Integrating Investor Relations Internally - ABF Investor Relations Conference

INTEGRATING INVESTOR RELATIONS INTERNALLYCase Study, Concepts, and Debatable Ideas

Kenny OngCNI Holdings Berhad

www.myCNI.com.my www.OOBEY.com

About: CNI

1. 18 years old

2. Core Business: MLM

3. Others: Contract Manufacturing, Export/Trading, eCommerce

4. Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan

5. Staff force: ± 500

6. Distributors: 250,000

7. Products: Consumer Goods and Services

IR and its problems

Overview of Corporate Communications and Investor

Relations problems

How to please Investors (the Dilbert version)

1. Buy back shares

2. Announce massive cutbacks

3. Spin off New Divisions

Ironically and Unfortunately, the above prescription is true in real life…

Why is UMW favored by Analysts?

1. high dividend yield,

2. low price earnings multiple,

3. buoyant growth outlook;

Challenges of Investor Relations

1. Stock- vs. Share-holder*

2. Public Opinions

3. Global operations – difficult to explain

4. Increasing focus on ecological, social, ethical issues

5. Diverged expectations for same issue

6. What to do with Excessive Cash?

7. Superficial changes vs. Fundamental Changes

8. Investors depend on ‘hearsay’ vs. ‘facts’

9. Share Price ≠ Market

10.R&D/M.S./HR vs. Investor Expectations

11.Opposing ‘Expert’ views

IR problems

“Good news for stockholders can be bad news for other

stakeholders.” Gregory Miller, Assoc. Prof., Harvard Business School.

Why integrate IR internally?

The unseen effects of Internal Matters on external Investor Relations

Principles of Investor Relations

1. Long-term relationship

2. Consistent and Proactive

3. Performance vs. Controllability

4. Aligned with operating/strategy position

5. One message, Different Emphasis

6. Outside-in Intelligence*

Types of Investors (1/2)

Institutional

Fund Managers

Corporations

Sovereign Funds

Non-Profit Org

Financial (Loans)

JV Partners

Social VCs

Holding Co.

HQ (MNC)

Gov. VCs

Supply Chain

Gov. Partnership

Competitors

Franchisees

Types of Investors (2/2)

Retail

Investor-Shareholders

Employee-Shareholders

Management-Shareholders

Customer-Shareholders

Distributor-Shareholders

Distributor-Entrepreneurs

Why do they Invest?

1. Return/Profit

2. Risk Management/ Hedging

3. Tax-benefits

4. CSR/Image

5. Diversify revenue

6. Counter-cyclical balance

7. Support ‘Mission’

8. Exclusive rights

8. Contractual obligation

9. National Agenda

10.Control Supply Chain

11.R&D portfolio

12.Control Management

13.Alternative Cash Flow

14.M&A

How do Investors get their ‘INFO’? (1/2)

Institutional

Gov./PoliticsCustomer

Suppliers

EconomicsAGM

Market Research

Internet*

Annual Report

Analysts

Fund Managers

Due Diligence

NewsletterSpokespersons

Institutional

Suppliers

EconomicsAGM

Market Research

Internet

Annual Report

Analysts

Fund Managers

Due Diligence

Retail

Gov./ Politics

Customers Public

Events

EconomicsAGMAds

Internet*

Annual Report

Analysts

Fund Managers

Relatives

Friends

Pasar Malam

Employees

Employee Bloggers

Mgmt Action

Newsletter

Retail

Gov./ Politics

Customers Public

Events

EconomicsAGMAds

Internet

Annual Report

Analysts

Fund Managers

Relatives

Friends

Pasar Malam

Employees

Employee Bloggers

Mgmt Actions

Newsletter

How not to talk to Retail Investors

“The holder [of a CAB certificate] may continue to serve regularly any point named herein through the airport last regularly used by the holder to serve such point prior to the effective date of the certificate. Upon compliance with such procedures relating thereto as may be prescribed by the Board, the holder may, in addition to the services hereinabove expressly prescribed, regularly serve a point named herein through any airport convenient thereto.”

Civil Aeronautics Board, 1977

How not to talk to Retail Investors

“It has been determined not to be in the public interest that United Airlines continue to provide air transportation services between San Diego and San Antonio”

“I forbid United Airlines to fly between San Diego and San Antonio”

What topics interest Investors?

Acquisition target

Layoffs

CostCutting

New Mgmt

Treatment of ProfitsConsistency

Ecology

Economics

Politics

Strategy Alignment

CSR-related

Crisis

Topics?

Acquisition target

Layoffs

CostCutting

New Mgmt

Ecology

Economics

Politics

Strategy Alignment

CSR-related

Crisis

Topics?

What Events impact Investors?

Politics

Financial Announcements

Shareholdingchanges

Structure

AccidentsEconomic

Crisis

CompetitorMoves

New Plans

Share-drop

Events?

Politics

Shareholdingchanges

Structure

AccidentsEconomic

Crisis

CompetitorMoves

New Plans

Share-drop

Events?

How to integrate IR internally

The unseen effects of Internal Matters on external Investor Relations

What to Integrate?

1. Aligning OrganizationTo the Culture

2. Integrating External

& Internal actions

3. Alignment and Consistency to the Strategy

4. Long-term Relationship

Building efforts

6. Outside-in Intelligence

Integrating IR internally

Culture

Importance

of I.R.Investor Relations Principles

StructureResources

Leadership

Person

Alignment: Framework

• Operational and Strategic moves have to consistent with messages

• Trust – consistency in external-internal messaging

• Visibility – through Culture and Morale• Clear Employee roles• Outside-in Intelligence for decision

making

Culture

The 6 Sins of Greenwashing

1. Sin of the Hidden Trade-Off

2. Sin of No Proof

3. Sin of Vagueness

4. Sin of Irrelevance

5. Sin of Fibbing

6. Sin of Lesser of Two Evils

Study by: TerraChoice, December 2007

• Org Structure• Job Design• C&B• Policies &

procedures• Decision making• Job fit• Management

Systems• BSC and KPIs• Decentralized &

Empower

Structure

•Specialists IR in CR topics e.g. Ethics, Ecology, Politics

•Spokespersons

•Business Unit reporting

•Shares, C&B schemes

•IR ↔ MR

• Role modeling• Vision/Mission/

Philosophy• Leadership Style• Delegation &

Empowerment• C&B, Promotions• Sense of Urgency• Speak regularly

about Strategic and Operational direction

Leadership

•Spokespersons

•Fundamentals vs. Short-term

•IR as MR intelligence

• Recognition• Recruitment• Training• Profit sharing• Values• Motivation• Self Efficacy• Awareness• Useful

Competencies• Career aspirations

Person

•Specialists IR in CR topics e.g. Ethics, Ecology, Politics

•Spokespersons

Enablers• Technology• Equipment• Materials• Human• Intellectual

Property• Partners• Property

ResourcesFinancial

Utilization • Investment• Divestment• Dividends• HR• Buybacks• Restructuring

Integrating IR internally

Culture

Importance

of I.R.Investor Relations Principles

StructureResources

Leadership

Person

Integrating Internal/External

Communications

Internal External

Mgmt Distributors

Suppliers

Government

Public

Authorities

Associations

Universities

Investors

Proactive Reactive Proactive Reactive

COMM Tools COMM Tools

Employees

Internal External

Internal• Halal Committee• Social Education

(e.g. SCK)• Umrah trip• China Trip• RBOS• CFA/HFA• Coffee Van

External• Sponsorship• Donations• News clippings• Newspaper Ads• MHI• Awards• Corporate Profile• AGM• Gov. Celebrity• Analyst research

Internal• Entrepreneur Dev.• Health products• Health education• “Made in Malaysia”• Events• Media Celebrity

External• Website• DSAM• Yayasan• Publish Book• Social Education• Crisis Comm• Children Education• National interest• Analyst BD

connections

Alignment & Consistency

• Mamak stall

Alignment & Consistency

"They are the most innovative"

"Constantly renewing and creative"

"Always on the leading edge"

"A great deal!"

Excellent/attractive price

Minimal acquisition cost and hassle

Lowest overall cost of ownership

"A no-hassles firm"

Convenience and speed

Reliable product and service

"Exactly what I need"

Customized products

Personalized communications

"They're very responsive"

Preferential service and flexibility

Recommends what I need

"I'm very loyal to them"

Helps us to be a success

Product Leadership

OperationalExcellence

CustomerIntimacy

Operational Excellence(low cost producer)

Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995

Product Leadership(best product)

Customer Intimacy(best total solution)

Alignment & Consistency: Market Disciplines

The McPlaybook*

Make it easy to eat• 50% drive-thru• Meals held in one

Make it easy to prepare• High Turnover• Tasks simple to learn

& repeat

Make it quick• “Fast Food”• Tests new products

for Cooking Times

Make what customers want• Prowls market for new

products• Monitored field tests

*Adapted from: Businessweek , Februrary 5th 2007

Operational Excellence

• Competitive price

• Error free, reliable

• Fast (on demand)

• Simple

• Responsive

• Consistent information for all

• Transactional

• 'Once and Done'

Operational Excellence

• Competitive price

• Error free, reliable

• Fast (on demand)

• Simple

• Responsive

• Consistent information for all

• Transactional

• 'Once and Done'

Customer Intimacy

• Management by Fact

• Easy to do business with

• Have it your way (customization)

• Market segments of one

• Proactive, flexible

• Relationship and consultative selling

• Cross selling

Customer Intimacy

• Management by Fact

• Easy to do business with

• Have it your way (customization)

• Market segments of one

• Proactive, flexible

• Relationship and consultative selling

• Cross selling

Product Leadership

• New, state of the art products or services

• Risk takers

• Meet volatile customer needs

• Fast concept-to- counter

• Never satisfied - obsolete own and competitors' products

• Learning organization

Product Leadership

• New, state of the art products or services

• Risk takers

• Meet volatile customer needs

• Fast concept-to- counter

• Never satisfied - obsolete own and competitors' products

• Learning organization

Alignment & Consistency: Disciplines, Priorities, and KPIs

• Operational Excellence• Move know-how from top performing

units to others• Benchmark against best in class• Ensure operations training for all

employees• Use disciplines like TQM for continuous

learning to reduce costs and improve quality

• Customer Intimacy• Capture knowledge about customers• Understand customer needs• Empower front line employees• Ensure that everyone knows the

customer• Make company knowledge available to

customers

• Product Leadership• Reduce time to market• Commercialize new products fast• Ensure that ideas flow• Reuse what other parts of the company

have already learned• Ensure there are multiple sources of

funding

Summary

Challenges of Investor Relations

1. Stock- vs. Share-holder

2. Public Opinions

3. Global operations – difficult to explain

4. Increasing focus on ecological, social, ethical issues

5. Diverged expectations for same issue

6. What to do with Excessive Cash?

7. Superficial changes vs. Fundamental Changes

8. Investors depend on ‘hearsay’ vs. ‘facts’

9. Share Price ≠ Market

10.R&D/M.S./HR vs. Investor Expectations

11.Opposing ‘Expert’ views

6. Outside-in Intelligence*

Institutional

Suppliers

EconomicsAGM

Market Research

Internet

Annual Report

Analysts

Fund Managers

Due Diligence

Retail

Gov./ Politics

Customers Public

Events

EconomicsAGMAds

Internet

Annual Report

Analysts

Fund Managers

Relatives

Friends

Pasar Malam

Employees

Employee Bloggers

Mgmt Actions

Newsletter

Acquisition target

Layoffs

CostCutting

New Mgmt

Ecology

Economics

Politics

Strategy Alignment

CSR-related

Crisis

Topics?

Politics

Shareholdingchanges

Structure

AccidentsEconomic

Crisis

CompetitorMoves

New Plans

Share-drop

Events?

What to Integrate?

1. Aligning OrganizationTo the Culture

2. Integrating External

& Internal actions

3. Alignment and Consistency to the Strategy

4. Long-term Relationship

Building efforts

Don’t forget…

“The business of business is Business, not Investor

Relations”

Thank You.

soft copy of slides: http://totallyunrelatedrandomanddebatable.

blogspot.com/

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