THE ANNUAL REPORT ISN'T WHAT IT USED TO BE.

REDEFINING ITS ROLE

The annual report (AR) is a company's most important strategic communication document, setting forth the firm's vision, values and operating philosophy, as well as its communication strategy. It is akin to a company's strategic plan in importance and lays out the positioning groundwork to explain where the organization is going over the next three to five years.

But if the AR is so important to a company's positioning and strategy, why have ARs been failing so miserably over the past decade?

In truth, many companies have lost their way with the AR. These companies lack a clear definition of the report's role in corporate strategy. They also fail to recognize the critical value it can have in providing a road map of important message that the company, can use in its external and internal activities.

The role of the AR-has been greatly changed by innovations in technology that have broadened access to information. Not only do we have more distribution channels for this information, but also the subsequent reporting of this information through various formal (i.e., news organizations) and informal channels (e.g., Internet char rooms) has exploded the sources of financial and business data. Competitors have also become an important source of data on price, market share and marketplace perceptions, equal to what has historically been provided by the company.

Information in the AR on the company's financial health has been largely replaced by the 10K. While the business discussion in the AR is still relevant, it too has been reduced somewhat by the numerous securities analysts' reports, which are now available over the Internet.

A Victim of Homogenization 

Increasingly, the AR is a project that neither the CEO, the head of corporate communication nor any other senior executive wants to tackle beyond giving approval to the graphic look and feel. The writing is either assigned to a mid-level communicator, or even more frequently outsourced to a freelancer, who then works through a committee of 20. By the time it's completed, few readers find any clear message or corporate personality. The book is largely a statement about how great we are. The reader, who generally is familiar with the company's current competitive space, know that's probably not true. And even if it is true, so what? The AR is a dated snapshot the day it's published. It certainly is not a predictor of future performance.

In truth, the annual report has lost its voice. It is homogenized to the point where it has no taste, no feel and no real effect. The need to reverse this trend is imperative in the information age.

Use the AR to tell your story

In media relations, the rule of thumb is that either you take the initiative to fill in the blanks by communicating your messages or someone else will. If reporters can't get you to respond, they're likely to find someone else who will characterize your decisions.

The same rule of thumb can be applied to the AR. In the information age, with multiple channels and suppliers of data about your company, the power and quality of your story becomes an even greater business imperative.

Think of the AR as a company's attempt to create a forward-looking and strategic story line that's powerful enough to withstand efforts by others to nibble away its reputation. Companies now face a growing competition for influence among their various publics. The AR provides a chance to anticipate, in light of trends and competitors, and to chart a course that's preemptive.

Reinvigorate the process and the content

Companies need to recommit and see the AR as their best opportunity to provide a "single voice" and to tell a consistent and clear story about their direction. The story must be a powerful and compelling picture of the future. It must be a sustaining story, and it must resonate with an increasingly diverse stakeholder audience.

The role of the AR today is to answer the following strategic questions:

* Who are we as a company?

* What is the CEO's vision?

* What do we believe in?

* How do we see the world changing?

* Where are the land mines and the opportunities?

* How is the company preparing for the unpredictable and changing nature of our industry?

* Does the company have the leadership capacity to lead?

* Have we demonstrated the values we'll need to succeed?

* Can we communicate examples of how resilient we are to change?

* Is the company the sort of place where people can innovate?

Make it strategic

To achieve this goal requires buy-in from the CEO and a commitment from the head of corporate communication. The AR should represent the culmination of a strategic communication planning process. If the AR is to reflect the company's vision and strategic messages, it should start with research and a broad assessment of external industry trends (for context) and interviews with the senior management team (for shared perspective). The head of corporate communication, as the company's chief communication strategist, should be leading, not delegating, this effort.

The AR provides an opportunity for the senior communication officer to influence how the company positions itself and the language it will use to frame its messages. It is also through this exercise that the senior communication officer can help the CEO articulate his/her vision and encourage alignment of these messages in all subsequent communication activities.

The absence of a strategic communication approach and hierarchy often results in a disparate set of messages being used in different areas of the communication disciplines. No wonder, for example, in media relations we develop, situational messages that may not flow from or be consistent with strategic messages. The same yardstick can be applied to marketing communication collateral, with its heavy emphasis on product messages.

Senior communication officers should develop the report's theme, storylines and visual concepts, based on research and: their own leadership vision (working closely with the CEO). The creative talent and substantive knowledge of communication staff should be used as a sounding board at various junctures in the AR process. But annual reports require a single point of view and vision to be successful. The more these tasks are disparate and delegated, the less cohesive, coherent and effective the AR will be.

Lead the design effort

Design firms will tell you they prefer clients with a clear idea of what they want to achieve substantively, conceptually and visually: The computer slogan "garbage in, garbage out" applies. Prepare for the meeting with the design firm staff. Give them an overview of trends in your industry. Educate them on the competitive issues and the company's targeted customers looking Out over the next three years. The challenge here is to articulate verbally so the design. firm can translate these ideas visually.

It is not a crazy notion to come with, your own page-by-page road map for the AR. You may be ill-equipped to produce anything beyond beyond crude drawings, but the thought process behind these drawings will help the design firm be more effective and give you a visual product exceeding expectations (even yours). The design firm is not the senior communicator's vendor, it is your creative partner in communicating and leveraging the effect of your story.

Be creative, be focused

Inventiveness in an AR should not revolve around a design firm's interest in using knock-your-eyes-out color or typeface, or photo imagery that runs from the Daliesque to a leftover Gap magazine ad. Dazzle smacks of design for the, sake of design. It's actually more inventive and interesting to look for ideas that augment or leverage your theme. For example, you could introduce a second story line in the AR that's unrelated to the company.

Following the consolidation of the U.S. National Securities, Clearing Corporation and The Depository Trust Company. last year, we picked "The Power of One"' as a theme to underscore the synergies that would benefit the financial services industry. Our second story line involved short vignettes about six people who changed the course of history by their unrelenting commitment to the pursuit of one idea.

The question has been raised whether ARs have any relevance, anymore. Unfortunately, some of those asking this question are professional communicators. For some communicators, their doubts may reflect the frustration of trying to get a single-voice approach. Others may feel, like the family member who knows he has to take out the garbage.

Win their hearts and minds

The exigent reality is that there has never been a more critical period for redefining the role and elevating the importance of the AR. In media relations, we talk a lot about controlling the media channels. We work at not allowing others to frame our message or our image without our response to balance perceptions.

Well, the same holds true for the AR. If the three "C"s of effective communication are clarity, consistence and constancy, the AR lays out the battle plan. It puts a stake in the ground against which multiple communication strategies can flow, while reinforcing a continuity of message that can be heard above the din of competing and conflicting messages offered by others.

In any marketing sales class, the first lesson is that people need to like you, and buy into what you believe, before you can even begin trying to sell them something. This is sometimes referred to as winning the customer's heart and mind.

Each year we have the opportunity to win the hearts and minds of millions of stakeholders and potential stakeholders. And if we succeed,' their support will sustain our company even during rough economic times, or product setbacks.

If the real aim of an AR is to communicate a company's vision and personality, maybe it's time "to give this story the attention it deserves.

Stuart Z. Goldstein is managing director of corporate communication, Depository Trust and Clearing Corp., New York.

The Flintridge Foundations Annual Reports are far more than fancy paper and earthy illustrations chosen because they are the visual trends of the year.

The board members are intimately involved in establishing the look and feel of their ARs. With their guidance the design firm is able to translate their organization's very creative personality and vision into print.

Sophisticated illustrations and recycled paper reflect their commitment to the performing arts, the visual arts and conservation while appealing to the audience of the auual report who hold similar values.

When the management of a company takes such an active role year after year the results are spectacular.