Preparing a Better Annual Report
Best tip: produce one that's easier to read 
and is a more effective marketing tool

By Suzanne Fischer

An arresting photo of a beautiful woman graces the cover. With Snow White-fair skin, brilliant blue eyes, and glossy black hair in a severe and stylish cut, the model easily could carry off the latest haute couture in the pages of Vogue. But it's not Versace or Calvin Klein she's selling; it's cellulose.

Buckeye Technologies, a Memphis-based supplier of specialty cellulose and absorbent products with facilities in Lumberton and Gaston County, selected the image for the cover of its most recent annual report. “We wanted to create an annual report that would stand out of a pile of 10 to 15 others on someone's desk,” says Sondra Dowdell, manager of the company's corporate communications department.

Dowdell headed up a diverse team of salespeople, technical folks and financial analysts to create Buckeye's annual report with the assistance of an outside design firm and printer. The team's goal was to produce a document that talked about the company's products in a witty, non-technical way. Filled with verbal and visual puns -- but certainly not lacking the necessary hard-core data -- the company's annual report succeeds on many counts.

“It was important to us that we show readers how they interface with Buckeye's products every day, especially since they probably don't even know it,” Dowdell adds.

Financial reports have been around in one form or another for as long as there have been investors interested in how their money was being spent. But after the stock market crash of 1929, the U.S. Securities Exchange act passed, mandating that all publicly traded companies provide yearly financial disclosures to their shareholders. And when emerging technology began to make color photography and other graphic wizardry more affordable, companies took the opportunity to put a marketing spin to the raw financial data they were required to send out anyway. In 1998, 13,577 annual reports were filed with the SEC, which doesn't even include the thousands generated by nonprofits and privately held companies.

A chance to shine or a monumental headache? Often both, annual reports can be a boon and a bane -- a golden opportunity for the company that wants to crow about its accomplishments and a tireless task for anyone unprepared to create the document.

Are you satisfied with your company's annual report? To glean tips for you on how to make it better, we consulted with communications experts from several North Carolina businesses and nonprofits for advice on creating effective, interesting presentations.

Learn more tips from the pros

Why bother?
If your company is publicly traded, you've no choice but to produce an annual report. The SEC maintains stringent guidelines about the types of information that have to be included and hard-and-fast requirements about when the report must be issued.

But if you're a nonprofit or privately owned, should you breathe a sigh of relief that your organization is off the hook? Maybe, maybe not. Ken Eudy, president of Raleigh public relations firm Capital Strategies, says that even if annual reports aren't required, they can still be useful tools in recruiting employees and introducing your business to new or potential customers. And while nonprofits aren't under any legal obligation to write annual reports, they often do.

“Nonprofits will want to show that they've been good stewards of your donations or tax dollars,” Eudy says. “It's also a way for them to publicize success stories and news of employees who have gone above and beyond the call of duty.”

Steve Volstad, the communications and marketing director of UNC Center for Public Television, echoes that sentiment. “People, quite reasonably, want to know why, if we get tax dollars, we still need contributions. An annual report is a good opportunity to explain that pledges pay for programming, while the money we get from the state pays for infrastructure and operating costs.” In the past, the state public TV network wrote a brief report that was included in its monthly program guide. This year will be the first time the network produces a report more along the lines of a traditional annual report. Volstad says the document will be the station's flagship marketing piece.

Barry Teater, public affairs director for the North Carolina Biotechnology Center -- a state-supported operation -- asserts that although he's not required to produce an annual report, doing so makes good sense.

“Almost any organization that takes its mission seriously should have an annual report,” Teater says. “It's a snapshot of the current state of our organization. We only have 45 employees, but we're involved in such a wide range of things and have so many partners that the sum of our efforts is much greater than our number of employees.”

SAS, too, though a private company, has been issuing annual reports since 1992. “Everyone else was doing them, all of our competitors, and there was this air of expectation,” explains Joy Evensen, director of marketing communications. “It's a good opportunity to take stock of the year and talk about our vision. For us it's primarily a marketing tool. It's the most important piece of literature we produce every year.”

On the other hand, some much smaller private companies forego the exercise. At Webslingerz in Carrboro, CEO and president Jeffrey Hoffman says he mails a letter to interested parties describing the company's revenues, number of employees and customers, but that it's “not anywhere near the size or scope” of a typical annual report. “We're a small company,” Hoffman continues, “and the people who need to know about us are pretty few and are plugged in on a day-to-day basis.”

What should annual reports say?
According to the Annual Reports Library, a clearinghouse of over 1.5 million reports and a source of information about creating them, the typical corporate annual report contains nine general sections. They are:

A letter from the chairman on goals achieved (or missed), industry conditions, future strategies;
A report on sales and marketing describing what, where and to whom the company sells;
A 10-year summary of financial figures;
Management discussion and analysis;
Letter written by an outside CPA firm;
Financial statements;
A list of subsidiaries, brands and addresses;
A list of directors and officers; and
Stock information

Content will vary, of course, depending on the nature of the organization and the mission of the annual report. The relatively recent trend of using annual reports as a marketing tool has gone a long way in changing their content, tone and approach.

For an organization that's steeped in science, the N.C. Biotechnology center wanted a report that was “progressive, but warm and accessible,” explains Teater, who writes and edits the annual report each year. “Some of our readers are very technically oriented, but others are new to it, and we can't alienate either group.”

Audience was often cited as one of the key factors in deciding the direction a company's annual report should take, once the SEC-regulated conditions are met.

“I think some reports have gone awry because they've been written to satisfy the company rather than the people who are going to read the report,” UNC TV's Volstad says. “This isn't just a feel-good piece for the company, but an opportunity to communicate with key constituents.”

Indeed, not every year is a good year. The experts we talked to stressed the importance of being straightforward about any disappointments the company encountered, pointing out any mitigating circumstances, and presenting some strategies to overcome them.

Eudy, who is working on his eleventh annual report for Central Carolina Bank, emphasizes the need for the content to revolve around a theme or a metaphor while keeping in mind the business' goals. “You can set out in an interesting way what all the financial data in the back say . . . where the company is coming from and where it's going. But you still need to take a very strategic point of view. It's not just random story telling.”

Who should create the report?
In some companies, one or two people write and design the entire annual report, at others teams of employees work on it, and some organizations out-source the project to public relations firms.

Buckeye took the team approach, pulling in technical people from their two main product groups, employees who deal with the investor community and financial analysts, and sales people who had experience talking about the products to customers.

“It was a really diverse group of new thinkers,” says Dowdell. “That's key. Get creative people from all over the company and get them early.”

At the Biotech Center, Teater is the primary author and he works with an in-house designer, a situation he calls “a great luxury.”

“Our set-up provides continuity from one year to the next and consistency in all our publications,” he explains. “There are a lot of efficiencies in that. Plus, the content largely follows the same format. We've found a formula that works.”

Volstad recommends including all players in the process from the beginning, including designers, communicators and financial people. Also important, he points out, is enlisting the help of a good details person to take charge of creating a plan and a schedule.

Evensen, at SAS, writes most of the copy herself and works with her counterpart in Europe, a design team of about six people, an administrative assistant and student intern to produce the annual report. Like many professionals in the annual report business, she also sends drafts to a “slew” of reviewers for feedback.

Several of the communicators we spoke to stressed the need to get upper-level management to “buy in” to the report's concept and direction. Others say that the report's theme comes directly from conversations with the president or CEO. And one or two maintained that their chiefs were willing to leave the big decisions up to them. It's best, then, to find out for sure who calls the shots in your organization and who needs to be included on your list of reviewers.

When do I start?
The simple answer is -- as soon as possible.

Nearly everyone we talked to reported that it took from four to nine months to produce an annual report, and most collected information for it throughout the year.

In general, the annual report production process can be broken down into several main phases: conceptual development, interviews and information gathering, first draft of text and preliminary design, reviews, incorporation of reviewers' input, final draft, printing and distribution.

Obviously, many factors affect the amount of time you'll need. Numerous reviewers and collaborators, lengthy documents, complex design, color photography, and inexperience can all add weeks or months to the process.

Organizations not regulated by the SEC usually have some give and take about when they release their reports, but publicly traded companies have to issue theirs 20 working days before the company's annual meeting. “The SEC is very strict,” says Richard Windham, director of public relations for Burlington Industries. “There is no such thing as a late annual report. Most projects have some leeway, but this isn't one of them.”

Our experts offered some tips for getting your report out on time. Volstad recommended getting a good detail person on the team to take charge of creating and maintaining a schedule, which also can save you from spending “extraordinary amounts of needless money” on last-minute changes and overtime for harried employees.

Teater and Evensen both suggest that you not reinvent the wheel with each annual report and that you gather information continuously. Evensen, for instance, sends out sections from the previous year's report to key people in the company and asks for updates. Teater follows the “pay as you go approach” by keeping a running list of important events as they happen. Eudy, who works on other CCB projects throughout the year, maintains a file of kudos and quotes about the bank.

It's almost a given that the process will take longer than you think. “We have an ideal scenario every year,” Evensen says, “but something always happens. We have to build enough time in the schedule to accommodate whatever happens that we didn't anticipate.”

How should annual reports look?
With the advent of computers and specialized software, design options have exploded. Good design can draw readers into the report and communicate corporate culture and management strategy in a lively, interesting way. The look of annual reports is as varied as the organizations that produce them.

This year, for instance, SAS decided to go with all black and white photography in its report. “I didn't think it would fly,” Evensen admits, “but I really pushed for it. It's dramatic, a change of pace, and a big departure from previous years. That's the thing; you want to top yourself every year.”

Teater advises keeping things simple: use subheads and white space and enough color to draw attention but not confuse. “You don't need a lot of bells and whistles, really,” he maintains. “Just solid content and clean design.”

At Buckeye, Dowdell aims for new and creative ways to approach the report, and encourages other communicators to try something different if they can.

Of course, cost is a major factor. Color photography, high-end paper and specialty printing can all elevate expenses.

“Expense-wise, we take the middle road,” Teater says. “The report certainly could be more expensive (it costs between $2.95 and $3.75 per copy), but we need to be good stewards of the state's money. We put a lid on spending.”

It's a fine line to walk.

“Your annual report makes a statement about your organization,” Volstad says. “If you look like you're disorganized or lack resources, that makes a statement. At the same time, if you are wildly lavish, that also makes a statement that perhaps you're priorities are out of line.”

This is a dilemma of which Evensen is well aware. “You get a feeling about a company from how the paper feels, how the photos look,” she says. “For better or worse, people make a value judgment about your based on your annual report.”

Will the web replace print?
Our experts think not.

Many companies are putting versions of their annual reports on the web, but few are eliminating printed copies. For one thing, while no federal securities laws specifically require paper delivery, the SEC, according to its web site (www.sec.gov), has stated that at this point “an electronic medium would not provide an adequate means for the delivery of required disclosure.”

Although web versions have advantages -- readers can search for specific information, and printing costs are eliminated -- most agree it will be a long time before the tactile experience of flipping through a well-produced annual report can be adequately replaced by scanning a computer screen.

Buckeye, for instance, produces a web version and a print version. “We get calls from people who have seen the report on the web and who want us to send them a print version, so I don't see print going away anytime soon,” Dowdell says. “There's just something to be said for holding the physical book in your hands.”

Copyrighted Material. This article first appeared in the February 2000 issue of North Carolina Magazine.