Communication Analysis of letter to

Shareholders.Vikram Dahiya

IIM-Rohtak

INTRODUCTION

Communicating the annual results is the most important activity in any organisation

Textual analysis on letter to shareholders of three consecutive years from 21 ‘BSE 100’ companies to

Purpose

Effectiveness of letter to shareholders on certain quantifiable parameters

How   these   factors   vary   with   changing  market  conditions  thereby  affecting  the  communication

Shareholders ease of understanding

Shareholders association with the organization 

 Parameters  on which  a  shareholder  gives  the  credentials  

Analysing the kind   of   tone   used   in   the   letter

 Change   in   the   style   of   communication   with   changing  market  conditions  that  affect  company’s  performance

Average of each quantifiable parameter is used as the final data to derive the conclusion

Various parameters are thus plotted on different histograms on yearly basis for the financial year 2008, 2009 and 2010.

Methodology

Analysis of effectiveness of letter to shareholders based on quantitative measures.

Gathering Information

The letter to shareholders is an important part of an annual report.

Annual reports for three consecutive sessions

2008-2009 , 2009-2010 and 2010-2011

of 21 companies from the BSE 100 index were collected.

List of Companies

• Wipro• Zee

Entertainment• USL• United

Phosphorus• TCS• Punjab National

Bank• State Bank of

India

•Reliance Communications

•Reliance Natural

•Reliance Petroleum

•Reliance Infrastructure

•Reliance Power

•Reliance Industries

•Reliance Capital

•Ranbaxy Laboratories

•Steel Authority of India Ltd.

•Sterlite Industries

•Suzlon

•Tata Motors

•Tata Tea

•Unitech

PARAMETERS

Content Analysis of letters was done based on 11 parameters.

( Parameters are derived from a study by Karen S. Sterkel on writing styles in business communication)

Active /Passive Sentences

Number of paragraphs

Number of words

Number of sentences

Average Length of sentences

Parameters Contd…

Number of jargons used Number of Difficult words You Orientation Positive/ Negative tone Direct/ Indirect Approach Requesting/Demanding

Every letter was evaluated by all the members of the group.

Hence, 5 sets of data so obtained were merged into 1 by averaging the value for each parameter for every letter.

Statistical tools and techniques were then applied on these averaged values to draw inferences.

FINDINGS

You Orientation Reflects

management’s empathy towards the shareholders. their concerns and affect the management equally.

Positive / Negative tone

Conveys the well being of the company future direction of an organization

Changing Passivity of letter

Passive sentence When the receiver of action is more important

When the going gets tough, the tough get going

Number of jargons

Jargon special words or phrases used within a group trade

or profession.

Difficult words used

It is indicator of the readability of the letter.

It is subjective.

DISCUSSIONS

You Orientation Some Organizations are rigid to their writing

methodology whereas some changes

No clear evidence of variation over the years

Positive / Negative tone

Average rating was above 3.5 For 2008 : 3.81 For 2009 : 3.88 For 2010 : 3.91

Analyzing Change in Passivity of letter

Average Passive sentences 2008 : 81 2009 : 35 2010 : 42

Number of jargons

Use of jargons decreased

Clarity and readability increased

Difficult words used

No particular trend

No conclusion

Conclusion

The study helped us analyze the various factors contributing to the effectiveness of communication in CEO’s letter to shareholders.

Positive tone Most companies focus on having a positive tone. Positive tone improved from 2008 to 2010

You orientation high you orientation in the letter to shareholders reflects

management’s empathy towards the shareholders Increase in crisis period

Conclusion contd..

Number of passive sentences

Number of difficult word

Number of jargon used indicate the ease of readability decreases from 2008 to 2010

Number of words , sentences paragraphs and average length of sentence

Conclusion contd..

Conclusion contd..

These parameters affects tone used in the letter,

Determines how easy it is to read and understand the report

Changes in the style of communication with changing market. conditions that affect company’s performance.

Thank You .

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