OD180 Nonprofit Management Letter #45

February 2010
Annual Reports

Dear Friends,

Lately I have received a number of questions on annual reports. I have also received a few in the mailbox from my own favorite charities, ranging from the simple to the elaborate. Not all that many faith communities and secular nonprofits are in the habit of publishing annual reports these days. I still recommend them, however. So this month I share my thoughts on them. As always, I welcome your comments. Write to me anytime at davidnorgard@OD180.com. I hope your year is off to a good start.

Peace,
David

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Organizational Assessment & Strategic Planning
Development Assessment & Planning

Annual Reports

Why

I still believe in the value of annual reports to constituents, even though the trend appears to be in the opposite direction. The trend, if my perception is accurate, is ironic because, over all, nonprofits are being advised to communicate more often and more fully than ever before. Given all the new technologies available today in even the modestly equipped office, it is easier to produce an annual report than ever before too, particularly compared to those ancient days at the start of my professional life, the era of Selectric III typewriters and index card files.

In my view, annual reports are worth the effort and expense for several reasons. First, it is always good to have readily available for possible new grantors and benefactors a summary report of the state of the organization. (You can slap something together for the unexpected lead but this approach is inefficient in the long run.) Secondly, it is a natural vehicle for keeping your established support base knowledgeable about both your challenges and your accomplishments. This is especially important for membership organizations; members want to know what their organization has done. Thirdly, they provide useful background to reporters and interviewers for public relations purposes. If you are trying to raise your visibility, including the most recent annual report as part of a media kit is always a good idea. Finally, although the main reasons for investing in them are external, they also serve valuable internal purposes. Put together in a series, they can be instructive to strategic planning, mission and vision clarification, and development planning.

When

There is not a bad time so long as it is more or less consistent from year to year. Choose the end of the program year, the fiscal year, or the calendar year, and then give yourself three months from the close of that year to get it out. ....And yes... don't bother unless you really commit to producing it annually.

Who

Make it available to your entire constituency. This is easily accomplished by setting it up as a downloadable pdf file on your website and then informing everyone that it is there via a broadcast e-mail with a link to it. Even if only a small percentage clicks through to peruse it, you still gain points for being communicative, informative, and generally transparent. I would also point to its availability in a prominent spot on the website itself. Don't make people do deep research to find it.

I recommend being proactive about getting it to certain constituents. Specifically, I encourage mailing a print copy to foundation contacts, government officials, important referral sources, key neighbors and community leaders, significant media contacts, and major donors (however you define that category). Make sure that all senior staff have copies readily available in their offices too and that visitors can pick up a copy in public reception areas.

I suspect one of the specific objections to preparing an annual report at all is the assumption that it needs to be printed and mailed to everyone. That would be a big waste and not improve your chances for any "green" award one bit.

How

I suspect the other concrete objection is based on another false assumption, namely that all annual reports must inherently be long and extensive and thereby also expensive and tedious. [Buzzer sound] Wrong again.

A perfectly serviceable annual report can be prepared in the space of four regular size pages, including text, photos, and graphics. For the print version, one current client of OD180 is using 2 11x17 sheets and then folding them over as a self-mailer to avoid the cost of an envelope...and the development director has still been able to wedge in all the essentials. (Very savvy...you know who you are!)

In any case, they don't need to be long and indeed should not be. Attention spans are diminishing.  However, they do need to be complete...

What

That leads to the question of what should be included. Here is my list of the essentials of any complete annual report deserving of the description (in no particular order):

Financial Summary - Whether the news is good or bad, it simply must be there. Not including figures subverts the very value of producing a report in the first place in that it raises more questions than it answers. So if the news is bad, explain it, and if it is good, thank everyone for it.

Leader List - It is tempting to omit a list of the Board of Directors or senior staff if you are working within very limited space but again, these lists need to be there. Leaving out the names of the responsible parties is like hoisting a red flag of caution and curiosity over the very thing that is meant to reinforce confidence and clarity.

Messages from Board President & Executive Director - A personal word from both is ideal. Space permitting, include a signature and a photo. The President's message should emphasize governance and development matters; the E.D.'s message should accentuate management and program matters.

Mission & Vision Statements - There is no need to comment on them unless they have changed but do include them.

Program Highlights - Cover all programs but not necessarily equally. Place proper emphasis on the larger programs or departments and be sure to highlight major changes, such as closures, openings, relocations, expansions, reductions, and changes in leadership.

Recognitions - You very well may not be able to list every donor by name but it is critically important nonetheless to list every category of support, individuals and foundations, government entities and community service clubs, etc. Also, do make room to list major benefactors by name, especially major memorials, tributes, bequests, and the like.

"The Story" - Whether in the message from the E.D. or President or the program highlights or as a separate piece, a story about how the organization has made a difference is absolutely essential. It's why you are there and why anybody is bothering to read everything else.

A Final Word

Preparing and distributing annual reports is time consuming and their impact is rarely immediate or obvious. Yet they contribute to building an organizational culture that values self-reflection and transparency and these values, in turn, can fortify learning and loyalty. In short, they are a long-term investment...but a very prudent one.