This is strange. Try talking to leading annual report consultants about trends this season and many don’t want to talk. Not because they are shy of promoting their skills in this magazine, with its key target audience and all that. Nor because they don’t have time between all the new-business pitches.
No, the simple reason is that many of these consultancies have reinvented the reporting process. The concept of ‘annual’ reports has been thrown in the trash in 2001 ‘It is all about corporate reporting not annual reporting. It’s more of an overall approach,’ says Sheila Lalani at CGI in London.
Her thoughts are echoed throughout the annual report world. Consultants may well be helping clients produce their traditional hard-copy reports as in previous years but they say it is necessary to change their label. Some consultancies have concentrated on offering clients better linkage between hard-copy and online reports. Others are taking the stakeholder route, persuading clients to address a wider variety of non-financial audiences via a suite of printed reports and web pages.
Online on time
The continued focus on online reporting should not come as too much of a surprise, despite the backlash against e-business in the markets. The new investment approach to the internet requires a more focused management discipline and more concentration on those areas where the internet can really add value. Reflect those sentiments into internal corporate processes and IR web budgets could come under pressure. Luckily, the internet is an ideal tool for corporate communications and most – especially larger – companies seem happy to proceed with their online reporting experiments in some shape or form.
This year’s progress takes the form of more companies turning to a dynamic, interactive version of their report online, rather than simply putting a PDF of their report onto the web site. Scott Greenberg, president of Hauppauge, New York-based Curran & Connors, notes that almost everyone does a basic PDF version these days so the real move forward comes with those companies that have decided to take their online reporting to a new interactive level.
In the UK, many of those who have done the rounds of beauty parades in recent months talk of a continued interest in ‘stakeholder’ reporting – talking to your non-financial audiences in a more rigorous, corporate reporting fashion. It has been going on for a number of years now, but seems to have taken a great leap forward this time around.
Quentin Anderson, CEO of Addison Corporate Marketing in London, believes that this broader remit could be due to a recognition by clients that strength of the corporate brand lies in careful dissemination of the story to all audiences, not just shareholders.
‘You have things like chat rooms where disenfranchised employees can have a real impact on the external perception of your firm,’ he says. He acknowledges that a bit of extra corporate reporting is never going to stop that sort of talk – but that is not the point. Every little bit helps strengthen the corporate brand and those companies that fail to take their stakeholder audiences seriously are more likely to lose the battle for survival should a hostile takeover arise.
Anderson also points out that analysts and other financial audiences now regularly monitor chatrooms and bulletin boards to pick up snippets of information from employees, suppliers and the local community. A recent report on stakeholder communications by Addison argues that ‘equal and simultaneous access to information for all stakeholders is now routinely expected, partly as a response to the new possibilities afforded by electronic media.’
CGI has also taken its clients – or been led by clients – down the stakeholder route. A more traditional continental European approach, it is a trend that has been big news in the UK in recent years. Lalani at CGI says that clients are thinking about ‘triple bottom line’ issues and the sustainability of their corporate brand over a longer period. Putting hard target numbers on non-financial aspects of the business gives them a robustness not previously seen. ‘It’s no longer just reporting on the economic and financial elements,’ she says. ‘It’s about social, environmental and employee reporting. Each company has to assess the best way for them. Stakeholders are asking for much more information and companies are looking to build value with them for the future.’
All in one
Separate stakeholder approaches to reporting remain less popular in the US. Addison in New York (no longer related to the London operation) reports that, if anything is produced, corporate fact books are the most popular add-on to the annual report in print form, encompassing the needs of all non-financial stakeholders in one document.
Charlene Haykel, managing director of the simplified communications group at Addison, says that a more obvious trend is for companies to start reinforcing the messages in their annual report through a wider range of corporate publications and outlets. Those might include the regular corporate or customer web site; the IR web site; the advertising approach; product literature and more.
‘They’ve found it’s much more efficient to have one group within the company managing it,’ says David Dunkelberger, account director at Addison in New York. He adds that more and more clients are requesting the simultaneous launch of their printed and online versions. ‘They also want to see us create a document that drives people to their web site.’ That may mean dropping links into the printed document or producing select financials with a request for readers to visit a site for the full story. Like others, Dunkel-berger believes it is simply a case of companies juggling reporting budgets rather than reducing the budget for the printed document.
Back in London, Simon Lake, managing director of TalkVisual, believes he knows one reason why that remains the case. ‘The printed annual report is something tangible to hand out; it’s still the corporate calling card,’ he says. Sure, the web site can add valuable depth of information – much of which might not be available in printed form – but the hard copy remains key. ‘Clients are still as into them and investing as much time and money in them as ever.’
And that means thinking long and hard about presentation of the book. Robert Moser, managing director of Merchant, says it’s important to recognize that every client is unique, with each having different requirements. He believes the key to a good document lies in encouraging clients to recognize their corporate reporting as an extension of their corporate identity, a chance to show off their individuality. ‘Everybody at the consumer facing part of a company is focused on selling unique products and brand personalities. So why is it that at the corporate reporting level so few companies recognize the need for differentiation?’ Lake thinks he has the answer: ‘Companies are really quite conservative; no-one wants to stick their neck out; no-one wants to go first.’
And the rest…
The trouble with companies being encouraged to think of themselves as unique is that it makes it awfully difficult to lump the various approaches together and identify trends. Some consultants claim that more clients are requesting a more defined separation of the front and back of a report – the words and the numbers – both online and offline. Others say the trend in splitting the book has become rather passe and online reporting means more seamless presentation of information.
Dunkelberger at Addison in New York handily comes up with a trend out of a number of unique approaches. He calls it the non-traditional annual report, encompassing all companies that are requesting something just a little bit different. Some want a more forward-looking narrative coupled with a slot or pocket for the SEC-required form 10K. Others want a more open design or multiple versions of the document for different groups of shareholders. Some US consultants lambast the idea of using the 10K as a replacement for a report. ‘They think it’s the easy way out because they don’t have to proofread another document,’ says one veteran annual report designer. He adds that it is not a recommended means of communicating messages.
The common denominator between all these approaches lies in cutting the amount of time for production. The general trend toward the inclusion of more visionary, forward-looking information in reports of all kinds in the US means that companies are less willing to firm up content until the last minute. That means more innovative proofing methods, with consultants using PDFs and the internet for faster document turnaround.
Two of the most commonly reported trends of the annual report season so far lie in the changing nature of corporate clients. Scott Greenberg at Curran & Connors points out that he is dealing directly with more investor relations professionals rather than members of a finance team charged with cobbling a report together. He believes this is a result of the recognized need for more visionary, forward-looking communication. This is echoed time and again by consultants on both sides of the Atlantic.
The unprecedented levels of corporate consolidation in recent years have also had an effect on reporting. When you move from, say, 1 mn to 5 mn shareholders, steps have to be taken to keep the reporting budget under control. More often than not that means a change in format, or multiple formats, rather than a cut in the size of the documents.
Finally, stronger themes throughout and across all the documents are becoming common. In London, David Ritsema at Radley Yeldar notes that the common content and communication theme of any corporate report has to work just a little bit harder in today’s environment.
And Alisa Zamir at Taylor & Ives in New York notes that clients are beginning to wake up to the need for individually produced photography rather than stock library photography to accentuate those themes. ‘It’s a new century and people are looking to be a little bit more free with their choice of photography. They are looking for themes that are a little bit more exciting.’
Online before time
Whatever trends corporates face as they prepare to dive into this year’s results season, the online or offline element is probably the most difficult question to answer. Nigel Forsyth of Bamber Forsyth is refreshingly honest in his appraisal of the situation. ‘I’m afraid that corporates are stuck in a position where the printed annual report isn’t the be-all and end-all of reporting,’ he confesses. And the online version has to be done but – as of now – there are few companies that can honestly say they are gaining any tangible financial benefits from producing a web-based annual report. ‘Companies are drowning in issues. It’s very difficult for clients to see the best way forward. Unfortunately, things will only get more complex before they get better. Today, they need a communications strategy rather than just saying, We’ll do this type of annual report this year.’
End of the cycle
While the annual report may not yet be dead as a concept, much of the thinking behind producing a once-a-year document already is. ‘The idea of an annual reporting cycle in the internet age is just ludicrous,’ asserts Roger Burgess, director at Pauffley, the London-based reporting consultancy. Companies are now able to publish their accounts more quickly than ever – Burgess points to Cisco Systems as an example. The internet group can do what was once thought unthinkable in reporting circles: close its books and report on any given day.
Even though it has made continuous reporting possible, companies feeling daunted by the prospect of more frequent reporting should not makes enemies of the web. Cisco makes use of new web languages like XML to make reporting a much less laborious task, simplifying the internal processes involved in producing a full set of accounts. While some still talk of HTML as cutting-edge, the new XML-based reporting tool XBRL promises not only to ease web reporting, but also make reports more user-friendly and cheaper to produce.
For Burgess, this new generation of XML-based web tools should also improve the quality of company reports. ‘The annual report is much more than a financial report – it’s a PR tool. But using XBRL to put balance sheet data online strips companies bare. It will allow annual reports to become more of a corporate brochure, liberating it from key financial facts and governance information.’ Already some of Pauffley’s clients are working on a structure to introduce such changes, Burgess reports. ‘We’re seeing the death of the annual report as we know it. What we’ll be left with is a shorter, glossier residual printed document,’ he concludes.
Shifting sands
With all the talk of jazzed up internet reports, you might think budgets for traditional printed annual reports would be coming under pressure.
‘We haven’t found that at all,’ chorus the annual report consultants in unison, most cleverly concealing any element of panic from their replies. Scott Greenberg, president of Curran & Connors, notes that companies have generally shied away from cutting the budget for the printed book. ‘The HTML version has become an additional item in the budget.’
Many consultants on the other side of the Atlantic agree: ‘I think a lot of companies have had to increase their budgets – if only for the online element,’ says Nigel Forsyth of Bamber Forsyth.
He notes that much of the added internet information is being targeted at retail shareholders, yet they tend to be drawn from an older age group that is maybe not so internet savvy – not quite, anyway. Their desire to receive information in an online environment is going to have to develop further before companies will see a real financial – or information- driven – impact.
It seems that most clients are continuing down the road of expanded internet reporting because they believe that impact may not be too far off. Indeed, some even talk of using this period as a type of dry run before true internet reporting comes of age.
‘At the moment we’ve taken the tack of expanding slightly upon our PDF option for the online report and experimenting with a more dynamic internet approach,’ reveals one UK-based IRO, who prefers to remain off-the-record. ‘People have been able to read our report in PDF format for several years now but we’re gradually increasing our other internet report offerings as interest grows.’
This ‘cross over’ period is also mentioned at other corporates. The desire to shift more reporting from print to the net is obvious. It makes real financial sense when the potential savings per annum per shareholder can be $15 (£10) and beyond. Still, there remains a real reluctance to reduce the information value of the traditional printed report until there is clear evidence that more shareholders would willingly turn to the web for their annual reporting diet.
An acronym, please
How times change. PDF or HTML? A few years back you’d have drawn blank stares from most corporate communicators faced with such a choice. Today, it’s a question at the top of the company reporting agenda. (A quick side note for techno-whizzes: we’re conveniently ignoring Java, Flash, XML and such like here in the interests of keeping things simple.)
For those still in the dark, PDF stands for portable document format – a means of effectively ‘taking a photo’ of a normal document, transferring it into electronic format and allowing it to be e-mailed or placed on the web. It isn’t dynamic; it isn’t very interactive. But it is up there and it is cheap.
HTML – or hypertext mark-up language – on the other hand, is a text-based internet language and allows the incorporation of bells and whistles into the presentation of your online report. It isn’t as cheap as a PDF; it takes longer to create. But it can help you make the most of the web.
This year, it seems, the PDF approach remains popular, however there is a definite trend toward more innovation with dynamic, interactive online annual reports too. No longer do companies publish their web reports as an afterthought – they are now there, right up alongside the printed document, from the start. Alisa Zamir, executive vice president and design director of Taylor & Ives in New York, says that PDFs probably still have the edge in terms of numbers but experimentation with the internet has reached a new level during this reporting season.
Some suggest doing a PDF of the statutory part of the report and then investing in bells and whistles for the non-statutory communication section. Robert Moser, managing director of Merchant in London, believes this is a great way to help companies to manage their costs. ‘It’s all about a realization that the internet is not necessarily the only answer – it’s just another dissemination method. The messaging bit of the report [the front end] is the bit that can be brought to life with videos, e-mails and so on.’ He adds that the statutory part of a traditional hard-copy report is all about what has gone before. ‘The messaging section is all about the future.’
And let’s face it, that’s where the future lies.
