Measurement
and evaluation are ways of Investor Relations (IR) teams to demonstrate that
they are a positive contributor to the company's performance and that they,
like other business departments, want to be held accountable. Achieving annual
goals and presenting well-defined quantitative and qualitative metrics enables
IR teams to define the value they add to their organizations. In this article,
five ways of analyzing the success in IR are reviewed, but first, what
performance metrics need to be considered?
Things
To Consider For Performance Measurement
Measuring
IR performance falls into two categories: output or outcome, quantitative or
qualitative, internal or external, controlled or uncontrolled. Metrics will
differ depending on the company's size and the budget allotted to the IR
department.
Since
there is no absolute method of measuring investor relations performance, each
IR function should develop its performance metric based on its objectives.
Ways
To Analyze Investor Relations
1. Corporate Value Exchange Model (CVE)
The corporate value exchange model is a framework for analyzing the
corporate-shareholder and corporate-investor relationships and formulating decisions that
can respond ethically to these groups without subordinating the interests of
other constituents.
The
value exchange is the sale transaction between your company and your company's
customers. The health of exchange has a significant impact on the success of a
business.
2. Peer Review
Sometimes
arise a situation where IR metrics are tied into broader company processes. It
is used for analyzing and measuring investor communications. It is also an
important tool used by the IR team in measuring progress and benchmarking
themselves against their peers. The main activities involved in peer review
are:
●
Asking
investors and analysts about the effectiveness of the company's investor
communication.
●
The
responsiveness of the IR team.
●
The
quality of disclosure.
After
collecting the data, the IR team compares the data against the aggregate scores
of other companies, and therefore they can benchmark themselves against their
peers.
3. Social Media Analytics
A
question is always asked, how does a company or internal IR team know whether
it is doing a good job? Social media analytics are used to track message boards
and blogs. Regional, national and global news also plays a role in determining
the company IR performance. Facebook pages and YouTube videos are the best way
to get data of what is being said about the company and how the information is
affecting the brand. How is social media analytics done?
First,
an IR team searches on the web to mention the firm name or its peers. The team
can also study influential sources like trade magazines or blogs. They track
sentiments, opinions, and financial performance about client stock. From the
information gained, they do an impact analysis of these sentiments.
4. Analysis By Numbers
It
involves computing the quantitative performance metric of a company's Investor
relations. It can be done by:
●
One
on one phone call and emails to let us say, top 5o shareholders
●
Analyzing
website visitors
●
Computing
response time to investors questions
●
Sell-side
analyst coverage
●
Non-deal
Roadshows
Harvesting
critical data from investors should not be a strenuous activity. There are many
digital companies that provide a Private Equity Platform that has streamlined
the workflows by enabling automation of harvesting investors' data. These are
market-leading platforms that help you seamlessly evolve and manage complexity
as your firm grows, your funds multiply, and your LP base expands. They have rich
visual analytics, automated requests for financial data, and a standardized
collection process. If you want to liberate your IR team from mundane tasks,
then you can consider using this platform.
5. View From The Top and View From Outside
It is
the most critical metric of measuring IR effectiveness. It involves the
following activities:
●
Valuation
of stock price
●
Feedback
from the investment community
●
Ability
to develop a relationship with the investment community
●
Shareholder
retention/makeup of shareholder base
View From Outside
From
the perspective of the investment community, what could IR do better?
Buy-Side
●
Disclosure
●
Transparency
●
Company
knowledge
●
Responsiveness
●
Website
Sell-Side
●
Discovery
●
Responsiveness
●
Transparency
●
Company
knowledge
●
Proactivity
Conclusion
IR
has evolved, and therefore the metrics of measuring performance have grown in
several ways. Analyzing the IR can be termed a fuzzy business because there is
no revenue, profits, or margin to judge its performance. The bottom line is,
investor relations can and should be measured, and the payoff of strategic
investor relations programs are demonstrated.
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