Annual reporting is a dirty job. The task is to present a legal document as engaging and upbeat as possible, while circumventing the fact that its contents are both widely-known and, it’s sad to say, perceived by many readers as being inherently dull.
The knee-jerk solution to the quandary is to allow form to triumph over content. But this has its problems. Overly snazzy design detracts from the message, leaving shareholders smiling but ignorant. Conversely, an austere batch of facts and figures risks being thrust straight into an investor’s filing cabinet – and probably the small one in the corner with the flip-up lid. Not surprisingly, annual reports’ identity crisis is causing a headache for design consultancies across the world.
A sense of purpose
The thing is, decisions concerning format, design and tone cannot be resolved until the actual purpose of annual reports is identified. The tardiness of publication means that, by the time reports are actually published, interest in their content has generally been diluted. Preliminary results are newsworthy – revealing a company’s financial state and offering analysts food for thought – but the annual report turns up much later, like an excitable, flashy gatecrasher, arriving at the party just as people are going home.
So what is its purpose? Quentin Anderson of Addison Design in London says, ‘If information has been given out in the prelims, the annual report has to add value. You don’t want to go over old ground.’ Simon Carter, director of optimization at London-based Thumb, agrees. ‘By the time they’re out, there’s no news,’ he says. ‘Nowadays, annual reports are often used as corporate brochures or for recruitment. Surely the real purpose is to demonstrate what’s distinctive about the company.’
Firming up a raison d’etre is bound to be tricky when there’s such a wide audience to encompass. ‘It probably is fair to say that prelims are targeted more toward analysts and institutional investors, whereas annual reports are for the benefit of private investors,’ Anderson admits. ‘But that’s wrong in terms of best practice. Retail investors want information too, and analysts love the wit and design of annual reports.’
Bill Ferguson, principal of Inc Design in New York, does see a distinction. ‘Reaching out to retail investors is important but, for analysts, it’s a lot of out-dated data,’ he says. ‘The idea should be simplification: giving all parties the company at a glance.’
End of gimmickry?
While Carter feels that simplicity is an ideal from which many companies are straying, David Bickerton, managing director of UK-based, Pauffley, believes that annual reporting has matured considerably and is beginning to find its feet. ‘There was a danger of getting bogged down in gimmicks, especially in the 1980s with pop-up reports and such like,’ he says. ‘But we’ve gone through the experimental stage now.’
A cursory look at a few annual reports, however, suggests that the days of ingenious daftness are still with us. This year saw the publication of ICI’s much-praised multisensory annual review, complete with perfumed panel and touch pads. Jo Sumner, client services director at CGI, the agency behind the report, justifies the innovations as a useful thematic concept: ‘The theme this year was to touch the consumer. We have a business review for the statistical detail. The report was more to illustrate the transformation of the company. The importance of the document is to communicate a message and there are many ways to do that.’ CGI used a magazine format, possibly to distance the report from the stereotype of a sterile statutory document: the Driving Technology Forward section recreates the style of a motoring magazine while the Ingredients For Success page resembles a cookery publication.
Ferguson agrees that unique conceptual approaches are more prevalent this year but he sees this as an emerging style rather than an out-dated fad, remarking, ‘Annual report producers do seem to be more open to examining relevant and meaningful conceptual ideas.’ He points to the GPU annual report, which revolves heavily around the idea of ‘delivery’, such that it actually resembles a postal package.
Carter accepts that a conceptual approach gives the company ‘a bit more of a grip’ on readers but he points to the danger in the form-versus-content struggle: ‘Design works best,’ he says, ‘when it supports the message rather than becomes it, or gets in its way. The key is to get the form to effectively present your content.’
A damn good start
Research by Thumb suggests that readers do value annual reports but spend only five to seven minutes on average perusing each one. Carter argues, ‘If you’ve got even three minutes of someone’s attention, that’s a damn good start.’ He believes, however, a succinct nutshell of what the company is about is a more effective use of this time than a glib conceptual idea.
Many observers are excited by the pacy innovation of annual reporting formats. But get Carter: he’s struck by the adherence to the norm and won’t be swept up by the tide of praise for ICI’s report. ‘What’s surprising is how little things have changed,’ he says. ‘I’m surprised by the reaction to the ICI report because it’s an idea that’s been used in annual reports before. The 1986 Burton report used a magazine format and that was 13 years ago.’
Whatever format a company plumps for, basic ideas about superficial presentation are evolving, too; and the new buzzword on the block seems to be ‘communication value’. Ferguson comments, ‘In terms of aesthetics and overall ‘feeling’, we’re designing reports that are less glossy and glitzy than in previous years. The vast majority of our reports have even featured matt-coated papers as opposed to high-gloss.’ He adds, ‘This understated approach adds to the integrity of the design.’ Carter concurs, ‘The aim is to give good value for money and we’re designing reports, such as that of Informa, which are deliberately less formal and grand.’
Less ostentation doesn’t equal less pulling power, though. Ferguson is convinced that we are increasingly seeing captivating front covers that border on the provocative, employing powerful images, words or phrases in an effort to capture the reader’s attention from the start. ‘The cover subject has forever been a quality versus quantity problem,’ he argues. ‘Just a few years back I recall many annual reports featuring complicated montage imagery on their covers. There is a movement of companies now that are turning away from showing too much. We’re heavily in favor of creating covers that really do something simple but intelligent to entice the reader’s attention.’
Even the language of annual reports is following the trend toward simplicity. A shift away from stuffy, arid copy and financial vernacular is becoming common. Bickerton has detected this linguistic change. ‘It’s not just the accessibility and presentation that’s changing,’ he says. ‘The actual tone and language of reports seems to be targeted at the private investor.’ The appeal seems to extend beyond retail investors, though. Speaking of newer reports, Addison’s Anderson remarks, ‘Analysts love ’em. If you can use wit, it makes the report less dry and more easily understandable.’ He is at pains to add, however, ‘This approach can only be used in certain situations. I wouldn’t necessarily suggest it to a bank.’
New focus
Perhaps the most significant change is the radical swing in focus. Ferguson notes a shift toward a more future-oriented approach. He comments, ‘Today’s annual reports are now including bolder and more succinct headlines and relevant graphics representations that communicate stronger messages about how the company is positioned for growth and how they are going about delivering shareholder value.’
Many reports are incorporating a ‘strategy for the future’ or a ‘strategy for growth’. A two-dimensional snapshot of the company’s present situation isn’t enough. Sumner remarks, ‘In the ICI report, we were trying to highlight the company’s progress. The report showed ICI’s transformation over ten years.’ Carter agrees but counsels that continuity should still be preserved. ‘Things have got to be given a context and continuity is a key thing. You need a very good reason for reports to be dramatically different year on year. Analysts tend to look back at ten years’ worth of reports and, if 1998’s report is incredibly different from 1997’s, they’ll think Has there been a train wreck?’
If you’re given responsibility for the company’s annual report, be sure of a big surprise because keeping pace with the shifting sands of trend, fashion and corporate strategy is not easy. Such ongoing tectonic movement renders the ground-rules of reporting very nebulous indeed.
As Simon Carter puts it, ‘Annual reports have to be re-looked at because they’re often lacking direction. They’re like a teenager getting to the end of their teens, just riding around on a motorbike and playing loud music, when they should be facing up to responsibilities.’
