Effective Annual Reports for public companies, private companies and nonprofit organizations
by Lawson Cox | Managing Partner | Prescott Alexander LLC
The annual report can be an important component in a company or organization’s communications mix. But understanding its purpose, audiences, formats and development process can be overwhelming!
This overview can take some of the mystery out of the annual report and make it less daunting.
What is the purpose of an annual report? Why should I produce one?
An annual report explains who you are, what you do, how sound you are financially, why you matter and where you are going. An annual report can inspire, inform, intrigue and more. It reinforces your brand. Ultimately, its purpose is to convey your organization’s unique position and to build confidence among its key stakeholders.
What types of organizations produce annual reports?
Annual reports are issued by public companies, private corporations and nonprofit organizations – each with unique aspects:
Public Companies – Government regulations require public companies to produce at least an Annual Report on Form 10-K. Communicators see the benefit in enhancing the financial report with a more elegant, professionally crafted message and brand-enhancing experience. The audience typically is investors. However, other secondary audiences can be highly important: employees, customers, communities, nongovernment organizations, media, etc. There is no direct call to action, but messages are structured in a way that investors can learn the benefits of investing in the company.
Private Companies – These companies normally don’t face a regulatory requirement to produce an annual report. However, many private companies see the benefit in issuing an annual report, especially if many competitors are public. It offers the opportunity to communicate the company’s vision, mission and progress to key stakeholders, such as employees, customers and communities, but sometimes also a small group of investors. Detailed financials are not provided, only highlights.
Nonprofit Organizations – Most nonprofits are not required by law to issue an annual report. But regular communication to supporters is important. An annual report can communicate the mission of the organization and its progress over the year. It is not uncommon to have a call to action, which encourages benefactors and volunteers to continue their support and invites others to begin supporting the group. Typically, nonprofit annuals do not contain detailed financials, but offer a financial highlights section.
What are the most common formats? Which might be best for my situation?
Most annual reports are distributed both in print and online.
Printed Annual Report Formats – Public companies typically issue annuals in one of three formats, each with a different treatment of the detailed financial information:
- Traditional annual report – Usually contains a shareholder’s letter, an overview of operations and a professionally typeset condensed version of the financials.
- Pros: visually inviting; conveys a professional brand presence; financials easier to read; fewer pages in the financial section can save money on postage; financial section can remove the need to mail 10-Ks with the proxy materials
- Cons: typesetting the financial section adds to production costs and requires extra review by finance/auditing personnel
- 10-K wrap annual report – The same format as the Traditional annual, but using the 10-K as the financial section rather than a more highly designed financial section.
- Pros: more efficient review process by finance/auditing personnel (no need to proofread a separate financial presentation)
- Cons: longer page count in the financial section can make postage more expensive; lower-quality look due to one-color financial section on thinner paper
- Summary annual report – Usually contains a shareholder’s letter, an overview of operations and only a few financial highlights. Detailed financials are made available in a separate document, usually the Form 10-K.
- Pros: visually inviting; conveys a professional brand presence; allows the annual to be used for non-investor-relations purposes, such as employee recruitment, customer communications, media relations
- Cons: for investor audiences, separating the narrative and financials into two documents can be cumbersome
Because their annual reports don’t include detailed financials, the Summary report is the standard for private companies and nonprofits.
Online Annual Report Formats – There are three common formats for online reports:
- Microsites – The online annual report is a stand-alone web site. Frequently, the online annual report corresponds to the narrative section of the printed annual, with the financials provided in a PDF file. However, some online annuals include HTML versions of the financials.
- Pros: provides the annual report in a way that is best suited for onscreen reading; can provide a more rich experience, through use of video, audio and interactive elements; ensures that the content is presented in the most user-friendly manner
- Cons: can be a long development process; higher cost than simply providing a PDF of the printed annual report; not ideally suited for printing
- PDF – An Adobe Acrobat version of the printed annual report, made available for download from the company or organization’s web site.
- Pros: easily and affordably produced; can incorporate bookmarks to aid navigation; has a built-in search function
- Cons: usability experts give PDF annuals low scores for onscreen reading, but the format is helpful for quickly obtaining a report for laser printing and offline reading
- Flip books – Attempts to simulate a book-reading experience onscreen, where the user flips pages with the computer mouse.
- Pros: Can be less expensive to produce than a microsite
- Cons: More expensive than a PDF but offers a worse usability experience; not suited for printing
Since some people prefer print while others opt for online, a best practice is to make your annual report available both ways. For the online annual, a microsite gives the best online reading experience and ought to include a downloadable PDF for offline viewing. The printed annual report format can vary based on your company or organization’s unique situation.
What content should I include?
Outside the financial information, annual reports contain a letter from the CEO and/or Chairman as well as a narrative section. The letter and narrative usually focus on the year’s key accomplishments, financial results and operational performance.
Highlight your strengths and explain why your company is a sound investment or how your nonprofit makes a difference. Include your strategies for growth and how you plan to add value to your company or organization. These types of forward-looking statements are expected and help show leaderships’ vision.
Provide industry information, including your position in the industry relative to your competitors or peers. When targeting investors, you may want to explain the industry’s growth potential and why it is more appealing than investing in other industries.
Make the report easy to read. It’s a good practice to have a central theme or tagline. This serves as a hook from which you can hang other messages within the report. Use headings, subheadings and captions that make content skimmable, so the casual reader can get your key messages at a glance. Be consistent with your brand. Tailor your message for your audience and its information needs. Be mindful of tone, especially when delivering negative results.
Consider offering expanded content online. If your online annual serves as a compliance document, you need to make the online content precisely match the printed annual. But some public companies label their online annual as an “online annual review” to underscore that only the print version is the legal compliance piece. This allows them to offer additional content online, such as videos, additional success stories, interactive charts and more.
How long should I plan for the process? Who should be involved?
Ideally, the annual report process begins a few months prior to your fiscal year end – sometimes midway through your fiscal third quarter. At this point in the year, you have an idea of how the year will end and what your key messages will be. The goal is to distribute your annual report in the middle or end of the first quarter of the fiscal year. (Public companies: check the current regulations for your stock exchange, as annuals must be distributed within a certain number of days after the end of the year and a certain number of days before your annual meeting.)
A key element to any successful annual report is involving the right people – and at the right time. Think through who needs to weigh in on the messages, approve budgets and grant final sign-off. Not everyone needs to be involved in every stage, but involving the proper personnel at the right point will make the process run smoothly.
When developing your schedule, plan on these major steps. Keep in mind that certain phases can happen simultaneously:
- Research, theme and concept development: 3–4 weeks
- Design: 3–4 weeks
- Copywriting: 5–6 weeks
- Photography: 3–4 weeks
- Typesetting: 3–4 weeks
- Online design and production: 6–8 weeks
- Printing, binding and delivery: 3–4 weeks
Plan and proactively manage the process – good project management will keep your report on track.
About this article:
This article was originally presented as a handout at the IABC/Atlanta miniconference in June 2011. The “Effective Annual Reports” breakout session featured Lawson Cox, managing partner of Prescott Alexander, as speaker and moderator.
Lawson is a versatile business communicator with 23 years experience providing communication strategy, project management and design services, which help companies and organizations better communicate online and in print to their key audiences.
Annual report development has been one of Lawson’s areas of expertise. Over the past 15 years, he has developed more than 80 annual reports for a wide range of companies and organizations. Clients have included Acuity Brands, Align Technology, Brown & Brown, Citrix Systems, Cousins Properties, Cox Enterprises, East Lake Foundation, Equifax, Goodrich Corporation, Massey Energy, TLC Vision Corporation and UPS.
In addition to annual reports, Lawson’s expertise includes developing web sites, corporate visual identity and printed collateral materials.