer regard themselves as tactical functions working in isolation within the communications whole.
Companies that seamlessly communicate their business goals, and work to retain their brand identity and the loyalty of their audiences through integrated communications, are best placed to withstand a crisis and to call for understanding when it is needed most.
Allan Biggar is ex-CEO of Burson-Marstellar and now chairman of All About Brands (www.aabplc.com)
Our experts discuss trends in the way that IR and PR are handled, and why consistency is paramount.
Simon Nixon
Executive editor,
Breakingviews.com
“The PR and IR teams I deal with are usually very helpful when it comes to getting me access to the people that matter. They will be the first port of call when we’re looking for information.
“About 50 per cent of the stories we run are driven by the news agenda, and that’s when IR and PR can really help. They should be ready to get us interviews with the right people, background information and official announcements.
“The other half of the stories are more driven by following up on previous pieces, spotting trends and so on, so there’s less of a role there. We’ll scour the internet and other news sources and usually come up with stories for ourselves. We work largely in financial PR and most of them understand us and are ready with the right information for our needs.
“When handling a crisis, the most important thing is to engage in a dialogue. Even if they’re in a tough spot, some dialogue is better than none. I think IR and PR professionals are usually happy to talk and see the value in it, but their clients are often of a different view. They need to remember that people have a job to do and we can only write about what we hear, so they really need to make sure they are communicating at all times.”
Michael Berkeley
Executive director,
Citigate Dewe Rogerson
“At times of crisis, whether that’s M&A, shareholder activism or a product recall, PR and IR really need to be joined up. At the moment, it’s a bit of a mixed bag in terms of how different companies handle their IR and PR functions and reporting lines. I am not evangelical about the merger of IR and PR into one unit. I don’t see a problem with the PR people reporting up to corporate communications or the CEO while IR reports to the CFO, as long as they are in close communication with each other.
“As far as mistakes go, there can be a lack of joined-up communciations in some companies.You might see a PR person - perhaps at divisional level - sending out a press release without realising that there’s a price-sensitive dimension to it.
"The safest rule is that all press releases pass through the IR team for a market sensitivity test. And there needs to be consistency of message. Before you say a company’s new product will generate X market share, you have to ask whether the finance director and IR agree with that view and its disclosure. IR teams need to see themselves as integral to the business communications.
“The blue chips are leading the way on this, but the joy about a lot of small and mid-cap companies is that they usually have one person who fulfils dual roles. The upside is that you rarely get muddled messages if one person is solely responsible.”
Stuart Bruseth
Head of Shell Global Media Relations
“Here at Shell we monitor the international press very closely. We do this both on a daily basis and by keeping a close eye on how the media represents our company in the longer term. In our view, the reputation of the company, through the eyes of the media, gives us an important snapshot of how wider stakeholders perceive our work across the globe, and that’s a useful insight.
“Shell has a clear system in place that allows us to monitor daily international press coverage around the globe. We also use external independent media analysis to assess how we are represented in the media and how our reputation shifts in time. The most important thing for us is that these systems are flexible enough to adapt to changing conditions and specific circumstances.
“We put a great deal of effort into understanding how we are viewed by our stakeholders, whether these are the countries and communities in which we work, our customers, the financial community, or the media. This is an important part of ensuring that Shell works responsibly and effectively in all its diverse operations across the world.
“In terms of our structures, investor relations and media relations are separate functions and have different reporting lines, but both teams work seamlessly together to ensure that the information flow to the media and investors is integrated and harmonised.”
Tor BĘkkelund
Chief executive officer,
Hugin
“Our clients operate in a world of globalisation where transparent communication drives the value of their business. At Hugin, we believe this is very important for our clients. Their goal is to build trust in their company, their brand and their products. They need to deal with increased market pressure and new regulations.
“Our company has developed IR and PR distribution and communication solutions, through collaboration with our clients and assessment of market needs, that facilitate and deal with the new demands, internal efficiency and the need for control. PR and IR departments can use the same communication tool to manage internal and external communication.
“Feedback from the market, especially bluechip companies, shows a shift towards organising communication, and its execution, in departments that handle both IR and PR. Our solutions are adapted to such needs, but are not dependent on how clients organise themselves. They are designed to facilitate any company, regardless of how they execute or define roles internally.
“We are experiencing an increase in demand for fully integrated solutions, and we will continue to develop our services to meet future changes in regulations and to improve execution of best-practice communication solutions.”
Bjorn Richard Johansen, MD of corporate communications at Iceland’s Glitnir, on how he co-ordinates PR and IR activities.
“I suppose you could say we have been innovative in the banking world. We’re an ‘advisory’ unit working for the CEO’s office across all business lines, and we have responsibility for all corporate communications, except paid campaigning.
“We have a clear constituency to serve. It’s based on what we define as ‘the key hole’: our corporate reputation. In our key hole we have the market, investors and shareholders, management and employees, and the community and media. There’s no hierarchy of needs as they are all equally important.”
Tor Bękkelunch, CEO of Hugin, says the Transparency Directive has “raised awareness of the need to ensure that all parties are properly served by their communication strategies”.
Talking to shareholders
“A key audience is shareholders/investors/analysts. The head of IR plans strategy, oversees communication, and tries to be innovative. Innovation drives growth. One of our objectives is to grow our base of global investors.
“We will focus on investors and we have a segment within the team that is focused on shareholder relations. We believe that we can break our potential investor groups down into different levels - Iceland, Nordic/UK/European, and US/Asia."
Employee communication
“Another audience is internal communications. Our strategy is simple: if you take care of the inside, that will take care of the outside. We always take care of our employees. For example, we send our company magazine to their home addresses so they can share news with their family.”
Issues or crisis management
“Then there are external ‘issues’. So if something has happened - say a new regulation - we can mobilise to get comment out. That requires having a strategy in place.”
Knowledge of banking in general, and Iceland as a modern finance nation in particular, is low. We’re trying to educate stakeholders about what we’re doing, and we’re trying to influence the influencers. I don’t think it’s important to get press coverage all the time, because if we educate the media as a stakeholder group the coverage will come. That process has worked well, because as soon as something happens in the Nordic market, who do you think they ask?”
Team structure
“I am responsibile for all the messaging and it’s crucial that you have one person in charge to ensure consistency. Below that there’s a fairly flat structure. I see us all as advisers to the business and I report directly to the CEO or any other leader in the bank who needs our services.
Biggest challenge
“The biggest challenge is to convince people of the need for IR’s involvement. Take the corporate finance team ā“ they see themselves as an almost secret part of the business, but they have to understand that we need to work with them and promote what they’re doing.
“When I arrived, I told the CEO that the bank needed to get its message out in Iceland and beyond. So Per-Christian Naesset and some of his peers from Hugin and I decided to develop our thinking into a joint project. That needed good organisation and a proper system. The Hugin team has helped us a lot. In fact they’ve been excellent, and have become an integral partner to the business, almost an extension of the company itself.”
Controlling newsflow
Marine Pouvreau, group financial communication manager at technology company Lectra, is pursuing a joined-up strategy.
“My biggest challenge is to help explain the message properly that the company wants to deliver,” she says. “This is made more difficult when it’s financial information. After all, revenue is revenue, percentage change is percentage change, but the numbers can’t talk. You have to match the company strategy with the numbers.”
This has meant that Pouvreau has, with others, embarked on a concerted effort to get both IR and PR teams working more closely together. “But, of course, PR people don’t always have the financial focus, just as IR people might not be the best at presenting things in the most PR-savvy way. But we need to work together.”
Pouvreau is working on an internal training course to improve the levels of financial understanding across the company.
Making connections
“PR people mainly come from a marketing background and IR people usually come from finance, so there’s a disconnect there,” she says. “I’m trying to improve the financial understanding of the PR team, by creating a training session to explain the basics ā“ how to read a profit and loss, and how to write a financial press release.
IR teams need to make an effort to educate the other people within the company, and non-IR people need to realize that we have obligations to the chairman, the board, and so on.”
Pouvreau is a veteran of 15 years in IR. She says that the need for a more joined-up approach to communicating effectively with stakeholders has increased in light of recent corporate events, such as financial scandals.
Losing trust
“There’s definitely been a drop in trust, especially for small- and mid-cap companies,” she explains. “If you don’t check every point of a press release, you could be in trouble. There’s an appetite for the next big scandal and I think sometimes PR people don’t realise that. It’s easy to think every piece of information is good information but it all has a potential impact on the company.”
Tor Bękkelund, CEO of Hugin, says the aim of the tool is to streamline the process by which listed companies talk to all their audiences. “The other benefit is that cost control gets better with increased efficiency,” he says.
Co-ordinated information
“When I started working in this field 15 years ago it was much more difficult because we had to fax all the information to people. If you didn’t have the right fax number that could be a problem. Tools such as the Hugin platform make this so much easier for us. And that means the co-ordination of information for the right audiences is a lot easier.”
Reaping the benefits
Pouvreau has already seen the benefits of the system. For one thing, all group financial statements, results and reports are distributed using the same system with the right controls in place. And there’s been a knock-on benefit for the IR team.
“A lot of this is a question of trust,” she says. “You need to be confident in the security of your information and that it’s going to be delivered efficiently. That means you can concentrate more on the content of your press release or investor presentation. If the tool you’re using works, it makes a great difference.”
It certainly sounds like a better use of time than standing by a fax machine all day.
The rules: what you need to know
In essence, the European Transparency Directive seeks to harmonise the way in which Europe’s public companies present and distribute IR and market information. Olivier Mégean, deputy CEO at Hugin Group, explains where this has come from, and what it will mean for affected companies.
What’s driving this?
This is mainly about pricesensitive information. It’s meant to ensure a greater degree of harmonisation among different regulatory landscapes. All information that can have an impact on the share price is covered by the directive. This will need to be distributed in full text and it needs to be distributed simultaneously, meaning it will have to be done electronically.
Who needs to be kept in the loop?
The directive mandates that this information must be distributed to the regulator, to a local storage mechanism (in the issuers home member state) and to the media on a pan-European basis. By media they mean, for example, Reuters, Bloomberg, and sites such as Yahoo! Finance, Euronext and Google.
How is it being implemented?
This directive is not yet implemented equally across Europe. That will occur in time. Local storage facilities will need to be created and, after integration, listed companies will need a pan-European storage facility. What needs to be remembered is that this is about facilitatingtransparency and giving all stakeholders access to the right data on a non-discriminatory, simultaneous basis.
Is everyone affected?
The directive has been driven by regulators, but in the past it was led by best practice. The blue chips were doing it before anyone else and the rest tried to follow, which is the way it often works. It is a change for many small- and mid-cap companies as they must be more transparent.
I can imagine for small caps it is difficult to make sure they are compliant, so they will need good advice and help. It’s easier for blue chips to cope with this as they have larger IR teams.
What should companies in the UK be doing?
In the UK the regulations came in earlier. They established a Primary Information Provider (PIP)/Secondary Information Provider (SIP) construct that only had to be adapted for directive requirements. Since 2002, UK companies have had to distribute through a PIP.
Regulators have certified a number of professional providers, of which Hugin is one. PIPs are certified by an independent auditor, and they distribute the news to SIPs. It’s a precise list.
Companies use these to fulfil the requirements of the directive. An Officially Appointed Mechanism has not been decided on, so this part of the directive has not yet been implemented.
What about the rest of Europe?
In France, the directive came in on January 20. Since then we’ve seen 80-90 per cent of companies using a professional adviser to ensure compliance. There is no precise date for harmonisation but most companies are on their way to doing this anyway on a best practice basis. They’re allowed to do it themselves but most favour professional providers.
To fulfil the requirements, companies should use firms such as Hugin, because we’ve built the infrastructure for them. We provide a web-based platform that is a straightthrough-processing solution, which allows them to distribute their news and regulatory releases securely and easily.
How does the process work?
It’s very simple. First, we give companies access to the platform where they select a “circuit” of the area they need to cover. Then they put the news in, index it to fulfil disclosure rules, then they can have a preview, and that’s it. A head of IR can do this in 20 minutes.
The cost depends on the size of the company. As a guide, in the UK it starts at 2,200 and in France it starts at 3,000 for a small cap. And size is based purely on market cap.