The 800 Pound Gorilla
Runs Speed Dating
If you haven’t got time to take the test in the video link below, don’t bother with this blog post – whether you invest the time or not is partly the point.
Since the video was made in 1999, approximately half of viewers miss something remarkable, something that if you see, you have difficulty believing it could be missed. After years of studying the response to this video -- at first questioning if the results were somehow skewed -- the psychologists who conducted it concluded we see what we expect to see and that there are absolute limits to what the human brain can absorb in a given time. Distraction, stress and information overload decrease the area of focus and increase tunnel vision.
These cognitive realities are at the core of conducting a Best Practice IR program. Sadly, the economic realities and inherent conflicts of sell side and broker sponsored institutional contact programs use your precious management time in ways that often feed the least productive instincts of both management and investors in face to face interactions: to transfer detailed data and operational updates as quickly as possible with little focus on what’s best to advance your IR goals. And while it seems to make all concerned feel as if they are making the best use of time, one of the biggest wastes of management energy is "Speed Dating IR" conferences.
In the last few weeks I have joined clients at several sell side sponsored "Speed Dating IR" conferences, the usual 45 minute sessions with anywhere from 3-10 people around the table firing top-of-mind questions at the CEO/CFO/IRO. While I am continually amazed at the depth and breadth of my clients' detailed knowledge of their businesses, I also observe (and comment upon/suggest ways to better message regarding) the absence of discussion focused on the company’s investment thesis and the strategic, tactical and operational components most important for understanding how management drives value creation. At the heart of what IR does is answering the question "why invest in this stock?" The most effective part of these meetings is that investors "buy management" and this is a reasonably efficient setting for interacting with management in close quarters. But the farther management’s messaging moves from answering the specifics of the key question "why invest," the greater the loss of IR efficiency and effectiveness.
Given what you know about the economic model of Corporate Access, why do you think these formats have evolved? I guarantee you it’s not because Corporate Access has studied investor cognition and determined this is the best format for corporates to inculcate their value building strategies and investment narratives. It is because they can get the most people in and out of rooms with investors gorging on information bits, filling in their spreadsheets, typing notes, and writing down answers to questions based on preconceived notions of what makes the company (and/or its peers) worth investing in. "Speed Dating IR" is one of the well-established franchises in the "Fast Food IR" industry.
If you have been reading my blog, you’ll know I’ve been ploughing through books on neuroscience and human cognition for years; advances over the last decades in these areas represent one of the most significant historic developments in humankind’s understanding of our world. Part of the reason I have been doing this is to explain to clients in technical/academic language how best to communicate to their investors and capital markets followers. But really, does one need science to answer the question regarding how much quality communication is conducted in speed dating IR conferences? Common sense tells us that a half dozen or so supercharged professional investors firing disparate questions at management in a 45-minute session is not going to allow for much Best Practice IR communication. It will however use up a great deal of management and investor energy in transferring information and data points that could be conveyed on a conference call or a longer, more focused face to face session focused on key components of the business.
Solution: Be careful about "over-conferencing." The next time you plan your conference schedule for the year, think carefully about what is achieved in each interaction, setting tactical goals (e.g. where we are before the event, where we hope to be after the event in terms of our investment profile in the marketplace) and question whether there are more effective and less expensive (especially in terms of management time) channels for delivering Best Practice IR messaging to precisely targeted audiences. Off the top of my head, I can name three to five better alternatives worth careful consideration…