Mastering the 3 Stages of Interviewing Management and Information Sources

Have you ever sat through a bad presentation?  If you’re like most analysts, you’ve seen too many of them.  Why is it a bad presenter seems to have no clue they’re not resonating with the audience? It’s often that they assume because they can speak, they can present.

This post isn’t about presenting, but rather I want to draw the parallel that analysts are equally challenged in conducting interviews, because they assume since they know how to ask their friends, family and colleagues questions, they must be an expert on interviewing others.

Based on my experience, it’s not that easy.  First, “interviewing with a purpose” is as much science as art, much of which isn’t taught to others unless you’re a journalist or law enforcement officer.  Second, most analysts aren’t evaluated on their interviewing skills like they are for their stock picking and ability to communicate a stock call which means it’s relegated to a low priority.

Interviewing others for insight is not as easy as riding a bike, unless your bike is a unicycle

Step 4 of our ASPIRE™ framework, “Introduce and Interview” provides the best practices for approaching your interviewee and conducting the interview in a manner that yields the most insights. Before delving deeper into Step 4 below, it’s worth noting key components are drawn from our PRACTICE™ and ICE™ frameworks, discussed in other posts.

Approach with a Plan

• First and foremost, check your ego at the door. The biggest problem with interviews led by equity research analysts occurs when they suffer from “I’m the smartest person in the room” syndrome. If you approach the interview convinced you know more (or are smarter) than the interviewee, you’ll likely not put them at ease, and in fact may put them on the defensive, which will not yield helpful answers.
• Research shows interviewees accept being led through an interview more readily when the interviewer is perceived as an expert or knowledgeable. With this in mind, somewhere early in the exchange, after building rapport, without trying to suggest you’re “the smartest person in the room”, ask a question that demonstrates you hold sector or company insights the interviewee doesn’t have or isn’t widely known (it doesn’t need to be a material piece of information).
  • This prevents interviewees from exaggerating or embellishing for the rest of the interview, because they know you have a good command of the topic
  • The interviewee may be more forthcoming because you are “worthy” of higher quality answers
• Start by introducing yourself in a polite and transparent manner in the first sentence or two of your conversation or email (this best practice takes elements from “Rapport” building of the PRACTICE™ framework):
  • Your name and firm
  • Role and responsibility
  • Who referred you (can be incredibly powerful to mention the name of someone whom the contact knows)
  • If approaching the contact without a prearranged appointment (e.g. phone call, email, approaching after they make a presentation at a conference, etc.), start by asking “Can you help me or know of someone who might be able to help?” This offers two benefits:
    • It de-risks the exchange because they think you are looking for a source of information (which most people will gladly provide) rather than information that they may be reluctant to provide
    • It gives them the sense “If I refer this analyst to someone else, it suggests I don’t have the answer.” Very often, they’ll feel obligated to help you to show you don’t need to turn to another expert because they have the answer
  • Reassure the individual that you:
    • Are not selling anything
    • Will keep his/her name anonymous if preferred. Explain you will not quote or attribute their thoughts (unless that’s what they want). Mid- to low-tier managers of publically-traded companies, as well as many other information sources, are concerned they will be “quoted in the press” (they often don’t distinguish between an analyst and journalist). If this occurs when approaching an information source, put their concerns to rest by starting the conversation with, “I won’t attribute anything you say unless you want me to.” (Sell-side analysts should make sure to put in their notes “do not publish” so they don’t forget later.)
  • Here is an example that uses the best practices above and from our PRACTICE™ framework for influencing: “Hello, my name is Lucas Gallo. I work for Golden Bull Securities as an equity research analyst responsible for researching the pollution control industry. I was referred to you by John Smith (or “…I read your quote in Pollution Control Today”) and was hoping you could help me or point me in the direction of someone who is an expert on this topic. I’m not selling anything and not looking for a quote…I’m just seeking an industry expert’s view to help me with my research, which I’ll gladly keep confidential.”

Take Control of the Interview

• Qualify the interviewee as quickly as possible, without losing your ability to positively influence
  • It’s important to quickly know:
    • Does this interviewee have a full command of the critical factor(s) you are researching?
    • Is the interviewee in a position to forecast the materiality or probability for the assumptions that drive the critical factor(s)?
  • If you determine the interviewee cannot help with the elements above, work through a strategy to:
    • Graciously thank them for their time
    • Ask if they know of anyone who can help with your area of focus; and
    • Move to the next interview candidate
  • Focus on one topic at a time
  • Don’t allow the interviewee to take full control of the interview:
    • In situations when the interviewee may not want to provide answers (such as when interviewing hostile company management):
      • Some interviewees will drag out answers so they don’t get more questions from you. After using the tactics found in the ICE™ framework, if it becomes clear they will not answer a question, move onto the next unless you detect deception and think probing will help with your research.
      • If they start to ask you questions, it may be a form of influencing — they’re trying to boost your ego to show your view matters, sometimes with the hope that you’re not going to be so tough on them. It also reduces the amount of time you have to ask them questions.
      • Are the comments consistent with other available data (e.g. public presentations and regulatory filings)?
    • Note when interviewees appear to be using too much jargon, they may be hiding insecurity because they don’t know the subject well. If you hear too much jargon or acronyms you don’t understand, stop the interviewee and ask for an explanation. Don’t continue until you’re comfortable with the answer.
    • When conducting an interview at a company being analyzed, if there’s an on-site tour of its operation, observe the intangibles:
      • Are the executive offices:
        • Opulent or run-down?
        • Near the operations or very distant?
      • Do employees take pride in their workspace (desk or factory floor) and show respect for one another?
      • Is the warehouse empty or over-filled?
      • Are assets being fully utilized?

End with Purpose

When it comes time to wrap up the conversation, always thank the interviewee and try to add accolades such as “You are the most knowledgeable expert on pollution control I’ve met.”  Try to also use at least one the following tactics below to ensure you can harvest additional insights.

• Ask for a referral: “You are such an expert in this area. Do you know of anyone else [at this event] who holds such expertise?”
• Get a commitment on accepting a follow-up conversation: “I found your insights to be incredibly helpful. Would it be okay if I reach out to you early next week to get a copy of the slides you mentioned?”
• If the meeting didn’t have a scheduled end time (such as meeting someone at a conference), explain why it’s imperative you exit now, such as “It’s been a pleasure meeting with you. I hope you don’t mind, but I need to speak to one other individual before they leave [the conference].”
• Hand off to another contact, in person or after the interview: “This has been a great exchange for me. I’d like you to meet another professional who has interest in this same area, who I suspect you’ll find quite interesting.”

If you approach “interviewing” as a professional skill to be mastered, you’re already further along than most of your peers.  Utilize the best practices above and you’ll find the interviews go more smoothly and yield greater insights.

This Best Practice Bulletin™ targets #1. Generate Informed Insights of GAMMA PI™, within our Pathway to Success Framework

Let me know if this Best Practice Bulletin™ helps and how I can improve upon this best practice. If you’re interested in exploring this topic further, AnalystSolutions provides equity research training with a specialized workshop to help Generate Differentiated Insights Through Better Discovery, Questioning, and Influencing.

Improve you or your team’s stock picking and communication skills with our equity research analyst training tools, which includes workshops such as the one above, as well as our GAMMA PI™ assessment and one-on-one coaching.  Also, consider ordering the book that inspired the founding of AnalystSolutions and the Best Practices Bulletin: Best Practices for Equity Research Analysts.

Visit our new Resource Center to find more helpful articles, reference cards, and advice towards your growth as an Equity Research Analyst.

©AnalystSolutions LLP All rights reserved. James J. Valentine, CFA is author of Best Practices for Equity Research Analysts, founder of AnalystSolutions and was a top-ranked equity research analyst for ten consecutive years