LET’S start with hello and thank you. Greetings to IR Web Report followers – I’m hoping we won’t be strangers for long. And thanks to Dominic for asking me to be a contributor – I’m looking to helping you make IR Web Report an even more valuable resource.
You may know from reading Dominic’s recent introduction to new contributors that I was trained as an accountant but now work as an independent financial writer and consultant. So I thought I’d share my thoughts and perspective on an IR project that involves both communicators and accountants – the annual report.
If it hasn’t already started, it will be in full swing within a few weeks. I’m referring to the tug-of-war that takes place during the planning and production of an annual report. This contest usually features two teams: left-brainers (the logic and finance folks) versus right-brainers (the intuitive and creative types).
The two sides share a common objective: that of producing an effective annual report; however, they usually approach the task differently. Like our brain, the annual report is divided into two hemispheres – a narrative section and a financial section. Depending on which end of the rope you’re holding, the primary purpose of the report is seen as either stakeholder communication or regulatory compliance. Agreeing on how to achieve this dual purpose is where the tugging match usually starts.
I’ve blistered my hands for both teams in these tugs-of-war, having started my working life as an accountant and later switching to the communication side. For the purposes of this article, though, I’ll play the role of the third participant – the rope – and share my ideas for making the production of an annual report less of a contest and more of a co-creative process.
Tell a convincing story
The challenge for communicators is that the finance folks often take the position that the numbers speak for themselves. In other words, say what you want at the front of the book, but it is the financials and MD&A that tell the real story. Well, a good story has a beginning, a middle and an end. Communicators can ensure that the beginning is convincing by:
- Easing up on the PR. And the adjectives, which, if used excessively, all too often don’t merely fall on deaf ears, they deafen the listener as well. An annual report done right enables readers to become sold on your company.
- Proving your points. Enrich the narrative with meaningful metrics. This provides a view through the eyes of management, one that your audience will value.
- Getting aligned. Be sure that the stories and examples reflect corporate strategy and objectives, not matters that have little bearing on the overall success or direction of your organization.
Simplify without being simplistic
The rules of the accounting and legal professions are geared to providing more information, not less. Add to that the timing of their contribution to the annual report (it’s nearly always the last thing to come in) and, well, you can to see why the communicators often bulk-up before the tugging match begins. The financial team can add to the communication effectiveness of an annual report by:
- Simplifying content. Ask yourself: is there scope for reducing complexity or deleting unnecessary material so as to simplify reporting, without making it simplistic, while still providing insights and a clear message?
- Using plain English. It’s an annual report, not an insurance policy. The goal is to communicate clearly to a business-savvy reader using jargon-free language throughout the financial section.
- Adjusting perspective. The numbers may speak for themselves, but what you say about them and how you say it speaks just as loudly. So rather than looking at the annual report as a disclosure document, look at it as an opportunity to communicate to all of your stakeholders.
Balancing reporting objectives
In the end, the report is a balancing act between meeting compliance requirements and providing meaningful business insight. To achieve that balance, both teams need to:
- Consider the reader. Take a step back and look at your report in its entirety, much like a reader would. Ask yourself: what would a first-time reader of our annual report think?
- Measure effectiveness. If you’re measuring and reporting your company’s performance, it also makes sense to report on the performance of your annual report. Besides, how can you manage what you don’t measure?
- Celebrate. When the job’s done and your hands have stopped blistering, celebrate the effort. With everybody. And talk about how you can improve the process and your report next year.
Letting a good idea evolve
The annual report was originally intended as a financial report to company owners and capital providers. It has, however, evolved into a complex, lengthy document. Today’s reports integrate an enormous range of reporting. From sustainability and CSR reporting, to increased financial and risk disclosure, everybody is pitching in with more content.
But these aren’t the only changes. The audience has grown to include a broad spectrum of stakeholders. The way that audiences consume information has also changed significantly. Meanwhile, business has become more complex, as have accounting rules.
Yet the annual report remains largely rooted in its traditional form and an entirely different communication era. Big changes are needed, but they won’t happen overnight. Indeed, many will require a fundamental rethink of today’s reporting model.
In the meantime, we’re all pulling for more effective corporate reporting and communication that truly informs. So what are you doing in 2011 to tug the content of your annual report into the Information Age?
photo credit: Alex Tran