Are annual reports losing their way?
What do you call the yearly exchanges between Bruce Sheppard and company chairpersons?
Most of us would agree that the prime job of an annual report is to provide an account of a company’s performance.
However, the report doesn’t exist in isolation. It is part of an ongoing discussion that commenced when the company was established and which takes place in a number of forums, including the media.
So one of the secondary functions of an annual report is to provide continuity as in; this is where we have come from, this is where we are now and this is where we are going. Or; this is what we said we were going to do, this is what we did and why, and this is what we are going to do next.
There are two points that I would like to pick up on. The first is the quality of information and the second is the way in which the information is presented.
Quality of information
There are two strands to this. The first is the relevance of the information.
Do we need a history lesson on the company’s origins or a sermon (bit harsh I know) on values and culture?
Are the first six pages of photographs critical to my assessment of company performance?
I’m a bit conflicted when making these points, because as a brand guy I understand the need for brand context and the role of emotion in any form of communication.
But it seems to me that too many annual reports veer into becoming corporate profiles or wander into territory that more legitimately belongs to PR.
The second strand about quality is providing sufficient information that enables me to make an informed assessment. Here’s a small example. If the report states that staff engagement increased to 68%, is this a positive outcome?
I’ve no idea. What was the increase? What was the target? How does 68% stack up internationally?
According to PricewaterhouseCoopers
I’ve used this example to segue into an observation from PwC. It suggests that investors should put more emphasis on non-financial indicators of a company’s health, including the degree of customer satisfaction and staff sickness rates.
PwC goes on to say that qualitative statements should be supported with quantitative evidence, using third-party data where possible.
Presentation of information
How easy is it to read the report? Obviously the quality of the writing is a factor. Is it straightforward or dense, formal or conversational? By and large I think most companies do a decent job.
In large part, the presentation of information is a function of design. There are the 101 factors such as, line, sentence and paragraph lengths, headings, subheadings and use of summaries, all of which help with readability.
Where I think a number of reports come up short is the number of elements on some pages. Now tables, charts, infographics and photographs all have a role to play, but too often they are decorative. The end result is visual clutter and a tendency to obfuscate, not intentionally, rather than elucidate.
One last point on presentation. Some annual reports are disjointed and end up being a series of disconnected parts. They need to tell a story, where the parts can be viewed as chapters and where there is a sequence of information which provides balance and structure, all in the interests of reporting on the company’s performance.
Guilty as charged
I’ve produced 80 or so annual reports. If I was to look at each one based on the comments I’ve just made, some of them haven’t measured up.
Nothing is immune from review or improvement. The first annual report planning meeting should involve a forthright appraisal of the last report and a dispassionate discussion of the approach to be taken to the next one, all in the interests of providing an accurate and transparent account of the company’s performance.
Oops, forgot to mention the target audience. I wonder what shareholders think about all this?