---

ANNUAL REPORT DESIGN 2001 A BEACON IN THE STORM

SOPHISTICATED READERS WANT MORE
The public's shortened attention span, coupled with the influence of new and increasingly interactive media, have given readers a craving for instantaneous visual gratification. This has spurred a growing number of annual report designers to depart from tradition.

This cross-pollination of print and web is having an influence on the design of print annuals, asserts Jonathan Pite. He sees a trend where print annuals are picking up some of the traits of the web, e.g., the appearance of being interactive, bold graphics that grab and pull the reader inside, and a more non-linear organization. Mike Weymouth agrees with Pite that many designers are departing from the traditional organization of the annual report in response to the growing sophistication of today's audience. Weymouth noticed some major changes in the annuals he reviewed while judging the Mead Annual Report Show. For example, some annual report designers are introducing the theme of the book right up front, pushing back the shareholder letter, which has traditionally appeared first.

In addition, Weymouth says about half of the annual reports in the Mead Show were scaled down to a finished size of approximately 6x9 inches, therefore doubling the number of pages. Weymouth believes these books have greater potential to land on the coffee table versus the trash can. "I'm not quite sure why the small book evolved, but I think it has to do with how it feels in your hand. Thicker means book... book means I don't throw it away... that I am more respectful of it."

PRINT AS BRANDING TOOL
The tactile nature of the annual report may also be one of the main reasons that the printed annual report has not been replaced by the web in most companies. "The tactile presentation can tell us a lot about the company in subtle ways — the format, the color, the palette, the arrangement of the images, the die-cuts, the embossing, the foil stamping — they all add another dimension to the message," says Brian Hannon.

The print annual report has evolved into a dynamic marketing communications tool that still has relevance in the investor relations armamentarium. But will it ride out the current economic downturn? Richard Lewis doesn't think so. "In recent months, I've seen a large number of corporations that have reduced their annual report to a CEO letter and Form 10-K," he says, a trend that last occurred in the recession of the early 90s. "And now, this low-cost approach to annual reports hurts them hardly at all because they have corporate web sites."

Of course, nobody really knows what the 2001 annual report season will bring. But this much we do know: the print annual report has evolved into a multipurpose marketing tool for many corporations. And with print annual reports still a significant source of income for many design firms, designers are sure to counsel clients about the benefits of communicating bad news — even when budgets are tight.

FINDING MIDDLE GROUND
Striking the right balance of quality and fiscal restraint is important, agrees Lynda Decker of New York's Decker Design. "You have to be careful not to do anything that might be considered expensive, wasteful or arrogant by a shareholder." This is one of the interesting challenges of working on a 'bad news' annual, she says. "It's really a fantastic opportunity. The more restrictions, the more you have to dig deep and be creative."

Yet a winning design should never, ever attempt to mask the truth, cautions Richard Lewis. One of the biggest mistakes companies make is to attempt to disguise bad news, he says, and when this happens, the document falls short of being an effective communication tool.

"CEOs tend to hate discussing bad news. They try to downplay it or cover it over. Sometimes they put out elaborate annual reports as a way to paper over their problems. This is the worst possible thing to do. It's usually transparently obvious what the company is doing," says the annual report advisor to such former clients as AT&T, GTE and Pfizer. He counsels designers to talk straight and get the bad news out as quickly as possible. "Investors know that there is bad news; they want to know what the company is going to do about it. Telling that story is the challenge of the annual report."

THE RULES DON'T CHANGE
Regardless of whether a company has experienced a strong or weak year, designers agree that the elements of a good annual report remain unchanged. These include a clear and focused message, good writing, compelling visuals, and high production values.

"Good design almost always makes a report better," says Lewis. "But the message is far more important than the design. And, sadly, some companies focus on the design and totally obscure the message."

He says IBM has done a particularly good job in recent years of communicating how it is overcoming its problems and adapting to new challenges. "They don't hide the bad news, but the story is about finding success in the future." Lewis defines 'good design' as good organization of information, readable type, compelling photos, and "some element that knocks people's socks off." That last point has become a critical factor for today's annuals because of all the competition for the reader's attention. That's why Anne Traver says that engaging the reader is her first rule when designing an annual report.

"If it doesn't engage the reader you can forget everything else," she advises. "If it's boring, predictable or flat, you lose half your audience at page one. And the half that slogs through the rest of the book will be forming the impression that the company is flat or predictable, no matter what the content reads."

"The annual report should be like a ship in a storm," counsels Mike Weymouth, of Weymouth Design in Boston.
"It needs to project a steady vision for the future regardless of the state of the economy."

Despite widespread hope for an economic recovery in the second half of 2001, businesses across the nation are still bobbing in turbulent waters as sales and earnings continue to fall below already lowered expectations. Hit hardest have been the manufacturing, technology, media, telecommunications and investment industries, which have responded by cutting spending, laying off workers and closing facilities. Among the tough decisions faced by many companies this year: how much to invest in the annual report and how to communicate bad news in their annual report.

While conveying the ups and downs of business performance is certainly nothing new to annual report designers, the question of whether to scale back, and how far to go, remains a significant challenge. Despite the small but growing number of companies that have pared down their printed annual reports, many experienced annual report designers and experts warn that this practice is not a good strategy when times are tough.

MANAGING FINANCIAL UNCERTAINTY
"The annual report should be like a ship in a storm," counsels Mike Weymouth, of Weymouth Design in Boston. "It needs to project a steady vision for the future regardless of the state of the economy." Anne Traver of Seattle's Methodologie believes that projecting a sense of confidence is absolutely critical during a period of financial uncertainty. "A business needs to project confidence and competence and so producing a well-designed, well-crafted book is important. We don't recommend doing such a scaled back presentation that it signals retreat, fear or that a company has something to hide."

Industry watchdog and former annual report consultant Richard Lewis agrees. "Reports that look like losers reflect loser companies. Obviously, when a company is flat on its back, it needs to make a greater effort to communicate, not a lesser one." A former Wall Street Journal reporter, Lewis's career as the principal of two consulting firms, Corporate Annual Reports and Conceptual Communications Group, spanned 40 years.

The fact that the annual report has evolved way beyond its beginnings as strictly a financial record to a full-fledged marketing and branding tool further validates the 'ship in a storm' metaphor. "Today's annual report can't cut it just as an investor relations tool. Not only does it have to meet the investor community's needs, but it also should serve as a vehicle for marketing, recruitment and business-to-business strategies," asserts Jonathan Pite of Pite Creative Services in Boulder, Colorado.

A STATEMENT OF VISION
The annual report has shifted from merely a record of past performance to a statement of vision, notes Brian Hannon, senior vice president of creative services at Long Island-based Curran & Connors. "Many people become active participants in investing for their future, and they want the management of the company to tell them what opportunities they see for growth," he explains. Further, an annual report may be the only connection between an investor and the company, thereby representing the brand and its potential in totality.

There are always downturns in the economy, Hannon points out, so it's important to help clients show their investors how they are going to "bridge the gap" between poor past performance and a better future. He advises clients to find the positive story and tell it in the best way possible. "Above all, don't compromise the vision by using materials that are less than quality because this might project the opposite message and will certainly backfire."