THIS XBRL thing has legs. The hype-o-meter is in overdrive and I can’t imagine anything is going to stop it.
So it’s now safe for me to tell you the awful, untold truth about what XBRL means to the investor relations profession as we know it today.
This truth is so frightening to the average corporate investor relations officer and member of the National Investor Relations Institute (NIRI) that I previously worried that writing about it might provoke a backlash big enough to stop XBRL in its tracks.
But I think it’s now safe to tell you because we are past the tipping point. XBRL is going to happen, no matter what anyone says or does.
And when it does, most of today’s IROs with a financial or accounting background are suddenly going to find themselves out of their depth — and possibly out of a job.
They don’t have the right skills for the coming new realities of investor relations in an XBRL era. Their CEOs are going to come into the office one day and realize that the people they have running IR aren’t adding any value. Chop, chop.
And in your place they’re going to appoint, wait for it, a member of the International Association of Business Communicators (IABC) or The Public Relations Society of America (PRSA). Yes, a PR or marketing communications person is going to replace you.
How can this be, you ask? Because once XBRL takes hold, a financial background is going to be much less important to an investor relations job than it is today. XBRL automates and commoditizes financial information and analysis. Analysts and investors will spend far less time studying accounting statistics than they do today.
Right now, investors know that there is a potential advantage to be gained in the market if they have better financial information than the next investor. They devote a lot of resources to compiling and analyzing company financials and calling up IR departments to ask all sorts of arcane financial accounting questions.
But when XBRL is available, that’s all automated and everyone has immediate access to the same, detailed financial information in a standardized format. And not just from one country, but from around the world.
Consequently, there will be far fewer questions of a financial or accounting nature and many more of a sort that IROs today are ill-equipped to handle. Essentially, analysts and investors are going to be looking for each company’s unique story. Non-financial factors. Intangibles. Stuff that’s much harder to communicate or explain than financial statistics.
And that means the most important skill for an IRO in the XBRL era is the ability to articulate a company’s unique investment proposition via global communication channels like the Web. Communication skills rather than financial acumen will spring to the fore.
The average U.S. IRO doesn’t have enough web communication savvy to compete with international IROs or the average U.S. PR or marketing practitioner.
You just have to look at their respective websites to see that. The typical U.S. IR department outsources its web communications to Thomson Financial and consequently has missed out on almost a decade of learning.
Not so most international IR departments and U.S. PR and marketing departments. They’ve mostly been doing it themselves and gaining a huge amount of knowledge and experience.
And those skills, coupled with basic business savvy and a formal communications background, are going to serve them very well indeed when CEOs start looking for people who can communicate their strategy and vision to a global investor audience.
Sadly, NIRI’s leadership doesn’t have a clue about any of this.
Update: A discussion about this post has started on another post. Feel free to add your thoughts there.
Update 2: John Turner at CoreFiling, who knows more about XBRL than me, sees through my provocation and says you don’t have anything to worry about. My thoughts on his post are here.
I would agree, and it is about time.
Apart from a handful of companies on the FTSE most IROs are out of their depth in terms of marketing and have no clue how to market their second most important product – their shares.
Interestingly I spend far more of my time now dealing with Communications Directors and IROs – three years ago it was just the IRO.
Also there is a sea change happening with IROs now being recruited with far more diverse backgrounds – financial acumen is no longer the most important factor
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