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Three Things All Investors Want to Hear From You

Important investors often lament the lack of detail on long-term strategy, the infrequent updates about a company's progress towards it, and that those messages sometimes conflict with past claims

Most firms spend the majority of their time when speaking to investors on how the company has performed in the previous quarter, and what is expected of it in the quarter to come. But investors consistently say that they want more information about long-term strategic plans to feel comfortable making decisions (see chart 1).


Chart 1: To what extent to do you agree with this statement?  Companies generally disclose enough information on future strategic plans to allow me to feel comfortable with the judgments I need to make; n=85  Source: PwC; CEB analysis


Three Things Missing from Most Investor Communications

Investors tend to feel that the typical corporate disclosures and communications don’t spell out a company’s strategy clearly enough, they don’t reflect the current state of the business, and they sometimes contradict previously shared information.

However, these are all things that the most successful companies in recent history have done well. CEB identified all firms that managed to sustain long-term revenue growth while simultaneously improving margins over the past 20 years, and then looked at what they do differently from the rest, and these “efficient growth firms” clearly communicate differently to investors in three distinct ways.

  1. Explain strategic trade-offs: Instead of just communicating about what investments they are going to make or how they are going to spend their capital, efficient growth companies tend to also talk about the investments they didn’t make and why. Investors appreciate this level of visibility into the strategic trade-offs firms are making in support of their long-term strategy.

    For instance, one paint manufacturer in the group of 60 efficient growth firms, uses pie charts to clearly show areas the management team has decided not to invest in. In the example below, investors are able to see that in order to meet its targets, the management team made a strategic decision not to invest in two areas: “Auto CEM” and “Protective and Marine” (see chart 2).


    Chart 2: Global “paints and coatings” market  Graphics recreated from investor presentation  Source: CEB analysis


  2. Update the market frequently on strategy, and strategic decisions: Management teams at efficient growth companies don’t typically rely on investor letters, annual reports, and investor days to communicate updates about company strategy to investors. Instead, they consistently incorporate elements of the long-term story they want to get across into the channels traditionally used for communications about short-term issues.

    For example, Gruppo Hera posts regular progress updates for key initiatives on its website. ING Bank uses earnings calls to link quarterly results to long-term goals. GE and T-Mobile use messages and graphics on social media to reinforce strategic growth messages.

  3. Use consistent, memorable messages: Another common attribute of this approach to investor communications is that investor relations teams don’t re-invent the wheel by constantly trying to find new ways to present the same story. They recognize that, for their message to stick, they must repeat it frequently. They use and reuse the same language and visual aids to help investors remember the long-term strategy.

    A software company in the group of 60, for example, makes its communications memorable by reusing the same strategy communication template over time and across different communication channels (see chart 3).


    Chart 3: Consistent investor communications  Source: CEB analysis


 

More On…

  • Efficient Growth

    Learn more about CEB's work on the few companies that outperformed their peers across the past 20 years.

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