Why Your Corporate Bench Strength Matters to Investors
The CEO and CFO are the public faces of any company. After all, they are primarily responsible for delivering the organization’s message during earnings calls and investor presentations and interacting with investors during road shows.
However, no great company is comprised solely of just two C-level execs, regardless of how talented they are. The importance of maintaining a solid management team below the CEO and CFO — quality operating officers and division heads, for example — cannot be overstated.
High-quality “bench strength” helps a company to successfully execute and increases investors’ confidence that it can keep its promises. You may feel great about your own company’s bench strength. And perhaps you should.
But just having bench strength is not enough. The next crucial step is getting the outside world to recognize and appreciate that strength.
So how can you do that? There are multiple opportunities to familiarize the investment community with your managers and to demonstrate their skills.
Here are some suggestions:
- Make a good first impression. Make sure the first introduction to a key executive is handled well. In the case of new hires, that first impression is likely to be made through a press release announcing their addition to the team. Of course the introduction should be positive, highlighting their relevant experience. But don’t oversell them. If the relationship doesn’t work out for whatever reason and you part ways, then it appears that your good-news story is broken.
- Be ready for follow up. After a press release is issued announcing the hiring of, say, a new chief operating officer or vice president of sales, covering analysts will generally call the CEO, CFO, or your IR officer to get more information. They want additional input to help inform their research reports and pitch to investors. This is not the time to speak off the cuff. Have prepared and practiced talking points on what the person brings to the team and the process you conducted to identify and retain this individual.
- Decide whom to put forward. Be selective about the managers you elect to put in front of investors. Not all of your managers may have the capability to effectively communicate with them. While the head of your most important business unit may be excellent at execution, he or she may not have the understanding and artfulness to speak publicly with the investment community, particularly when it comes to being careful about disclosure about material non-public information.
- Recognize this is a process. Relationship-building isn’t a one-off transaction. It’s a process that takes time. Undertake this important effort gradually by doing such things as:
- Having them take part in a limited capacity during events such as analyst days;
- Tasking them with delivering certain prepared remarks on earnings calls; and
- Tapping them to tag along with the CEO or CFO during investor conferences and non-deal road shows.
When the manager is fully prepared, he or she can take the lead at conferences and investor meetings. Taking that step is important, and not only because it gives your extremely busy CEO and CFO a bit of relief. Investors like to hear from different leadership voices at a company, even if the story isn’t all that different from those delivered on previous occasions (and, of course, it shouldn’t be). What’s more, such exposure can prepare the investment community for internal change.
Let me share an example of how well this can go if done right.
One of our clients recently announced that the CEO is retiring and that the chief operating officer will be taking over. The news was taken very well by investors. The move was described as “expected” and the transition is likely to be smooth.
What contributed to this? During the past couple of years, the COO has delivered scripted remarks on every earnings call, presented at investor conferences, and participated in hundreds of one-on-one investor meetings. In other words, the COO is a known quantity to investors rather than an unknown variable that they need to quickly figure out.
Credibility, reliability, and a degree of certainty count for a great deal on Wall Street. Don’t keep those top performers at headquarters a secret. By sharing them and their abilities with investors, you can reap valuable dividends now and in the future.
If you would like to discuss how to incorporate this objective into you strategic IR plan, get in touch.
ICR Westwicke is the largest healthcare focused investor relations firm in the country. We provide customized investor relations programs and independent capital markets advice to small and mid-cap healthcare companies.
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