Most publicly quoted companies are aware of themarketing potential of annual reports. That is why many commission communications agencies to hone the look and feel of them to fit their brand and appeal to investors.
Strange then, that many marketing departments have little input into these legally required documents – with most of the work being carried out by corporate communications departments, company secretaries and financial directors.
But this could be about to change, as company reporting will soon become more transparent and forward-looking, throwing the door open to marketing departments to take a more holistic approach and increase their standing within large organisations.
Marketing agencies, meanwhile, need to get up to speed quickly so that they can advise their clients accordingly and make the most of a great marketing opportunity.
The catalyst in the company reporting revolution is the OFR – not some revolutionary new truth drug that company directors will be forced to ingest but anOperating and Financial Report, which will be legally required from all publicly quoted companies for the financial year beginning April 2005, probably as part of their annual reports.
According to Trade and Industry Secretary Patricia Hewitt: "It'll improve the quality of [company] reporting and give investors a clearer picture. It'll also help the owners to better understand their organisations and think about how people perceive them."
At the heart of OFR legislation is an attempt by Government to rebuild trust in large corporates – to create robust, transparent and sustainable organisations – and it has been driven forward by a recent EU directive stipulating that company reporting across Europe should be more comprehensive.
Although given the cold shoulder by the top-100 companies back in January 2003, when the Accounting Standards Board (ASB)n set out its initial suggestions for what should be included in an OFR, this change in reporting has been welcomed by key marketers.
"Today intangibles, in the form of services and assets – such as brand equity – are far more important than the tangible financials, but are not well portrayed, if at all, in annual reports," says Tim Ambler, senior fellow of marketing at the London Business School.
Meanwhile, David Hanger, publisher of The Economist and Master of the Worshipful Company of Marketers (WCM) looks forward to more transparency, saying: "The average annual report is backward-looking and financially based. Even the more subjective a the Chairman's Statement, is usually very guarded."
However, Hanger and Ambler have a problem with the OFR guidelines, which they feel fall short by failing to bring out the importance ofmarketing in the production of the report.
"They recommend including details on the future strategy of a company, specifically mentioning environmental and social factors – but marketing has a more direct influence on the future of a company," says Hanger.
"It's a direct method of sourcing and enhancing cashflow. It defines what's being done to win and retain customers – the single most important cash generator in any firm. A company's marketing budget and how it's spent is a key indicator of future performance and should, therefore, be an important part of an OFR, without disclosing confidential and overtly sensitive market information."
As a result, a WCM think tank has been set up to advise the ASB on placing a greater emphasis on market factors in its final guidelines.
If the current bland historically and financially- based annual reports have marketing potential and the power to influence investors, imagine how much this will increase following the inclusion of an OFR containing details of a company's plans for future success, revealing risk-avoidance strategies, environmental and social policies, plus a report on market performance and how this will be developed by attracting more customers.
"Once the bar is raised in what institutional investors want to see in terms of performance reporting, marketing departments will become more accountable for how they are spending shareholders' money," says Peter Cameron, managing director of corporate communications agency SAS, which has extensive experience in producing annual reports.
This could thrust marketing departments into the spotlight, placing greater demands on them in terms of better measurement of the effects of their campaigns, more detailed market research and improved management of customer relationships in order to satisfy investors – generally raising the standard and importance of marketing in large organisations.
And, although legislation requires an OFR only to be released to institutional investors and shareholders, why shouldn't it be used in a wider marketing sense and sent out to other stakeholders as proof of a robust, socially responsible, customer-focused and marketaware organisation?
Is the sun about to rise on a new dawn for corporate marketing?
An OFR shall be a balanced and comprehensive analysis of:
- The development and performance of a business during the financial year
- The position of the business at the end of the year
- The main trends and factors underlying the development, performance and position of the business during the financial year
- The main trends and factors likely to affect the future development, performance and position of the business
Government publishes White Paper recommending large companies to publish an Operating and Financial Report.
The Accounting Standards Board (ASB) sets out proposed key components of an OFR.
EU Directive lays down requirements for annual reports. OFRWorking Group sets out initial proposals.
Government officially announces plans for businesses to produce OFRs.
OFRWGpublishes guidance for company directors producing OFRs. Draft OFR regulations published for consultation.
ASB is asked to develop standards for the introduction of the OFR.
25 November 2004
DTI statement on OFR issues final proposals for OFR without regulations.* 30 November 2004 Publication of Draft Reporting Standards from ASB. Consultation document.
28 February 2005
Consultation period ends.
OFR legislation comes into force.
* DTI needs to lay final regulations before parliament before ASB document can be produced.