When the annual report requires a major change

by | Mar 27, 2018 | Annual reports, INSIGHTS | 0 comments

A noticeable change to a company’s business, its strategic direction or corporate structure will demand changes to the design and content of the annual report, website and other forms of communication.

Similarly, events causing damage to a company’s social or reputational capital will require a new approach to communication.

The company could be buying a major competitor, closing a factory, selling one of its businesses or implementing the vision of a new CEO to transition from a low-growth industry. It could be recovering from a major crisis, regulatory inquiry or other reputation-battering issue. Each issue requires a different degree of response in the annual report to not only explain the change, the corporate response and the new growth outlook it promises, but to begin to alter perceptions of the brand and emphasise aspects of the new corporate culture.

A big question for the corporate communication and investor relations teams is ‘How much change should we make to the annual report?’

The answer depends on the size and extent of the corporate change or disruption that has occurred. How major, unexpected or complex is it? What are the implications for the company’s employees, shareholders, regulators, local communities where it operates and others? What questions does it raise in the minds of those stakeholders? How much reputational damage has the company suffered and how has public perception changed?

The annual report remains an organisation’s main direct communication from board and management to company shareholders and other stakeholders. Therefore, getting the nuances of communication right in the report can play a decisive role in determining whether people are reassured or become more concerned about the company’s situation. A lack of honesty and openness, or side-stepping the issue through over-use of corporate jargon, could lead to loss of faith in board and management.

Determine the extent of change

Simply taking last year’s annual report text as the starting point and maintaining the same approach may not be enough to reassure stakeholders that the company is taking its new situation seriously. Re-using similar design and photographs to last year compounds this problem.

If you are trying to communicate to investors that, following the disruption, your company now has above average growth prospects, inspired leadership and a go-ahead approach, then you’ll need to alter the tone of the text. You’ll need a fresh approach to the structure, design and photography as well. That may call for a new design and writing team with fresh creative ideas.

You may consider a major move, such as changing from a static, online pdf to the latest technology interactive online report, including a Chair or CEO video response to questions shareholders may have on the issue that is disrupting the company.

FCR’s approach to helping companies to determine the right changes to make in their annual report follows these steps:

  1. Establish what you want to communicate:

  • How to position and explain the corporate change or the strategy being implemented to overcome a business-threatening issue?
  • How will the new direction transform the company’s outlook?
  • What are the main points to make to investors and other readers?
  • What were the stand-out achievements during the past year?
  1. Establish what you need to communicate:

  • Determine if the report should be an integrated one, analysing the company’s business model, inputs and outputs for value creation and long-term sustainability in ways that go beyond short-term financial measures, according to a framework released by the International Integrated Reporting Council (IIRC) in December 2013.
  • Focus on the reasons or responses to the company’s major corporate change or disruption during the year, as well as expected developments in the coming year.
  • Does the change alter the company’s business model? How?
  • Discuss adverse industry issues, company setbacks, and aspects of the business that may not be fully understood among different investor groups.
  • Consider specific concerns of investment analysts and proxy firms.
  • Check proposed content against Australasian Reporting Awards guidelines.
  • Find if the company has a more enlightened approach than its competitors to investment community hot topics: governance, remuneration, environmental and sustainability issues.
  1. Clarify the attributes of the corporate brand, or personality, that should shine through.

    Following the corporate change/disruption should you emphasise solid, dependable and conservative values; diversity, equality and sustainability, or an innovative, technological leadership in your sector?

  2. Determine how much change you should make to the annual report.

    FCR’s corporate values template, below, will help you (and your CEO) to identify which elements of the report to tweak, and by what degree. By moving each control knob to a position on the scale between conservative/classic values at one extreme, to innovative/progressive at the other, you can gain the right combination to reflect your company’s positioning and brand values. Compare this new chart with the one you would have constructed for the previous year’s report. Is the new approach revolutionary or evolutionary?

  3. Should you go further?

    If research shows your audiences have the wrong impression of your company, you’ll need to move the control knobs more radically to alter public perceptions. In doing this, have regard to the position that others in your sector have taken and the values they are projecting.

FCR’s annual report ‘corporate values’ scale

The designers and writers in FCR’s team work together to convert the resulting scale creatively into an annual report that best communicates your new corporate values. They’ll help you develop the structure, suggest possible new elements that might emphasise your new corporate direction, and set the detailed timetable for production.

Viva la revolución!

By Brian Mahoney, director, FCR