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Annual reports - examining the best.

Why do some annual reports succeed in communicating with their audiences and others fail? What makes excellent annual reports stand out from the large numbers of mediocre ones produced at great cost, often by companies that should know better?

Although disclosure requirements vary from country to country, the basics of producing a good annual report remain the same internationally. This article focuses on the input of the communicator, the designer and the investor relations executive who, each in his or her own way, has a contribution to make toward producing a report of excellence.

Different levels; same basics

A few words about annual reports in general. They run on so many different levels -- not just from company to company, but also from country to country. Some are required to be published by law; others, coming from unlisted companies, have more leeway and appear as pure PR documents. The key issues to be addressed by one company may be totally different from those addressed by another because of the industry that it is in and the conditions it operates in.

In addition, disclosure requirements vary from country to country and the focus of the non-statutory section also will differ depending on investment patterns and on the accountability to different stakeholders.

Having said that, the basics of producing a good annual report remain the same internationally with the elements of writing and overall design saying to the recipient, "Take this report and read me."

The role of the communicator

Ideally, the annual report should be "a labour of love" for the communicator, but, sadly, in many cases, it becomes just "a labour." Why? I believe that this happens whenever the communicator hasn't established a firm policy of direction from the outset.

A man with whom I have worked for many years has evolved a basic checklist of questions which he addresses prior to the start of every annual report. I call it "John Cammell's Checklist" after its initiator and the questions he uses are as follows:

* What is our corporate personality?

* What is our reputation?

* What are our strengths?

* What are our weaknesses?

* What steps have we taken to increase earnings?

* What external factors have impacted on us?

* How have we performed as a business?

* How have we performed in the community?

* What were our greatest accomplishments during the year?

* What problems did we encounter and what steps are we taking to solve them?

These are all questions that your wide spectrum of readers would like addressed.

Obviously, you have to check with your management as to what key messages they want to put across; check with analysts as to what issues they want discussed in the report; check on the perceptions that the financial community has about your company.

This process will help you evolve themes for the publication; it will help capture the image and the spirit of the company and unite the design and the contents. (For example, see Chevron Corporation, 1990 and 1991.)


The readability of the report is the responsibility of the communicator. So many reports are written in "legalese" or "financese" that one might as well be trying to decipher a document in a foreign language! Simple, readable language, with the minimum of buzzwords, technical jargon and platitudes is all that is required -- and the same goes for any language or languages that you are publishing in.

The communicator who coordinates the production of an annual report has a responsibility to the target audiences when it comes to relevance and readability. The reports that don't score well in the excellence stakes are the ones where the "upfront" copy section seems to have been written by the management and only for the management.

Two examples of reports which, in my opinion, have a readability element about them -- and would appeal to the financial person, the employee, the shareholder, or to the potential investor, are Hewlett Packard's 1991 report and Toyota's 1991 report for English consumers.

The investor relations element

The communicator who ignores the input of the company's investor relations executive or consultant does so at his or her peril -- this is the message being sent out today by financial analysts, major shareholders and the financial media.

Because it is the investor relations element that gives the annual report the focus that all of these major target audiences are looking for. No matter how beautiful your design or how creative your copy or how much your annual report appeals to employees and all the readers who may only take six minutes to scan through it -- it is the financial community that is the main target audience for the annual report. It is this sector that reads the report from cover to cover and, based on its knowledge of the company, can play a vital role in the fortunes of your company's shares on stock exchanges around the world.

In the words of an investment analyst with whom I have spoken:

"When I get an annual report I look for the relevance of information. I look for the financial picture of the company as well as the integrity of the numbers. I look for a message -- usually from the chief executive -- which gives me the company's prospects for the years ahead, in other words, the vision for the future."

And this is where many annual reports fall down -- the fact that they are only concerned with reporting on the past -- and not on giving the shareholder an indication of the company's future prospects.

Now while "the integrity of the numbers" has to be left largely to our financial colleagues, we, as communicators, can make substantial input into the "integrity of the comment" and persuading our management that their "vision of the future" statement is an imperative. (See Union Carbide's 1990 report for a good question and answer interview with the CEO and the president.)

As far as design for the investment analyst is concerned, gimmicks are out. However, good layout, clear graphs and pie-charts represent the company as a professionally run business and make the analyst's task that much easier. (See South African company Barlow Rand's reports for excellent statistical analysis and presentation of the financial sections.)

When planning your next annual report, find out which companies are receiving awards in competitions organised by local investment analyst societies or chartered accountants organisations. Ironically, many reports that receive awards, especially for design, are not rated highly by investment analysts, who are looking for strategy, management vision, detailed financial information, analyses and comments.

Remember that investor relations can go a long way toward addressing what is probably the annual report's single most important audience. Your investor relations executive is a vital link between the financial input and the PR input and can also advise on the relevance of various issues to the financial audience as well as the credibility with which they are discussed.

The role of the designer

Design, by its very nature, is a subjective process -- and what appeals to one person may not appeal to another. However, regarding the designer, I have found that one basic rule is followed by good communicators the world over -- bring him or her into the planning process as early as possible.

That, of course, does not mean that the design should be "the tail that wags the dog." It must be flexible enough to accommodate changes to the written text if necessary and must obviously reflect the image of the company rather than the personality of the designer!

When it comes to design, an important question to ask is: "What do we want this report to do for our company?" As I mentioned at the beginning of the article, annual reports run on many different levels -- so, looking at it from that viewpoint, the level at which the document is pitched should dictate its design considerations.

Top design short-cuts

Studying the design of annual reports is a full-time occupation. However, there are some short-cuts to reviewing top designs.

One is to read CARN (Corporate Annual Report Newsletter), which comes out with its own "Best of the year" issue and gives addresses so that you can write to the companies concerned and get copies of the reports -- a very useful service.

Another is to get hold of the Graphis annual reports publication which features the "best of the best" in design, i.e. the 1 to 2 percent of excellent reports produced every year.


As far as both writing and design elements of annual reports are concerned, study as many as you can -- not just the ones produced in your own country, but also internationally. You may just see an idea that works and be able to adapt it to your own publication.

The annual report is the most important document that a company publishes every year. Not only is it a statutory document, but it is also a marketing tool pitched at a wide variety of audiences. It is your company's calling card. So make the report informative, relevant, credible, exciting. Hit on that winning formula and your report will work for your company and all its target audiences.

Barbara Palframan is a senior public relations executive at Barlow Rand Limited, South Africa.
COPYRIGHT 1992 International Association of Business Communicators
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Author:Palframan, Barbara
Publication:Communication World
Date:Sep 1, 1992
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