Are there any rules of thumb or recommended staffing levels for dedicated AR people in companies?
Robert Eastman chipped in:
One of the better resources that I have seen on this is the book by William Hopkins (of the Knowledge Capital Group), Influencing the Influencers. You should really read this book to get the full color and context of their model. In short, however, the rule of thumb that this book proposes is one AR person for every 2-3 major business initiatives. It would not surprise me if the Institute of Industry Analyst Relations, Sagecircle, Lighthouse Analyst Relations also had some advice or insight here. I would enjoy hearing what you find out. Could you share?
AR guru Efrem Mallach added some good insight:
Firms tend to get a full-time AR professional when they reach annual revenue of about US$100 million. This is an average. Individual situations vary widely on both sides of this figure depending on the specific company situation. From there up the number grows, again very approximately, as the square root of revenue. A company would have about two FT people in AR at an annual revenue of $400 million or thereabouts, three at $1 billion and so on. This is a straight line on a semi-log graph.
These figures come from looking at a lot of companies in many areas of high-tech, plotting the two figures (annual revenue and analyst relations FT equivalent headcount) on a graph, and fitting a curve to where they cluster. T
hese are broad averages. You have to look at the breadth of a firm’s product line, how it breaks down vis-à-vis typical analyst practices, its geographic scope, who it sells to, its typical price points (they affect how much analysts influence its sales), etc., etc…, to come up with an appropriate number for a given firm. There is usually good business justification for spending more on AR than most firms do.
I agreed with Efrem:
It’s a decreasing curve that tends to flatten out at 1/$b revenue.
This said, the product mix is important: you need more AR managers for companies having a diverse s/w portfolio with a wide footprint, less for h/w typically.
So the best way to go is actually starting from the goals and the audience:
- if the goal is to support sales directly, then 1 AR manager cannot follow more than 15 Tier I analysts (and that’s a big task).
- if the job is more marketing oriented (producing white papers, doing more 1:many events) then this ratio can increase.
Tim O’Sullivan (EMEA AR for Deloitte) added:
I agree with Robert – all depends on what is important to the company. I would be loathe to make a recommendation based on revenue in anything except an affordability discussion (can we afford 1 more AR). The thing with revenue if you hire a new AR pro (even if you are a $1BN Revenue company) and they close 10 analyst related deals in a year worth $50M then you can afford it. Ludovic is correct about the product mix but services appears missing from the list – a diverse services based organisation would need a substantial team imo. Map the AR team objectives back to the strategic goals of the company – that shoudl give you a fair idea of what is important and allow you to structure a set of programs to support the corporate goals. Once you have these programs (either topic, geographic or some other structure) then you will have a fair idea through an AR Audit how many analysts you have to cater for and what your tactics are and therefore what the team size should be. Given the imoportance of AR and the different approaches in different companies I would be careful following rules of thumb and reccommend due dilignece and planning as the most prudent way to proceed.
If the average analyst impacts $2.3 million in revenue per year, with customer facing analysts more and vendor facing analysts less, then analyst relations’ staffing decisions can be disconnected from the company’s current revenues. An opportunity cost analysis helps management understand what they miss out on by not staffing AR rather than trying to figure out how to afford AR. Although AR has a statistically greater influence on customer decision making than PR does, companies still pour money into PR visability rather than AR effectiveness.