5 Ways to Analyze Investor Relations

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 is demonstrated.