Tuesday, May 05, 2009

Annual Reports & Shareholder Reviews - avoiding the 'house of pain'

Here are some practical tips for those involved in the annual report & shareholder review process, written by one with some scar tissue on the subject. While some aspects of the reporting process are outside corporate affairs or investor relations control, many things can be done to make the process more efficient and produce a higher quality product.

Want the 30 second version? This week I'll also post Top 5 things in best annual reports and Top 5 annual report shortcuts.

The annual report house of pain
This is when:
- a process starts without clear criteria
- everyone is an expert on language, images, design and content
- hence no-one agrees
- deadlines are missed
- things are done at the last minute and of course...
- quality suffers.

Throw in a 4am finish and you have a living hell.

Typically at some point in this nightmare (usually too late) the CEO will decide that they really doesn’t like a particular image and they want it changed. Or the General Counsel will suggest the language and punctuation needs their personal stamp on it. And who can blame them? There were probably no clear criteria set out for the visual identify or language style guide of the document to start with.

It sounds simple, but some clear objectives and criteria for the annual document suite can make judging success far easier. How to decide what success looks like for this year’s report?

Simply look around at your peers, previous experience, and best practice sources then take the draft objectives for the document and criteria (for messages, images and overall meaning) to your CEO and then Chairman. This needs to happen BEFORE anything else. How do we brief designers, writers or contributors if we don’t know what our criteria are for a successful report in the first place? How can the effectiveness of the reports be judged if no one set out objectives? The answer “poorly” and “I don’t know”.

Similarly, if you don’t have a style guide, you better get one fast before the documents are written. If you don’t have a style guide everything is up for debate - which word to use, how abbreviations are referenced, and where the comma goes, and on...and on...and on.

Audience analysis
Annual reports and shareholder reviews are for shareholders... but are read and interpreted by everyone from analysts to customers, employees, suppliers and high school economics students. We may care more, or less, about some of these audiences but we do need to know who matters most. We also, I argue, need data about what the most critical audience or two currently thinks about the company.

Typically at least one part of an annual report or review is a message driven document. Companies invested significant sums in creating and delivering messages to audiences. This is almost pointless if you don’t have facts (not your ‘gut feel’) about what those critical audiences think, THEN create messages and deliver them in a way that works for, or influences, the current mindset of the most important audiences.

Right now, whether talking to retail or institutional investors, humility goes a long way. How do we know? Because it makes sense but it’s also backed up by data from investor research telling us just how annoyed some shareholders and investors are.

Ultimately I have no doubt most annual reports have great ‘bones’. However some are limp, lifeless things with no clear logic in the presentation of information.

Starting with good structure, before anyone begins to draft and two things happen. First the document writes itself. Phew. Second, no one can find a word out of place because the logic and simplicity of a good structure is that every word fits in the right spot with crossword-like precision.

Overall document structure
This you can glean from convention - competitor reports, your own previous years’ reports, best practice guides such as the AICD or Australasian Reporting Awards and of course any major focus for the year. This document structure is increasingly a content hierarchy rather than a typical fishbone ‘table of contents’.

And please, if you are doing an online version, do not create an ‘online table of contents’ that mimics the printed document. It’s not good use of readers’ time and it wastes a perfect opportunity to actually communicate a message. BHP Billiton [URL] is a great example of how to use this space for messages rather than a bland listing of contents that sit behind the first report or review landing page.

Formula for each section
The format for each report section can also be gleaned from convention. The Chairman’s letter, video or transcript may differ in structure to a divisional report but there is a basic common format.

It’s this:
1. The result, compared to the previous corresponding period.
2. The things that led to that result – company driven or from the external environment
3. How it compares to a relevant reference - others in the market, the overall market or more on previous years’.
4. How this result will be repeated, improved on, or avoided in the year to come.

Tip – the best reports talk to streakers, strollers and scholars - see here for more: http://financialservicesmarketingpr.blogspot.com/2009/04/streakers-strollers-scholarsyes-they.html.

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Thanks for reading. Constructive and relevant comments welcome!