Building a Strong Foundation: Creating an In-House Investor Relations Department from the Ground Up

Whether your company is newly public or has been in the trading game for a while, you may find it increasingly beneficial to keep and oversee your investor relations functions in-house. While there are benefits to working with outside consultants, internally managing your IR allows you to better understand IR impacts and have more control over the company's communications strategy.

At the very least, having your IR “mission control” or a central point of truth managed in-house is recommended. To help you get started, we've compiled our industry insight along with advice from our Winning IR Podcast episode with Brooks Rennie—Vice President, Head of Investor Relations at Byline Bank. In this article, you’ll learn more about:

• The challenges vs. benefits of in-house IR
• How to create an IR function from scratch
• Building out an IR budget
• What to look for when hiring an IRO
• Things to remember when building an IR function

Challenges of In-House IR

One of the main challenges of managing investor relations internally is a lack of time and resources—especially for newly public companies. IR functions usually fall on the shoulders of busy CFOs, leaving them to think the only option is to delegate IR tasks to personnel in the finance department or external consultants.

In the past, this may have been true. Managing your own IR program was cumbersome, and with endless spreadsheets and clunky and expensive software, it often made more sense for companies to outsource to an IR advisory firm. 

That being said, the IR landscape has changed a lot in the past few years, and it’s easier than ever to target, track, and communicate with investors. While advisors still play a key role in assisting companies with investor relations, there are many benefits to keeping mission control in-house.

Benefits of In-House IR

Communication with Stakeholders

One of the main benefits of executing an IR strategy internally is that it is far easier to get alignment on communication with internal stakeholders. While functions such as PR, marketing, and customer service may mean well, it is always a risk that their messaging can contradict or jeopardize your investor messaging. An in-house IR representative is best equipped to align internal stakeholders on public market communication strategies.

Data / Insights for Board

Data is invaluable for almost any business decision, so it would be a mistake to forgo access to your company’s investor data. Access to your shareholder data, research and estimates, and NOBO lists should, at the very least, be accessible on demand. This mitigates disruptions to business continuity—even if your advisor relationships are interrupted, you still maintain ownership of your data and relationships. Having all your research and data on hand allows you to be agile with your IR strategy to avoid obstacles before they even arise. 

Relationship Ownership

Another benefit of managing an internal investor relations program is maintaining a direct relationship with investors. While warm introductions are always helpful, managing personal investor relationships is highly valuable. Interruptions to your relationships with consultants and analysts should never hinder your relationships with the investor community. Having access to your investor CRM at all times is the optimal way to oversee your investor relationships. . 

What steps should you take to build a business’ IR function from scratch? 

Creating an in-house IR function will depend on your knowledge of all aspects of the company. Here's how you can best get started.

1. Learn Your Company’s Story

If you’re a new addition to a company, it’s your responsibility as an IR professional to roll up your sleeves and learn the ins and outs of the business strategy. Great learning opportunities include:

• Participating in investor meetings 
• Going through your first earnings season with the company
• Reviewing your company’s IR website and related resources such as investor presentations, earnings releases, and annual reports

However, one of the best ways to learn where—and how—you can best add value is to connect with coworkers in different company departments. From day one, you should aim to understand their roles and processes and hear how they interpret the company's storyline. It’s also important to sit down with C-suite executives such as the CEO, CFO, and President to listen to them tell the company's story in their own unique way. 

Learn what successful IR practitioners have to say about storytelling.

2. Assess Available  Resources 

During your first six months at the company, you should aim to understand what resources are driving value for your IR department. This includes assessing:

• Who currently supports the department internally
• What vendors you are using, and if they’re being used appropriately 
• Opportunities to enhance the budget or decrease spending

Overall, you should be taking this time to think through what resources you will need to ensure the success of the IR function.

3. Create a Comprehensive Investor Relations Plan

After your initial company assessment, your next step will be to create a detailed investor relations plan to formalize the department and lay the foundation for what's to come. This will help you to better understand what a best-in-class IR function looks like for your company.  

When creating your IR plan, you should seek opportunities to enhance and elevate the department. Meaning—can you find new ways to improve your earnings preparation, stakeholder engagement, message developments, or make efficiencies in reports? Is there a better way to tell your story if an event occurs within the market or your industry during earnings? 

An investor relations plan should encompass your overall IR strategy and the strategic pillars necessary for success. This includes (but isn’t limited to):

• Communications and Corporate Positioning (Investor Targets, 12-Month IR Calendar, Formal Policy on Company Representatives, etc.)
• Financial Communications (Quarterly Earnings Calendar, Company Fact Sheet, Guidance Strategy, etc.)
• Market Activity and Trading Requirements (SEC Requirements, Future Stock Strategy, Market Research Reports, etc.)
• Shareholder Outreach (Investment Profiles, Target Shareholders, Analyst Email List, etc.)
• C-Suite Communication (Earnings Scripts, Investor and Analyst Feedback, Internal Network Building, etc.)
• Environmental, Social, and Governance (ESG) Communications (Annual ESG Report, Sustainability Update, Set ESG Goals, etc.)

You should also develop KPIs to measure the department’s success during this time. And while it can sometimes be challenging to measure the success of IR due to the uniqueness of the department, there are several key quantitative metrics that IROs can implement to measure their success. These include (but aren’t limited to):

• Stock price valuation
• Share retention and the makeup of the shareholder base
• Sell-side analyst ratings and coverage on the company’s website
• Investor perception studies
• Awards
• Quality of investor meetings

4. Centralize Your IR Data and Contacts

Managing IR as a standalone team member is challenging but certainly not impossible. Whether you accept the help of advisors or do it yourself, your first objective should be setting up a central hub or “mission control” for all your investor relations data. 

When we discuss having a “mission control” for investor relations, we are referring to a single source of truth for your IR data. This means that your shareholder base, investor targeting, peer analysis, investor conversations and contacts, analyst research, and estimated data should all be accessible within a central hub. Not only does this make it easier to find and access information, but it also makes it easy to oversee your investor relations even if you are working with third-party consultants or analysts. Keeping a centralized system helps you ensure that all your data is available within the organization, on demand.  

As a bonus, should your IR team grow to include other members, everything they need to get up to speed will be ready for them.

How to Build Out an IR Budget 

Investor relations is an incredibly niche yet key executive role for a company. Almost every department in a business will, at one time or another, flow through IR, including marketing, finance, and corporate development. However, regarding the budget, it’s necessary to recognize that IR is an expense to a company that doesn't generate any immediate revenue. 

When building a new investor relations department budget, deciding what your must-haves are vs the nice to-haves is an excellent first step. From there, understand what company expenses will roll into the department. This will include the service fee required to be listed on the NYSE or NASDAQ, as well as the rate charged by stock transfer agents.

When building out your IR function, it's also important to look for opportunities to negotiate pricing with your current providers while simultaneously doing a market scan for other potential vendors. You should understand what tools are available to you—even if it isn't the right time to invest in a new vendor. Finding new efficiencies as an IR team is critical—so it’s essential to be aware of any vendor that can help improve your processes.

Hiring an Investor Relations Officer

If your company is building an IR function from scratch with no team in place, it’s likely that at a certain point, you’ll decide that hiring an Investor Relations Officer is the logical next step.The role of the investor relations officer is unique in that it requires analytical and strong communication skills, as well as  regulatory and financial knowledge required for earnings and financial modelling. 

The typical responsibilities of an IRO include (but aren’t limited to) the following:

• Serving as the main contact for shareholders 
• Establishing and maintaining relationships with the investment community
• Crafting—and managing—both the company and investment narrative 
• Providing strategic advisory to C-suite executives
• Building a strong investor brand
• Investor outreach and engagement
• Organizing company presence at conferences, road shows, earnings calls, and investor meetings

IROs are invaluable for growing the capabilities of your IR function. Full-time IR personnel can take care of your regulatory financial disclosures and proactively pursue new investors, execute investor engagement campaigns, help protect your board from activists, and spearhead ESG initiatives. 

Even if hiring an IRO is out of the question, we still recommend designating a single person to act as a liaison between the company and external parties. This ensures a streamlined flow of information between external partners and the company, reducing the likelihood of miscommunication or lost data. When looking to make the next hire in your IR function, be on the lookout for someone who challenges the status quo while also seeking constant feedback to do the job as efficiently and effectively as possible.

Things to Remember When Building an IR Function

Establishing an IR department from the ground up is an incredibly unique opportunity that rarely comes around. Remember to be patient with the process, as it will take time to establish a high-performing department that operates as you envision.

One of the best aspects of starting an IR department from scratch is that you can try new things and challenge the status quo. It’s your playbook, and you must take advantage of the opportunity to work with executives, the company's board of directors, and various other intelligent people in the industry—including institutional investors, sell-side analysts, and lawyers. 

Remember: the more you can network and build relationships, the stronger foundation you’ll have for a successful department moving forward.  

If you’re considering bringing your investor relations team in-house, you should also ensure you have a centralized platform that allows you to streamline your IR function. From there, whether you decide to run IR single-handedly, with advisors, or with an IRO, you can rest assured that your contacts and data are safe in-house. 

For more in-depth information, tune in to our podcast—Winning IR. In Brooks Rennie’s episode, he shares his experience developing an investor relations department from the ground up while diving deeper into the challenges and benefits of doing so. Listen to the episode or read the transcript here.