Demand for top-notch investor relations professionals is on the rise as merger madness continues and individual investors perpetuate the longest economic boom since World War II. But while new technology is contributing new tools to the I/R arsenal, printed annual reports still constitute the biggest bazooka.
"Most of our clients' annual reports are published in March, after which [the I/R people] take a nice, long vacation," says Patrick Tuohey, a director with Market and Communications Research (MCR) in Rockville, Md. "Then they get started on the next one again in May or June."
Considering the annual report cycle eats up 10 months out of the year (not to mention big bucks) it's surprising that few corporations measure how well their annual reports are communicating key brand messages. "Only 25 to 30 percent of Fortune 1000 companies do this kind of testing," says Christy Beckman, VP public affairs for the chemical company Solutia (a spin-off of food giant Monsanto).
Of course, Solutia is one company that does measure. And Beckman was happy to explain why at the PR NEWS "Best Practices in Measurement" seminar held Nov. 15 in Washington, DC. The annual report is the highest ticket item in the budget and has a long shelf life, she pointed out. It can also serve as a useful benchmark for comparing your company's performance against the competition.
Each year, Solutia hires MCR to conduct two rounds of focus group reviews - one mid-cycle and one after publication - to determine whether the company's annual report content is hitting its mark with professional analysts and individual investors.
In round one, participants are asked to review cover concepts, draft text, graphs and visuals, from which the corporate name and logo have been removed. In round two (post publication), the same group reviews the finished product.
"The advantage is two-fold," Tuohey says. "First, you get to find out which messages are resonating [with investors]. Often the communications department is working in an echo chamber, and they don't have an opportunity to find out if their messages are credible with their key audiences before they go to print."
Second, independent research helps dissuade CEOs from any irrational preferences they may have. Armed with feedback from real investors, a communicator can tell a CEO that his or her idea stinks without fear of being lynched.
And yet, focus group testing has been slow to catch on in I/R circles. One reason may be that it adds yet another dimension to an already painstaking process.
"When we approach people, the last thing they want to do after 10 months of work is subject their work to another level of criticism," Tuohey says.
The price tag may also be a factor. Solutia shells out $25,000 each year for two rounds of testing. It's not cheap. But then again, neither are the Web-based annual reports that companies are so eagerly posting in their race to appear technologically savvy.
Companies with limited funds are best advised to concentrate on a single, polished print report, says Tuohey, whose firm tests roughly 70 annual reports each year.
"Although people like [digital reports], the hard copy version is still the most popular. Analysts can mark it up and write on it. Investors can sit on the couch and read it. An online report is wonderful, but this [medium] is far from replacing the published copy," Tuohey adds.
How is he so sure? The focus groups told him.
(Solutia, 314/674-3804; MCR, 301/962-5660)