While most annual reports are a sure cure for insomnia, yours doesn’t have to be

Annual Report Tip 1
Chairman’s Letter

Consider the opening section of your annual report carefully; it may contain the 30 most important words in the entire book. The majority of people that pick up your annual report make instant judgements about your company and its performance based solely on the first paragraph of the Chairman’s letter. If your readers’ first impressions are inaccurate, they may not give you an opportunity later to change their minds. That means you have but a few brief moments to convince people that your company is worth investing the time to read about. As in the rest of the report, the writing in the Chairman’s letter should be clear. To earn your readers’ trust, deliver good news without exaggeration and bad news without evasion. Whether your readers go any further than your opening depends on what you say and maybe, more importantly, on how you say it.

Annual Report Tip 2
Concept

Few companies today see their annual report as solely a financial document; in a recent survey* of communications executives of Fortune 500 and recent IPO companies, less than 25 percent said that their annual report served only individual investors. We might even suggest that if your intent is to create purely a financial document, that you submit only the required 10-K and forego the remainder of your annual report. Apply the money you’ll save directly to your bottom line.

You probably expect more from your annual report, though. Most companies use the annual report as a marketing, brand building, corporate image and strategic positioning tool. Creating a report that meets all of these diverse objectives, while communicating effectively to a wide audience, is a challenge. Our advice: you should have a cohesive concept that is relevant to your company to guide readers through the book. The concept should be broad to unite all of the elements of the report design, writing, and photography yet specific enough to quickly communicate the company’s core message with interesting images and few words. Ultimately, the annual report should be conceived to ensure that it communicates your annual report’s primary point and fits within the framework of your other marketing/branding efforts.

*Roper Starch Worldwide, June 2000. Commissioned by Potlatch Corporation

Annual Report Tip 3
Access to Senior Management

is critical if your creative team is to accurately reflect your company’s strategic, business and even cultural story. If your corporate message passes through too many levels of management and approvals, each retelling of the story includes subtle shifts that will ultimately alter its precise meaning.

Your investors are savvy. They will perceive the level of involvement by your top management in the crafting and presentation of your annual report. An annual report that speaks with the voice of leadership is far more believable.

Keep the process simple to create the most effective annual report. Assign one person to coordinate between your company and your agency. With fewer points of contact and more direct access, you increase the clarity of your message while reducing your opportunities for error.

Annual Report Tip 4
Is it a Book or a Story?

Your annual report is the embodiment of your corporation—the journal of its success or failure, profit or loss, vision or misdirection.

The narrative is never ending; this year should only be a part of the complete story. Change your thinking from producing "this year’s book" to producing "this year’s chapter." Take the time to see how this year relates to the context of your corporation’s life, and how it relates to the predictions you make. Your investors are thinking about the present but, more importantly, anticipating what’s coming next. They remember promises made over time and your expectations for the future.

Is your corporate story a consistent one? Or does it reflect unfocused thinking? Strategic change can be good, even necessary. In context, a wise investor or business leader sees change in relation to the last "chapter" of your corporate story to make judgements about your future.

Annual Report Tip 5
It’s as Easy as One-Two-Three.

We are creatures of habit! Just as we have been taught to look left, right and then left again when crossing a street, we have also all been taught a method of review when approaching visual material: 1. Photo or Illustration, 2. Headline, and 3. First sentence of copy.

It is important to understand how people read printed material and then format the design of your report to accommodate their tendencies. Allow people to follow their habits. If you intend to "startle" your audience to grab their attention, then set up a rhythm and break it. But break it only one time or your reader will lose patience and move on.

Now about that funky illustration or photo on the cover—the one everyone resists because it challenges convention. The goal of the graphic on the cover is not to satisfy the ego of the agency. It IS to get the attention of the reader. What car do you remember seeing on the drive into work this morning? The Honda Accord or the red Porsche? Remember, you are not in control. The reader controls what gets read and what doesn’t. And the reader has more to choose from now than ever. YOU are competing with popular culture and literally thousands of investment options for your reader’s time!

To compete, use a time-honored technique that David Ogilvy perfected in the late 50s: 1. Photo or Illustration, 2. Headline, and 3. First sentence of copy. American Express, Dove and Pepperidge Farms have been using this thinking with great success for more than 40 years. Be original with something to say, and your readers will give you their time.

Allow your professional services firm some room to challenge you in these first three steps. After that take as much control as you want. Remember that your agency is trying to help you be successful.

Other simple rules of engagement:

1. 10% more people will read a headline below an illustration than
   above it.
2. More people read the caption below an illustration than will read the body copy.
3. Advertising has graphic conventions that have taught readers to skip them. Do you follow advertising conventions when creating
   your report?
4. If roughly six times more people read editorial content than advertising content, why not follow a format that is suggestive of successful publications instead of advertising!
5. Use short copy to tell the story (call outs, cut lines, headlines), then use long copy (body copy) to tell it again in detailed format.

Annual Report Tip 6
Making It Easy

I want the news and I want it now! But make it easy to understand.

The current rage is to expect your professional services, your stock quotes, and maybe even your lunch at the oft requested and rarely delivered "Internet speed." To compound that problem, most people also have a "USA Today" mentality: they want their news in short, easily digested blurbs.

The way your annual report looks should reflect the way readers want to "see" the news. While critics called USA Today bubble gum news, the paper understood the way people absorb information. They use photography, illustration, charts and graphs because they know graphic communication is more effective than straight text. A picture is worth a thousand words. (Bonus question: who said that? Answer below.)

Our advice, if you want a large audience to "get" your message, structure your book to accommodate your readers’ habits. Use headlines, subheads, cutlines, graphs, charts, etc. to tell your story. Use the body copy to tell the same story in greater detail. Your graphics should be vibrant and attractive to grab the reader’s attention, but simple enough to communicate clearly and without trivializing the information.

Still not convinced? Consider this. Sound bites elect presidents and tear down pop celebrities. We as a culture rarely take the time to consider all the details of a story. We rely, instead, on the "executive summary." If you understand that mentality, the USA Today mentality, you can use it to your advantage.

Bonus Answer: the quote "A picture is worth a thousand words" is credited by Bartlett’s to the infamous Anonymous. It is often misattributed as an ancient Chinese proverb.

Annual Report Tip 7
Don’t Be Afraid

A recent survey* of fortune 500 companies asked an interesting question: How important are the following elements to the annual report?

1. The discussion of financial results
2. The CEO letter
3. The design and copy
4. The photos and illustration

The irony in the question is in the failure of understanding. The real question is "Why consider design and visuals as distinct from serious business discussions?"

An annual report is obviously a serious financial discussion. But that does not mean it must be boring. An annual report without "art" does not indicate you are a more serious businessperson. An annual report without thoughtful design, more than likely, will not be taken seriously because it will be ignored. If you do not first capture the attention of your readers, they will never hear what you have to say.

The reality is, few people load their nightstands with annual reports. If you want to communicate your message to your readers, you must first give them a reason to read. You cannot assume that your readers, even though most of them have ownership interest in your company, are eager to hear what you have to say. Remember, you are competing with every aspect of your readers’ lives for their attention.

In the same survey mentioned above, 88% percent of the focus group stated that an annual report without visuals would be "boring." The lesson in that response? Don’t separate the message from its format; create the two to work together. Think of the art as inherent in the message and it can actually add credibility to what you say.

Annual Report Tip 8
Gobblygook?

Is your annual financial review incondite, incorporating lingua franca contrived to dazzle your audience? Or do you speak plainly with the confidence of one who dares to be candid?

Language can be a barrier to communication. Has your doctor, stern faced and peering over his glasses, ever spoken to you about your prospects of remaining "alive and well" in a language that more closely resembled Latin than English? And afterward, a nurse came in and said, "Everything’s OK. Just about everybody on the street has the same health issue. Eat less dessert and you’ll be fine." Clearly, we all want doctors who know what they are doing, but we also want them to talk to us in a language that we can understand.

Do the same for your reader. Your reader expects that you have a detailed knowledge of your industry. Dazzling them with fancy industry terms and insider phrases gains you no advantage. When you use the language of your industry, ensure that it doesn’t get in the way of good communication.

Clarity is a matter of intent; even the most complex industries can be explained in terms that the average investor can understand. The added benefit is that when your reader understands you they are far more likely to believe you.

Annual Report Tip 9
So What?

A final test for your annual report. According to Ernst & Young, the Buyside makes its investment decisions based on the following:

• 30% Corporate Brand and Image
• 35% Financial Related
• 35% Quality of management, strategic vision, technology,
  distribution, etc.

If only 35 percent of an investment decision is based on financial information then 65 percent of that decision is based on non-financial issues. Any way you look at these numbers, marketing matters.

And the fundamental tenets of marketing have shifted to a large degree. In the 1960s it was all about the four Ps: Product, Price, Place and Promotion. Today, marketing focuses more on the four Cs: Customer needs, Cost to meet those needs, Convenience to purchase, and Communication. The four Cs are designed to refocus the marketing engine away from the company and toward the customer.

The term "brand" defines all of your company’s communication, as it does for every company. It is the brand message that must be relevant to the customer. Pull back and look at your report. Put your stakeholder hat on—even better do some research and have your customer look at it. Ask "so what?" about every element in your report. To whom is your report relevant?

If your reader can answer the question, then you have a winner. If your reader cannot answer the question, re-examine what you are doing. Remember, your reader is the one who gets to decide if your message
is relevant.