In-house or consultancy?

There is a healthy obsession among public relations people to debate fruitlessly the relative merits of in-house or consultancy public relations people. Without doubt financial public relations is an area where professional knowledge and skills are needed by even the smallest quoted company in one form or another.

The complexity and regulation in financial communication make it particularly important that there is someone around with the knowledge of both the company and the financial markets. Whether this expertise comes from in-house or consultancy is completely irrelevant. What does matter is the access that the adviser has to the top management of the company and the breadth of understanding they have of the interlinked City audiences of financial media, brokers, banks and securities houses and share-earning institutions.

It is important to remember that the key description is ‘adviser’. It is an even bigger mistake in financial public relations than the rest of the communications industry for the communication experts to get between a company and its audiences. As well as being an adviser we may occasionally be an intermediary, but it is important to remember that the message is that of a company and its management, and that ‘good’ public relations programmes are those that are effective, not those that are noticeable.

Vickers plc – a very brief case study

1. The development of financial public relations at Vickers PLC from the mid-1980s provides a good example of the benefits of having a clear financial public relations strategy in good times and bad.

2. This famous name in British engineering is now a medium-sized company with an interesting portfolio of companies including Rolls-Royce Cars and Vickers Defence Systems, the UK’s only manufacturer of main battle tanks.

3. In the mid-1980s, Vickers was still recovering from the nationalization of its shipbuilding and aircraft business in the mid-1970s, but following its merger with Rolls-Royce Motor Cars and under the guidance of its new chief executive, David Plastow, was just developing its strategy of concentrating on a limited number of areas of engineering and technological excellence. Its public relations and investor relations strategy was also developed at this time and given particular impetus by the Big Bang in the City.

4. The communications strategy devised by management and the in-house public relations director was simple: to ensure an understanding of the company’s business strategy and its aim of refocusing its somewhat diverse businesses. A key aim of the programme was to achieve a thorough familiarity with the company’s senior management – and its ability to deliver the goods – among a clearly defined specialist City audience. No attempt was made either then or since to explain to the public the confusing situation whereby Vickers owned Rolls-Royce Motor Cars rather than Rolls-Royce PLC, that the Vickers Shipyard in Barrow no longer belonged to Vickers. Or that Vickers which has been historically famous for aircraft manufacture since the days of Alcock and Brown and the Vickers Vimmy, the Wellington and not to mention the Spitfire, no longer manufactures aircraft.

5. The in-house public relations department was set up to both manage media relations and investor relations in a coordinated fashion and to develop an understanding of the company’s followers, whether they are journalists, investment analysts or institutional fund managers. The department of eight or so people divided the work into three main areas – media relations, investor relations and the rest, including internal communications, events and publications. The director of public relations personally took on the responsibility for investor relations with the number two being the media relations specialist. They carried out all the public relations functions, including the running of a press office, but their prime responsibility was as an advisor to the chief executive and finance director. They were supported by ad hoc consultancy advice.

6. If the strategy was simple, the tactics were even simpler: to take the opportunity of acquisitions and disposals, results announcements and the high profile of the chief executive to put across the company’s messages, either via the press or directly to analysts and fund managers. It was important, however, that these opportunities were taken against an established background of understanding. The initial part of the public relations programme involved organizing briefings usually on a one-to-one basis for the chairman, the finance director or the director of public relations as appropriate with key journalists, analysts and other key City players whose opinions would be sought in the City.

7. The importance of the chief executive, Sir David Plastow, in all of this cannot be over-estimated. A natural communicator and a man who clearly understood the need for proper public relations, he already had a good reputation in the City for being a straight talker and someone who did not disappoint shareholders. It is all too easy for corporate and financial public relations to become focused around the personality of one person, but people like to see companies with clear leadership and to be run by one or two people who are demonstrably in charge. In David Plastow, Vickers had a very good man to put forward.

8. There is nothing startlingly innovative about this approach, The key factor was to ensure that this was done properly and in a coordinated manner. In terms of messages, the company was careful not to oversell itself or to be extravagant in its claims or predictions. Fortunately for the public relations team, Vickers was also producing steadily improving profit figures, and carrying out a significant number of disposals of non-core businesses and buying a much smaller number to augment the developing core. Each deal provided a welcome hook upon which to continue to hang the message of the company’s strategic development – and improved financial strength.

9. Some research was carried out into the views of both journalists and analysts, and the company steadily developed a reputation for being a company with a well-formulated communicated strategy, and a reputation for being helpful and open and confident in everything it did.

10. If all this sounds rather boring and ‘motherhood and apple pie’, the payoff for Vickers was rather more dramatic when in the late 1980s an antipodean financier, Sir Ron Brierley, and his investment company decided that Vickers was well on its way to recovery. Containing operating companies like Rolls-Royce Motor Cars, it might have more embedded value than the stock-market was giving it credit for. His tactic was to build a near 30 per cent stake and then, rather than bid, try to shake an investment profit out of the company by forcing the demerger of its jewel in the crown, Rolls-Royce Motor Cars, a company at that time going through a successful high growth patch following the survival of the Bentley marque.

11. The subsequent proxy battle – the battle for shareholder votes at the company’s annual general meeting – was the ultimate test of the company’s communication strategy and of its success in having built a good understanding and reputation for success among the key City audiences. The battle raged through the newspaper City pages and the institutions’ meeting rooms of the City until Sir Ron Brierley was soundly beaten at the annual general meeting with the Vickers’ management winning over 90 per cent of the free vote. Although much lobbying of shareholders’ votes was done directly it was done against a background of supportive press comment and analyst notes.

12. The commentators’ conclusions were, in essence, that the management had carefully explained its strategy, demonstrated that they had made good progress in following that strategy and deserved, therefore, to be given the chance to follow it through and not be hijacked by a raider from New Zealand, however clever and engaging he might be. It was very public recognition that a carefully thought out and implemented – if unspectacular – financial public relations programme had got its message through to the key audiences.

13. Vickers subsequently went on to fight a high profile battle to win the contract for the British Army’s new battle tank, a battle fought against a very large and sophisticated American arms manufacturer, and a very determined and government-backed German tank manufacturer. Once again in this battle, Vickers’ reputation for competence and ability to deliver on its promises played a very important part in ensuring that the contract was won.

14. The Vickers experience demonstrates that although there is a great deal of important specialist knowledge and technical ability required for financial public relations, the essence of successful communications activity differs little from many other parts of the public relations industry.