Investor Relations: These days, it’s one tough call
April 10, 2011
Top execs who let their “numbers people” write the scripts for quarterly analyst calls attended by “numbers people” are making a fundamental mistake: There are no such things as “numbers people”—only business analysts, who appreciate numbers as a quantitative measure of progress, but who need a context, a story that frames that progress.
But the numbers do not, in fact, speak for themselves.
I spoke with two investor relations experts, wizened by more quarterly analyst calls than they care to count, about the communicator’s role in helping prepare top executives for the toughest call they make every quarter. Our conversations yielded a step-by-step guide to creating a quarterly call that simultaneously serves investors and advances the company’s agenda:
A few weeks before the quarter close, you’re already working on key themes for the call. “You can’t wait for the numbers to know what the themes are,” says Christine Solie, vice president of financial communications for PNC, the Pittsburgh-based bank. By the time she gets the numbers, she’s already built a “message box” that frames the key messages for the quarter. And she’s descending into a three-week “black hole” where she’ll spend “90% to 120% of my time” writing the scripts for the CEO and CFO to deliver during the call, and getting them approved.
While the script is being written, the Q&A is being prepared. Questions are anticipated based on a meticulous study of industry analysts’ recent notes, based on questions asked in competitors’ recent calls, questions asked during your company’s last call and questions begged by the gist of your presentation. While 99% of analyst presentations are read verbatim from the scripts, says David Calusdian, executive vice president of the investor relations consultancy Sharon Merrill Associates, the Q&A is generally ad-libbed—which makes preparation and executive review all the more crucial. (Compilation of the Q&A is not a job for PR people, Solie opines; it’s more a job for IR heavy hitters.)
The script is written with a single aim. Well, two, if you listen to both Calusdian and Solie. Calusdian says the sole goal of any analyst call is helping investors make good decisions, and a successful call is one that contains no surprises—for sell-side analysts, buy-side analysts or company executives. “It’s really about communicating honestly and accurately to give investors the information they need to make good decisions,” says Caludsian. “It’s not an exercise in persuasion.”
Solie doesn’t disagree exactly, but she adds to Caludsian’s agenda: A successful analyst call is a continuation and a furtherance of a story—“every company has a story, every company has a point of view,” she says—about a company and an industry in relationship with an economy. She acknowledges that the analyst call is not the place for high-flown rhetoric, but rather for simple, declarative statements. “No one’s going to write the Gettysburg address for an analyst call,” she says. But the opening and closing, usually delivered by the CEO, does offer an opportunity for “lofty framing,” as she puts it, of the context of the call. At minimum, the CEO should say: “Here’s my view of the industry, here’s how it affects my company, here’s what we’re doing about it.”
Next, executives don’t rehearse the script. But they should, suggests Solie, who worked with an executive who not only read the script once ahead of each call, but then played the call back to rate his own performance. Alas, this isn’t standard practice, although Calusdian says a coach is occasionally brought in to enliven a monotonal executive. Though many analysts can deal with emotionless fact-regurgitation—TIE editors listened in on a call in which a living, breathing CFO sounded eerily like the computer voice on NOAA weather radio—employees and reporters are often on the calls too, and so some attention should be paid to the performance aspect of the quarterly call.
And then the call itself—typically 60 minutes: CEO opens with big-picture analysis, CFO dives deep into the numbers and interprets them (“analysts don’t like it when the CFO reads the press release,” Calusdian says) and then opens it up for Q&A. Are the calls sweaty events, or calm recitations of fact? “It depends on the management team,” says Calusdian, “and it depends on the quarter.”