Industry veteran discusses IR metrics

May 19, 2010

John Dawson talks about his time as head of IR at ICI

Yesterday’s webinar held by the UK’s IR Society tackled what some call the Holy Grail of investor relations: performance metrics. Thankfully, John Dawson, deputy chairman of the IR Society and former head of IR at ICI and Cadbury, was on hand to explain different ways IR departments can keep track of their own progress.

Dawson focused on his time at ICI, the chemicals company, which he said was in a bad way when he took over the IR function: shareholders had a poor view of management and a large percentage of the stock was held by investors unlikely to hold for the long term.

Working under a ‘numbers-driven’ CFO, Dawson produced a series of spreadsheets that recorded how management time was being used and the relationships between the company and key analysts and investors.

The spreadsheets adopted a color-coded system, featuring green, amber and red, depending on how well or badly the company was performing in those areas. ‘What did we achieve at ICI? We managed to move the share price up significantly, and the consensus up in line with it,’ stated Dawson.

ICI also changed its share register, bringing in more investors more likely to be buyers or holders and moving away from people who were big sellers, Dawson added.

He went on to discuss more generally the ways IR teams can assess their own performance. ‘You need to understand its strategy and its audience, and structure its objectives and key performance indicators accordingly,’ he said. ‘Keep the measures realistic and think about the trade-off you need to make in terms of simplicity of measures verses complexity.

‘One of the challenges I had with this mathematically driven approach was that it worked very well for one CFO but, when we had a change of personnel, the incoming CFO said it was all far too complex.’ The new CFO picked out just four simple metrics to follow.

Dawson’s final points were not to set the bar too high and certainly not to judge yourself against the share price, which is not under your control. He also advised setting objectives in line with management’s own plans. ‘You can’t be off trying to do one thing while management is trying to resist and do something else. That’s very important, particularly if strategically you are trying to take some big steps,’ he concluded.

The full webinar well be available to IR Society members on the society’s website by the end of the week.

By Tim Human