April 10, 2020
What Makes a Great IRO?
Over the course of my career as an analyst I encountered a broad range of IROs, from the great ones that were the only point of access you needed to fully understand a company, to those who might have seemed like glorified receptionists, there to screen calls for the CEO or CFO that actually knew something about the business. Later as my career shifted and I became an IRO, I had the chance to do things my own way, to do the things I saw as important to investors from an analyst point of view, which didn’t always work out the way I had hoped. So what makes an IRO truly great?
In my experience, there are three key factors that really separate truly great IROs: 1) Know your company; 2) Know your financials; and 3) Express an innate confidence in your ability to represent your company.
Know Your Company
I have to admit, this one was not my first thought when I took my first IRO position. Coming from being a sell side analyst, I thought all I need was a look at the financial statements, some insights from the senior management and like that I would be able to effectively represent my company before investors. I spent very little time at the production plants and almost no time interacting with our customers or end consumers. As a result, it must have seemed obvious that I didn’t really have an adequate grasp of the underlying fundamentals of the business. Soon I was just a gatekeeper, there to answer basic questions as most investors wanted only to speak with our CFO or CEO.
When I became the IRO at Thor Industries (Tii:THO), I decided to take a different approach. I was offered the position based on my past experience in the RV industry, but I knew in my heart that wasn’t enough. So, I spent the first few months diving deep into the company, not just a surface level, I wanted to really understand how the company operated, who the key players were and what really drove the results. I began by meeting the leadership teams at each subsidiary, which was aided by the fact that our CEO thought this was a good way to start. I tried to understand the culture and motivation at each subsidiary, what were their product strengths, their reputations among dealers and consumers. Then I visited the plants, not just a cursory tour of one facility, but an in depth review of plants that product the final products as well as the support plants that feed into the main assembly facilities. At the end, I had a good understanding of how the business really operated, and then it was off to the next subsidiary.
Once I felt I had a good understanding of production it was time to move on to the product. Fortunately, in the RV industry there are a large number of shows, whether wholesale or retail where a broad array of products are on display. I could go exploring to see the broad variety of floorplans, décor options and features. At retail shows I could observe consumers and what interested them, whether younger families with small children or retired couples, it provided valuable insights into the underlying drivers of demand. When the big trade shows came around, I could talk to the product development folks that I had met earlier and ask them what they were excited about. That again drove me to see what was new in our product offerings. Eventually, I was able to take the ultimate product step and drive a motorhome across country. I learned how to operate all of the systems in the coach, from driving to slide outs, to emptying the tanks. This enhanced knowledge of the product provided greater insights for me and for our investors, as I could enlighten them on the user-driven changes we made to products.
In my experience, those who have a passion to fully understand their business end up being the most passionate representatives of their companies to investors.