ASKING an investor what makes a good annual report is like asking somebody what makes a good pizza. Some enjoy the simplicity of a thin, crispy base topped with only tomato sauce and cheese. Others prefer thick-crusted varieties capable of supporting a shopping-cart load of toppings.
What’s the secret sauce for annual reports? Like good pizza, it usually boils down to keeping things simple. As Leonardo da Vinci proclaimed, “Simplicity is the ultimate sophistication.” I’m not sure what Leonardo would say about annual reports, but keeping them simple these days is a challenge.
Rising demands for more disclosure and the integration of sustainability reporting are among several factors making annual reports ever longer and more complex. Unfortunately, too many annual reports are choked with low-quality information, disconnected content and boilerplate, all of which obscures key messages.
Clear, crisp communication, on the other hand, is a sign of strong leadership. It’s also an opportunity to improve engagement and dialogue with stakeholders. Let’s look at four techniques for cooking up a good annual report.
Focus on strategy
You can structure a report in any number of ways. But describing your strategy – and perhaps even illustrating it – at the front of the book provides a means to underpin the rest of the narrative.
Start by summarizing the main elements of your strategy, highlighting corporate goals, performance indicators – both financial and non-financial – and strategic priorities. This will unify the report, creating a clear story and consistent message from cover to cover. It also helps organize the copy into sections that readers find easy to comprehend.
Cut the clutter
Regulations are a big source of clutter. If it’s required, it goes in the report. But that doesn’t mean it can’t be managed.
Clutter usually crops up in two ways. Immaterial narrative and repetition, such as that found in financial notes and disclosures, often reduces a reader’s ability to identify and understand relevant information. Plus, it can be annoying. Explanatory information that remains unchanged from year to year, such as policy and procedures, often provides little value to readers.
The annual report preparer is always faced with a smorgasbord of content. Rather than use all of it, you need to continually make choices about the value of content. If there’s no compelling reason to add it, leave it out. If you must include it, you can eliminate or reduce duplication by cross-referencing to other sections in the report or pointing readers to a corporate website for more detail.
The goal is to explain performance in a meaningful way while avoiding excessive or meaningless detail that obscures key messages. Less clutter equals more impact.
Sum it up
The traditional three-part business writing model looks like this: introduction, body, conclusion. Unfortunately, that doesn’t work well in an annual report. People tend to read only the initial part of any piece of content. So your essential messages may be missed if they’re buried at the end of a section.
To get readers to read beyond the opening, you must convince them of the content’s value. A better approach is to combine the conclusion and introduction. Or start with a few highlights. In other words, put the bottom line on top. By developing an interesting and informative lead, you’ll pull your readers into the story.
Similarly, tables, charts, callout text and other graphic elements help tell your story visually and at a glance.
Stakeholders aren’t always familiar with the jargon and terms of your business and industry. The same is true with acronyms. Even if these are clearly identified, overusing them overloads a reader’s ability to comprehend meaning quickly.
Plain language, on the other hand, minimizes the effort required to understand relevant information and key messages. It also reduces often imperceptible hesitations that readers experience as they search for meaning.
I’m a big fan of simplicity in annual reports and, for that matter, pizza. Simplicity is an often overlooked yet powerful strategy for keeping content clear and informative. The objective is to communicate simply, not simplistically, by using structure, brevity and language to convey your messages clearly. That, in my opinion, is the recipe for a good annual report, whether it’s thick or thin.