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Feeding the Hand that Bites You

Betsy Pisik gets a crash course in handling the media

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 record.

"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 the damage.

"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 they'd misinterpreted."

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 building."

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 account.

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.

Knowledge level

"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," she says.

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 information.

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 together."


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 of backfired."

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 services.

"You learn," says Norton ruefully. "You always learn something."

By Betsy Pisik, Investor Relations magazine. All rights reserved.