In this post-Enron era of mandated transparency, corporate annual reports offer greater insights to a broader range of stakeholders, not just investors.
Though annual reports suffer from an excess of glossy prose and disclosures, savvy corporations realize that it’s not just financial analysts and investors reading between the lines. Increasingly, job candidates are mining annual reports to better equip themselves for interviews and to gauge the corporate culture.
“The strongest candidates are the ones that dig into annual reports,” says Lori Blackman, president of DNL Global, a Dallas-based recruiting firm. “The job candidates’ objective should be to help grow the company.”
Here are some questions job seekers should keep in mind when reading an annual statement:
- Is the company profitable? Which lines of business turn a profit and which underdeliver?
- What are the company’s biggest business or market-driven challenges?
- Does the company focus solely on executive compensation or does it tout an equity distribution plan for rank and file workers, too?
- Does the company discuss its commitment to talent management?
- Does the company express a preference for home-grown rather than acquired talent?
- Does the company have a commitment to global diversity? Is this commitment reflected in their choices of directors and executives?
- Does the company have a viable global growth strategy?
- Is the company committed to building greener, more energy efficient operations?
- Does the company support volunteerism and creative philanthropy?
Profitability. The good news is you don’t have to be an MBA or financial analyst to make sense of the numbers. There are a wide range of articles on the web and various books available about how to read financial statements and annual reports. If a company is privately held, it is not required to disclose its financial results, however, few companies keep their success a state secret and there may be press releases or newsletters available that share the information.
Sharing the wealth. Few companies take the opportunity to talk about what they do for employees, apart from discussions about funding pensions or other required disclosures. This is a mistake. Job seekers are potential stakeholders who want to know what’s in it for them, too.
Talent Management. In General Electric Co’s annual report, Jeffrey Immelt, Chairman & CEO, devotes considerable space to human capital initiatives. “We don’t want thematic leaders who move from subject to subject,” Immelt writes. “They can’t build. All of our compensation and succession planning values long-term commitment.” I don’t think you have to be a Kremlinologist to read between the lines: GE wants depth, rather than breadth, in its leaders.
Home grown preference. Honeywell states in its annual report that 65% of its top positions are filled with internal candidates. As an outsider entering the organization, would you have a harder time than a long-time Honeywell employee of jumping to the next higher level within the organization?
Global Strategy. If the company lacks offices, customers or suppliers beyond its home country, it lacks a global strategy. A company that boasts of growing international revenue is committed to sustaining a global presence. Both Honeywell and GE, for instance, will see nearly half of corporate revenue come from outside of the U.S. this year.
Global Diversity. While GE is one of the standard-bearers for global growth and human capital investment, Pepsico is unrivaled for its commitment to global diversity. From its Indian CEO Indra Nooyi, to its “Ethnic Advisory Boards,” to its discussion of diversity and ownership culture, Pepsi ‘s commitment is more than skin deep. Does the potential employer simply talk a good game?
Good Citizenship. Baxter touts its place on a list of “100 Best Corporate Citizens” by Corporate Responsibility Officer magazine. A wide range of employers engage in innovative philanthropic initiatives. Aflac, for instance, established a children’s cancer center in Atlanta and sells ‘plush’ ducks to raise money for hospitals that treat children with cancer. Again, does the employer have anything to tout and if not, why not?
While you could ask a hiring manager or a recruiter many of these questions, assuming you’re granted an interview, you might be better served to kick the tires first. If the company is committed to talent management – it’s in the annual report. If it’s not there, perhaps that should tell you something about the company.
Of course, annual reports are just one tool among many. Paul Zellner, Managing Director of Russell Reynolds, a recruiting firm in Chicago, recommends listening to replays of quarterly analyst calls for a discussion of key business issues facing the company. If you want to impress a hiring manager or recruiter, Zellner says, prepare yourself to express this idea: “This appears to be your [company’s business] issues … Here’s where I have been helpful in solving these kinds of problems.”
Reading annual statements, which are typically available in the investor section of a corporate website, is a bit drier than surfing business articles or corporate brochures. But, in effect, job seekers should view themselves as investors -potentially investing the best years of their lives in this company.