Redefining the Role of the Annual Report
by Stuart Z. Goldstein

(previously published in IABC's Communication World magazine, March 2001)

The Annual report should be a company’s most important strategic communications document, setting forth the firm’s vision, values and operating philosophy, as well as its communication strategy. It could be akin to a company’s strategic plan in importance and lays out the positioning groundwork to explain where the organization is going over the next three to five years.

But if the Annual is this important to a company’s positioning and strategy, why have these reports been failing so miserably over the past decade?

In truth, many companies have lost their way with the Annual. If you doubt that point, ask the analysts and media that cover these publications. Also, one need only look at the level of disengagement by the CEO and senior management in the entire process for further proof.

Companies today lack a clear understanding of the Annual’s role in corporate strategy. They also fail to recognize the critical value it can play in providing a road map of key messages that the company can use in their external and internal activities.

The role of the Annual has been largely changed by innovations in technology that have broadened access to information. Not only do we have more distribution channels for this information, but the subsequent reporting of this information through various formal (i.e., news organizations) and informal channels (e.g., Internet chat rooms) has exploded the sources of financial and business data. Competitors have also become an equally important source of data on price, market share and marketplace perceptions to that which has historically been provided by the company.

The early role of Annual in providing information on the company’s financial health has been largely replaced by the 10K financial filing. While the business discussion in the Annual is still relevant, it too has been reduced somewhat by the numerous securities analysts’ reports which are now available over the Internet.

A Victim of Homogenization
Increasingly, the Annual is a project which neither the CEO, head of corporate communications or any other senior executive wants to tackle beyond giving approval to the graphic look and feel. The writing is either assigned to a mid-level communicator, or even more frequently, it is outsourced to a freelancer, who then works through a committee of 20. By the time it’s completed, few readers find any clear message or corporate personality. The book is largely a statement about how great we are. The reader, who is generally familiar with the company’s current competitive space, knows that’s probably not true. And even if it is true, so what? The current use of Annuals to report last year’s business results is dated the day it’s published. It’s certainly not a predictor of future performance.

In truth, the Annual report has lost its voice. It is homogenized to the point where it has no taste, no feel and no real impact. However, the need to reverse this trend is even more critical in the information age.

Use to Annual to tell your story
Companies now face a growing competition for influence among their various publics. In the information age, with multiple channels and suppliers of data about your company, the power and quality of your story becomes an even greater business imperative. The Annual is the one document that reaches millions of readers, either in print or via the Internet.

As the single most widely read document, the Annual provides a chance to anticipate how the company is perceived, in light of trends and competitors, and to articulate a forward-looking story about the company that reflects vision and direction. The story is intended to transcend the current business circumstance and address the future.

Companies need to create their own folklore. Folklore stories have survived through centuries, because they communicate powerful stories that resonate with readers. Usually they reinforce some ideal or set of values that transcend culture and customs. We can all think of companies with a story line or image that might well fit this description. In the modern age, the persona of a company can be a powerful means by which to influence perception, reputation and buffer financial results.

By no means is the Annual a panacea. But we should think of the Annual as a way to fill in the blanks about your messages and to characterize your decisions.

Reinvigorate the process and the content
Companies need to recommit and see the Annual as their best opportunity to provide a "singular voice" and to tell a consistent and clear story about their direction. The story must be a powerful and compelling picture of the future. It must be a sustaining story and it must resonate with an increasingly diverse stakeholder audience.

The role of the Annual today is to answer the following strategic questions:

• Who are we as a company?
• What is the CEO’s vision?
• What do we believe in?
• How do we see the world changing?
• Where are the land mines and the opportunities?
• How is the company preparing for the unpredictable and changing nature of our industry?
• Does the company have the leadership capacity to lead?
• Have we demonstrated the values we’ll need to succeed?
• Can we communicate examples of how resilient we are to change?
• Is the company the sort of place where people can come and innovate?

Make it strategic
To achieve this goal requires buy-in from the CEO and a commitment from the head of corporate communications. The Annual report should represent the culmination of a strategic communications planning process. If the report is to reflect the embodiment of the company’s vision and strategic messages, it should start with research and a broad assessment of external industry trends (for context) and interviews with the senior management team (for shared perspective). The head of corporate communications should be leading, not delegating, this effort as the company’s chief communications strategist.

The Annual provides an opportunity for the senior communications officer to influence how the company positions itself and the language it will use to frame its key messages. It is also through this exercise that the senior communications officer can help the CEO articulate his/her vision and encourage alignment of these messages in all subsequent communications activities.

Now before some my colleagues take umbrage with the personal accountability suggested here, let’s not overlook that in a number of successful companies the CEO writes his/her own letter. These CEO recognize the strategic importance of the task and provide an appropriate leadership role model we should emulate.

The Annual offers a once a year opportunity to unify strategic messages that can be used throughout the year and be reinforced in all areas of the communication disciplines. Without this strategic communications approach, often the result is a disparate set of messages being used. No wonder, for example, in media relations we develop situational messages that may not flow from or be consistent with strategic messages. The same yardstick can be applied to marketing communications collateral with its heavy emphasis on product messages.

Senior communications officer should develop the Annual’s theme, storylines and visual concepts, based on research and their own leadership vision (working closely with the CEO). The creative talent and substantive knowledge of a communications staff should be used as a sounding board, at various junctures in the Annual report process. But Annual reports require a singular point of view and vision to be successful. The more these tasks are disparate and delegated, the less cohesive, coherent and impactful the Annual will be.

Lead the design effort
Design firms will tell you they prefer clients with a clearer idea of what they want to achieve substantively, conceptually and visually. The computer slogan, "garbage in garbage out," applies. Prepare for the meeting with the design firm staff. Give them an overview of trends in your industry. Educate them on the competitive issues and the company’s targeted customers looking out over the next three years. The challenge here is to articulate verbally so the design firm can translate these ideas visually.

It is not a crazy notion to come with your own page-by-page road map for the Annual. While you may be ill-equipped beyond crude drawings, the thought process behind these drawing will help the design firm be more effective and give you a visual product exceeding expectations (even yours). The design firm is not the senior communicator’s vendor, they are your creative partner in communicating and leveraging the impact of your story.

Be creative, be focused
Inventiveness in Annuals should not revolve around a design firm’s interest in using knock-your-eyes out color or typeface, photo imagery that runs from the Daliesque to a leftover Gap magazine ad. This smacks of design for the sake of design. It’s actually more inventive and interesting to look for ideas that augment or leverage your theme. For example, you could introduce a second story line in the Annual that’s unrelated to the company.

Following the consolidation of National Securities Clearing Corporation and The Depository Trust Company last year, we picked, "The Power of One," as a theme to underscore the synergies that would benefit the financial services industry. Our second story line involved featuring six individuals with short vignettes, who changed the course of history by their unrelenting commitment to the pursuit of one idea. The subtext was that beyond the size of the company or marketshare, we recognized a key point of differentiation as we move toward a global financial services community would be the power of our ideas.

A school of thought is emerging on whether Annuals have any relevance anymore. Unfortunately, some of those raising these questions are professional communicators. For some communicators, this may reflect the frustration of trying to get a single-voice approach. For others, it may be like the family member who knows he has to take out the garbage.

Win their hearts and minds
The exigent reality is that there has never been a more critical period for redefining the role and elevating the importance of the Annual report. In media relations, we talk a lot about controlling the media channels. We work at not allowing others to frame our message or our image by getting in the newspapers or on TV ahead of us or without our response to balance perceptions.

Well, the same holds true for the Annual. If the three "Cs" of effective communication are clarity, consistency and constancy, the Annual should be used to lay out the battle plan. It puts a stake in the ground against which multiple communication strategies can flow, while reinforcing a continuity of message that can be heard above the din of competing and conflicting messages offered by others.

In any marketing sales class, the first lesson is that people need to like you, and buy-in to what you believe, before you can even begin trying to sell them something. This is sometimes referred to as winning the customer’s heart and mind.

Each year we have the opportunity to win the hearts and minds of millions of stakeholders and potential stakeholders. And if we succeed, this support will sustain our company even during rough economic times or product setbacks.

If the real aim of an Annual is to communicate a company’s vision and personality, maybe it’s time to give this story the attention it deserves.

About the Author:
Stuart Z. Goldstein is Managing Director, Corporate Communications at The Depository Trust & Clearing Corporation in N.Y. His 20+ years of experience cuts across the disciplines of corporate communications and public affairs, including serving as a spokesperson at two Fortune 500 companies. He also spent a decade running political campaigns in New Jersey. He can be contacted at sgoldstein@dtcc.com.

back to Table of Contents