Feeding the Hand that Bites You
Betsy Pisik gets a crash course in handling
Nightmare scenario #1
An unhappy employee has secretly faxed an
internal memo to a Wall Street Journal reporter. The letter
is from the company's treasurer, and tells department heads to hold
down expenses and conserve cash. Taken out of context, the treasurer's
letter sounds dire, makes it look as if the company is on the skids.
It could be construed that the company won't be able to take deliveries,
which would make suppliers -- not to mention shareholders -- jittery.
"It looked bad, really bad," admits
Brad Allen, who used to run investor relations at this large computer
company. "It was a real letter, obviously, and this [journalist]
was ambitious. There was no way he wasn't going to run the story."
Fortunately, he says, the Journal reporter
called his office for comment, and Allen immediately got the company's
controller on the phone to explain the cash flow situation on the
"The story ran, but it had context,"
says Allen. "It could have been very damaging, a self-fulfilling
prophesy. It could have panicked suppliers."
Nightmare scenario #2
Your stock, normally pretty stable, has been
dropping all morning. No one knows why.
Just before lunch you find out that the Washington-based
watchdog group, Center for Financial Research & Analysis (CFRA),
has published a report that tears apart your company's balance sheet
and doesn't like what it finds. CNBC has picked up the report, compounding
"We had no idea they were researching
us," confesses Donald Eagon, vice president global communications
and IR For Diebold, the Ohio-based producer of automated teller
machines. "They never called to ask about their findings. We
got a copy of the report and went through it line by line. They
were right on some things, I guess, but there were a couple of things
Specifically, CFRA had picked up on unusually
high inventory at Diebold. Coupled with low day sales, the group
had concluded that Diebold's business had slowed down.
"We worked those phones for four or five
days," recalls Eagon, who oversees a communications division
of nearly two dozen people at Diebold. "We answered every call
from shareholders. We called the sell side to make sure they were
aware of the report and our response to it. We called our largest
shareholders so they could tell their fund managers. I tell you,
we were blindsided. When something like that happens, you just need
to put your fingers and toes in the dike and pray."
Sleepless in IR
Product tampering, chat room gossip, bad press,
no press, an industry out of favor, an executive in trouble; there
are so many ways the world can come crashing down, it's a wonder
today's IRO can sleep at all. "You've got [to] stay on top
of things," Eagon advises. "Be in touch all the time,
not just from time to time."
It's almost impossible to separate a company's
investor relations from its media relations, say professionals who
work at companies large and small. Even the most sophisticated investors
can still be spooked by the grabber headline or the ineptly written
article. This is especially true in the age of desktop news wires
and instant transmissions, say IR experts, many of whom scrambled
to put out a statement or arrange conference calls in the wake of
an unexpected detonation of news.
Every investor relations professional, media
relations expert and business reporter interviewed for this article
had the same suggestions, in almost the same words. The cardinal
rule: know your own company inside out and backwards, and be able
to discuss it in your sleep; you must also strive for accessibility,
transparency, internal coordination of IR and PR, and relationship-building
with the press.
Brad Allen, who today runs the investor relations
department for Imation, the color management and data storage company
spun off from 3M, says regular contact with beat reporters is one
of the most important aspects of IR. "When someone is picking
up coverage of the company, it's easier in the long run if you make
the time to get to know them, educate them about the company or
the industry," says Allen. "It's standard relationship
Tips & pointers
So, how to build a business relationship that
is, by its very definition, one of mutual or colliding interests,
rather than friendship?
Journalists say it helps to get to know each
other before the deadline crunch. For starters, they suggest that
media relations and IROs have lunch or coffee with beat reporters,
off-the-record and not too fancy. The point is to establish a level
of comfort and trust, not to impress anyone with the company's expense
Consider the idea of walking reporters through
headquarters or a factory area to let them see a bit of company
culture, ogle the machinery and understand what the company does.
If possible, take the journos through the executive floors, introducing
them briefly to a few key officials just so everyone can have a
look at each other.
In the long run, it's also beneficial to become
a valuable source. If there are good books about the industry or
recent magazine articles, be sure to recommend them. Drop the names
of analysts who are knowledgeable and accessible. Be comfortable
discussing the industry, or connected industries, in the context
of current events or market moves. Not well, however: this is not
a license to gossip about your competitors.
And by all means, find out about your reporter
and where they work, about their own history and interests. Make
sure to find out the best and worst times to reach them, when their
deadlines are, and whether they prefer e-mail or faxes or phone
calls. Quietly gauge reporters' depth of knowledge about your industry,
and the sophistication of their audience.
With general assignment reporters, the dance
is a bit trickier. Often they will be parachuting in on deadline,
and you won't know how sophisticated they are about your business
until you - and the rest of the world - see their finished product.
"Everyone has a horror story about when
you assume they know something and they don't," suggests Allen.
He also notes that things were a bit different when he was a reporter:
"There was less on-the-job training and, well, a bit more editing."
Working with the media requires a delicate
touch, according to Audra Capas, president of 5StarPR in Herndon,
Virginia, who advises high-tech and financial executives on communications
skills and public relations practices. "You never cold-call
a reporter unless it's white-hot breaking news," she says,
noting that IROs can't rely solely on press releases and the web
site, either. "You can't call every day with all the minutia,
but you do want to keep in touch."
When a reporter is interested in something
- from a routine filing to a catastrophic market development - Capas
says, "Given them access to the highest company official you
can find. And give them quotable quotes."
"I tell all my clients they have to know
their company inside out and be able to explain obtuse business
concepts in a way that makes them clear to anyone," Capas adds.
"Metaphors are helpful. So is real-world practical experience."
Capas tells her clients to always be as open
as possible and forward-looking; not to score the fast point at
the expense of a longer goal; and to never risk reputation by lying
or fudging. "A lie will always bite you on the behind,"
It's also tempting for IROs to play the ostrich,
avoiding bad news for as long as possible. This will also bite,
according to the experts, who advise IR professionals to get in
there and acknowledge the inevitable.
Experts also say it's not just potential investors
who read the papers or watch television, but company employees as
well. This is especially true of the local media. If there are bumps
ahead, it's better they hear about them direct from management than
read about them online.
"You have to be honest," Capas summarizes.
"If there are signs of trouble, have off-the-record talks with
reporters you can trust." And let them know what's around the
corner and why.
Now that the markets have taken a dive, Capas
notes, "The companies that have had good relationships all
along are being treated evenhandedly and fairly." Many investor
relations officers are still reeling under the new rules imposed
by Regulation FD, which requires companies to release significant
news publicly and without favor. In an effort not to run afoul of
the sweeping rule, many IROs admit it's easier to clam up rather
than talk louder.
Which is another reason why investor relations
and public relations go hand-in-hand. If your company is large enough
to have separated the functions, make sure there are clear and routine
channels of communication, and that at least a few people in each
department are cross-trained in both media communications and financial
Paula Norton, who joined UPS as director of
IR last year, said it took some getting used to such a large and
specialized staff, after running a smaller shop at Terra Industries.
She joined UPS just before its IPO.
"When UPS went public it set up IR separately
from media relations because of the complexity of the job,"
Norton says, noting the careful division of labor. "When there's
news and it is clearly IR-related, such as earnings, they will leave
it to us to decide the sort of message we want. Sometimes we do
the scripting and they do the mechanics. But we always work closely
Of course, you don't want to let the story
- even the positive story - get ahead of you. That's always an occupational
hazard; and one which Norton now has some firsthand experience of.
She explains what happened at UPS - and the background.
UPS is universally known for its boxy brown
trucks and package deliveries. But the company has diversified lately,
and the media people thought it would be both interesting and useful
to let the world know all about its growing logistics division,
which was racking up prestigious new clients regularly.
"Rather than making periodic announcements,
we decided to group it all together and make a more general announcement,"
recounts Norton. "Last year, we got the Wall Street Journal
to write about our new logistics capabilities [for clients that
range from Nike to Hewlett-Packard to Fender guitars]. But it kind
The reason? The logistics unit became the
center of attention, upstaging UPS's core package delivery service.
Norton admits her unit ended up having to do a webcast conference
with the president of the logistics unit, explaining to nearly 100
analysts and investors that the $30 bn company was not moving away
from deliveries, but was in fact in the process of expanding its
"You learn," says Norton ruefully.
"You always learn something."
By Betsy Pisik, Investor Relations magazine.
All rights reserved.