Cutting the clutter
One of the annual reports we’ve been most impressed with over the years is a 12 page, 50 x 60mm leaflet, stuck to the side of an Innocent smoothie bottle, probably about six years ago now.
The report had one fact per page and all the basics you usually turn to an annual report for (profit/loss, turnover, key facts, major achievements) all combined with a presentation of the company’s ethics and motivations for how it does business.
OK, so it wouldn’t pass the regulators, but the report communicated brilliantly and equitably to all people interested in the company the fundamentals of Innocent’s business, in a completely uncluttered way.
Two years on from their report, Louder than Words: Principles and actions for making corporate reports less complex and more relevant, the Financial Reporting Council (FRC) with the Accounting Standards Broad (ASB), is getting even deeper into the reasons for why so much stuff goes into annual reports.
They’re calling for preparers of reports to use the summer ‘review period’ to plan for a simpler annual report next time around. Well done them.
‘Cutting the clutter’
Had hoped, of course, that their report on cluttered reports could have been shorter, but the sections we’ve read so far are well written. We reckon with two hours to spare you can get through it and it will have been worth it.
Of course, at Zephyr, we’re all for de-cluttering. From our point of view it’s about making your annual report communicate (again), with your primary target audience, investors.
The FRC and ASB get even more specific about the definition of clutter, saying it comprises two problem areas:
- Immaterial disclosures that inhibit the ability to identify and understand relevant information;
- And explanatory information that remains unchanged from year to year.
Who hasn’t skipped over the explanatory information in big chunks because it’s repeated from last year and scribed so carefully in thinned out legalese? Designers just set it to look tidy. Little thought is ever given to its purpose and therefore its presentation.
Take a look at pages 14 and 15 of Cutting the Clutter and you’ll see a fun presentation of the behaviours that create clutter. Our personal favourite is “everyone else discloses it”, which reflects the benchmarking approach to definitions of best practice. We think they should add in “we didn’t get any hassle for what we put in last year, so let’s keep it in”, reflective of the risk- and work-averse report preparer’s mindset!
Materiality is the other biggy they address in Cutting the Clutter and interestingly they highlight inclusion of CSR content as an issue. Not because it shouldn’t be included necessarily but because only 20% of a research sample provided a convincing explanation of why CSR is important to their business. Take care those embarking on integrated reports, as per a couple of previous blogs of ours:
2011/04/08/who-wants-integrated-reporting
2011/03/04/integrated-reports-have-to-provide-the-links
There’s lots more to talk about in Cutting the Clutter including the tools included to help preparers of reports. Once we’ve got to those we’ll report back again.