Convergence: It's one of the few buzzwords from the dot-com days
that survives in today's thoroughly re-vamped business dictionary of
useful terms. The communications industry, much-changed since those
rich, heady days of the late 1990s, still proudly carries the
And the disciplines most often singled out as the next big
communications convergence duo are public relations and investor
relations. After all, both target internal and external audiences, both
rely on the media and face-to-face communications to help a client
achieve measurable goals, and both are essential to today's "consultant"
model of high-end, corporate public relations.
Lou Thompson, chairman and CEO of the National Investor Relations
Institute (NIRI), is one of many communications industry leaders who
predicts that PR and IR in agencies and major corporations will one day
be merged, with one communications leader reporting to the CEO. Because
the carbonation has fizzled from the stock market, some IR officers are
less inclined to use their time-honored method of proving IR results by
measuring increases in share price. Thompson, therefore, predicts a
greater IR emphasis on non-share-price metrics, such as quality of
management, relationships with customers, market share, use of
technology, and innovation.
Sound familiar to some PR measurement programs out there?
But the pendulum isn't swinging in just one direction. While IR moves
into the communications side of financial communications, PR is moving
into more financial analysis. Many companies are reigning in their
marketing spend, and demanding that PR agencies prove their worth. This
means it is no longer rare for the effectiveness of a communications
program to be measured by changes in a company's sales or stock price.
In an effort to prove valuable, PR people may also meet with the
formerly IR-exclusive audience of stock analysts and financial
publications. Even non-corporate practices, such as media relations or
product launches, may be more involved with a company CEO through media
placement or reporting project impact to the bottom line -
dollar-and-cent accounting that was once the bastion of financial
Accelerating the merge
Because the two disciplines are moving closer together, many agencies
have begun to integrate the practices.
"At PR21, we've layered our investor relations competency into our
business and financial communications portfolio of services, rather than
maintain a separate offering as we had in the past," says Robert
Hubbell, president and CEO of PR21.
Hubbell says the poor economy has decreased the agency's IR business,
but he maintains that the practice is important to an agency eager to
offer a full range of communications services to current and prospective
"The IR consultancy remains particularly valuable to companies in
special circumstances, whether mergers, bankruptcies, or battles for
shareholder approval, or for those contemplating their turn at the
public markets, pending favorable economic conditions," says
But despite agencies that offer both PR and IR services, the two usually
remain separate practice areas. There are still gulfs to be bridged or
gulfs unbridgeable for true IR-PR convergence. One prominent gulf is
something all communicators know a bit about: perception.
It's an uphill battle to help IR professionals realize the importance of
the PR function, and to help PR professionals understand the basic
language of IR, explains Deborah Radman, managing partner at KCSA Public
Relations, an agency with both IR and PR practices.
"There is a perception on the behalf of IR professionals, regardless of
how inaccurate, that PR professionals are not businesspeople and don't
understand finance or investing," says Radman. KCSA holds multiweek
training workshops on the subject of IR-PR integration, she adds.
To beat the conceit of IR pros that PR people don't know a share price
from a stock split, Radman advises PR folks to prove their financial
intelligence: "In representing publicly traded companies, the only way
for this to go away is for the PR professionals to demonstrate their
understanding of investing, and how the PR function fits into the
success of a company from a business standpoint."
The regulation gap
Another, more significant gulf between the two disciplines, is
Besides "truth in advertising" concerns, PR is not policed, while IR is
a regulated industry. SEC Regulation Fair Disclosure requires a company
to release material information to all audiences, and the stock and
commodities markets each have their own rules and requirements for
listed companies. As a PR industry expert jokes, "In PR, if you make a
mistake, you'll get embarrassed, not sued." In IR, a disclosure mistake
can cost a company millions not just in media or customer relations, but
also in a courtroom.
NIRI's Thompson says that PR workers may know their own ignorance, but
that doesn't mean they always take proper precautions to prevent getting
clients into trouble. One of his great frustrations, Thompson adds, is
PR consultants who give clients counsel without checking the IR rules
"They call after the fact," says Thompson. "They say, 'I have a client,
and here's what I told them to do. Am I okay?' For a firm to be
operating in the IR area, giving advice when they don't know what
they're doing, is unethical. If PR firms are moving into the IR area,
they need to hire people who know what they're doing."
Roger Pondel, MD of Pondel/Wilkinson MS&L, the IR practice of Manning
Selvage & Lee, says experience in the legal ramifications of IR is
exactly why PR company MS&L bought this IR shop a year ago.
"Finding executives who are disciplined in IR as well as PR processes is
one of the greatest challenges for recruiters today," says Pondel.
"But there's no getting around it: For the publicly owned corporation,
investor and public relations must marry. Marketing-oriented consumer
news can have a tremendous impact on a stock price, just as a company
announcing dire financial results can turn customers off."
If PR agencies are not interested in buying the IR capability through
acquisition of agencies or individuals, Thompson urges them to send
their practitioners to NIRI education events. Also, many schools - such
as the School of Continuing and Professional Studies (SCPS) at New York
University - offer night and weekend classes in financial topics. At
SCPS, an introduction to corporate finance includes such topics as
financial management, corporate growth, business failures, return on
investment, risk leverage, the time value of money, dividend policy,
debt policy, and leasing. PR practitioners can use such classes offered
by their own local universities to bone up on their knowledge of
financial terminology, or even the regulations surrounding financial
Money marks the difference
A major challenge for recruiters is yet another gulf between the
"converging" IR and PR functions: salary. According to the NIRI 2001
salary survey, the average annual cash compensation (salary plus bonus)
received by IR officers increased by 20% over the last two years - from
$120,500 to $144,900.
Meanwhile, in the PRWeek salary survey of the same year, PR salaries
went up by 17% on average, from $50,000 to $59,000, before
an average 9% bonus.
However, education - often a direct indicator of salary - is also a
differentiator between PR and IR. While PRWeek statistics show that most
PR practitioners hold a college degree (and that some have completed
graduate work), NIRI's numbers show that half its member IR officers
hold a master's degree, most often an MBA.
"IR is a hybrid," explains Marilyn Vollrath, president of Vollrath
Associates in Mequon, WI. "It's essentially a communications function
that requires a specialized knowledge base. From my experience, the
skill sets required for IR are the strong communications skills acquired
through PR training, combined with the financial knowledge acquired
through a business degree."
If PR people are unwilling to invest in an MBA, however, a form of the
aforementioned continuing education classes can be a way to garner the
education that can contribute to a higher paycheck. Also, KCSA-style
agency seminars or workshops teaching IR skills can be a way to garner
the proficiency that can contribute to a higher paycheck.
Gaining IR skills is in the interest of PR people, according to Jack
Bergen, former president of the Council of PR Firms and current SVP of
corporate affairs and marketing at Siemens. He says IR people are often
in front of the CEO and CFO to brief them before meeting investors or
other financial events.
"In my experience, the IR person is in front of the CEO ten times more
than the PR person," says Bergen. "I'm not saying investor relations is
a more credible enterprise than media relations, but it has more
acceptability within the corporate world because it uses research and
speaks a language people in the corporate world understand better."
A PERSONAL VIEW
Gaining my first position in PR was a challenge, because no matter my
credentials, what mattered most at the time was how fast I typed. PR
used to be viewed mostly as an administrative, secretarial function,
where recipes and stunts were the main stay to develop publicity.
Strategic messaging wasn't discussed. The focus was on the quantity of
Shortly after I entered the PR world, a friend of the family suggested I
switch into IR, pointing out that it was the most rapidly growing niche
of PR, with some of the highest salaries. The field wasn't widely known
then - my parents thought I was a stock broker.
In the early '90s, the biggest challenge in IR was educating management
teams on what it was and its benefits. During new-business
presentations, I spent the bulk of my time explaining the difference
between the buy side and the sell side, and how they worked
Today, IR is studied at the university level, and degrees are offered on
the subject. The profession has been elevated to the CEO's office and
the board room, and there is a firm understanding that communication is
an essential business component.
Everything that happens in the life of a public company impacts Wall
Street's perceptions - new product launches, regulatory comments,
litigation, and other crisis situations. Today's CEO understands the
positive impact communications has on a company's image and cost of
capital, and actively cultivates it.
In recent years, there has been a flattening of audiences, and the line
between IR and PR has blurred. IR professionals focus on both the
business fundamentals as well as industry trends. PR professionals are
aware of new product specs and their financial implications. This
convergence is even more evident when you see sell-side research
analysts and shareholders routinely quoted as industry sources, showing
up on broadcast programs as expert commentators, and when trade shows
are attended by investors and analysts along with the press. Messages to
shareholders, media, business partners, and employees alike, are
becoming more consistent.
Integrating IR and PR nets out to business communications. I've long
believed investor relations is the overarching umbrella to effective
As a communications professional with over 12 years of IR and PR
experience, I can tell you it hasn't always been this way in my
Corey Cutler, senior vice president Morgen-Walke Associates.