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Growth strategies, diversifying revenue sources, innovative approaches to member engagement, and technology initiatives were among the topics discussed by association executives at the TRENDS Finance Live Breakfast on Key Lessons from the TRENDS Financial & Operational Excellence (FOX) Survey.
David Kushner, The Kushner Cos., LLC, and I facilitated a discussion about the current strategic thinking of association executives, including on the shifting economy, strategic initiatives, and implications for staffing and compensation:
Positioning to grow; sooner vs. later: Some associations already are executing growth plans, and a great number of others have assessment and planning efforts under way. As noted in the survey, 71% of the responding CEOs placed “Operational/Strategic Planning” in their top-3 areas of current focus.
How best to grow and provide value varies by each association’s unique circumstances and competitive landscape: Not surprising, those with revenues of more than $5 million are somewhat more bullish in their expectations and action planning than smaller associations. Regardless of size, many are exploring “pull” engagement strategies to grow their presence and retain members. These associations are creating in-person and on-line communities and forums, building repositories with interactive tools for members to share knowledge, etc. They are not solely relying on “pushing out” expert content to the masses they are actively engaging the masses and encouraging their contributions.
Resourcing growth strategies: While most associations reduced or maintained staffing during the recession, more than one-third are expecting staffing increases over the next six months. Many associations are looking to leverage partnerships and strategic alliances to provide greater value and manage costs. Some are even exploring merger opportunities. One of the clearest examples of positioning for growth and engagement is the emphasis on technology – 43 percent of those surveyed have major new technology initiatives planned this year.
Revenue diversification: While exploring revenue diversification is nothing new, what we are seeing suggests that coming out of this recession there is an even stronger push to have nondues revenue become a larger proportion of annual revenue. In the survey, 57 percent of CEOs place “Revenue Diversification” in their top-3 areas of current focus. Overall, survey respondents see the majority of their nondues revenue programs growing in the upcoming year. Fifty-nine percent of all respondents said they initiated a new nondues revenue project in the past 12 months. So, are they wishing and hoping, or being innovative and managing risk? The lessons learned from prior efforts will cause associations to be more thoughtful in their product development processes, testing the market in measurable phases.
Comparing internally focused issues
When comparing respondents’ current internal areas of focus (“up-at-night” issues) to their major new initiatives planned for this year, clearly “expense/cost control” has their attention – 50 percent made it a top-3 choice (Chart 1). But this point is far lower in their list of major new initiatives. Likely, they are looking to the initiatives they put in place over the past couple of years to continue producing results. In these relative rankings, we see signs of emerging from the recession when “operational/strategic planning,” “revenue diversification” and “technology infrastructure” are the top three in major new initiatives.
What’s the Boss worried about?
The following comparison suggests that CEOs and the combined COO/CFO respondents may look at the internal focal areas somewhat differently. For instance, 71 percent of CEOs placed Operational/Strategic Planning in their top three.
CEO COO/CFO “Top 3” Areas of Interest Rating
71% 57% Operational/Strategic Planning
57% 41% Revenue Diversification
46% 55% Expense/Cost Control
29% 41% Technology Infrastructure
21% 45% Financial Management
20% 9% Staff Performance Metrics
Continuing the theme, survey respondents said that strategic planning is currently “the consulting service most important to their association.”
More on Revenue Diversification
When asked what percent of current annual revenue is composed of member dues, 20 percent or respondents said less than 20 percent; 58 percent said 20-60%; 14 percent said 61-80 percent; and 9 percent said 81-100 percent.
As you might expect, larger associations tend to have a lower percent of their total revenue coming from dues. As an example, 28 percent of those with more than $5 million in annual revenue selected the answer option of “less than 20 percent comes from dues”; only 15 percent of those of less than $2 million selected that answer option.
On the other hand, less than 8 percent of all respondents are expecting decreases in any of their nondues revenue categories, and 46 percent have plans for a new revenue diversification initiative this year.
Emerging from the recession
Encouraging signs are the percents of respondents who said that in the next six months they expect to see an increase in the following categories of nondues revenue:
• Educational programs (excluding annual meeting) (48 percent)
• Advertising/sponsorships (48 percent)
• Annual meeting registrations (39 percent)
• Exhibits (35 percent)
• Products and Services (31 percent)
Perhaps another indicator is the projected revenue from annual meeting registrations over the next six months - with only 7 percent expecting a decrease, while 39% expect an increase. Interestingly, in spite of rising travel costs, there is more optimism at the national/international level (with 44 percent expecting an increase) than at the state/local level (34 percent).
Again, larger organizations are more bullish when it comes to increases in nondues revenue coming from products and services, with 37-39 percent of respondents with more than $2 million in total annual revenue projecting an increase, vs. only 23 percent of those with revenues of less than $2 million.
Projected fiscal year expenses
When asked about nonlabor expenses expected to increase in this fiscal year (compared to last), the percent of respondents for each of the following gives us some indication of relative priorities:
• 56 percent Website Development
• 54 percent Technology (excluding website)
• 47 percent Membership promotion/retention
• 40 percent Member communications
• 34 percent Product and Service
• 33 percent Real Estate
Perhaps surprising, given the degree of interest in nondues revenue programs, technology and controlling costs - relatively few associations have formal processes in place to clarify expectations, manage vendor relationships and optimize outcomes; specifically:
• 57 percent rarely or never participate in a group purchasing program
• 76 percent rarely or never use outside consultants to help with targeted expenditures
• 62 percent rarely or never use a standard process for measuring key vendors
• 60 percent rarely or never use a standard process for on-boarding new vendors.
Compensation, staffing and talent retention
While TRENDS has a detailed compensation survey in the works, the this survey provides some early insights into organizational staffing and compensation, as well as projected change in personal compensation. At the organizational level:
• More than one-third are expecting staffing increases over the next six months
• 61 percent are expecting staff salaries to increase in the next six months
Specific to the individuals completing the survey:
• 91 percent expect to be in their current job over the next 12 months
• Nearly no one was expecting a decrease in compensation
• 62 percent expect to receive an increase in compensation in the next six months; with this being…
• Somewhat higher for associations with a national/international scope (66 percent) than those with a State/Local scope (55 percent); and
• Significantly higher for those with more than $2 million in revenue (79 percent over $5 million, 73 percent between $2-5 million) than for those with less than $2 million (48 percent).
• 52 percent of trade association responders said they expected to receive incentive compensation in the upcoming year, compared to only 35 percent of responders from professional societies.
Additional insights from the breakfast discussion
Participants agreed that associations tend to be on the lagging end of any significant economic change that their members experience. And, as you might expect, there are significant variances by the industry served; with some recovering faster than others.
One of the breakfast speakers, Moira Fathy Baker of the National Science Teachers Association, said that “(during the past few years) we’ve had to run faster, just to stand still.” With states, cities and counties struggling financially and federal funds to schools diminishing, NSTA renegotiated contracts, limited travel and put a new building on hold. Now her organization is implementing a number of growth-oriented initiatives, including outreach for corporate support and an emphasis on “pull” strategies to engage new constituencies.
Barbara Reno, CEO of the Chief Executives Organization, talked about how her international association chose to move aggressively in the early stages of the economic downturn, re-negotiating all of their vendor contracts. Today, they are well positioning to grow.
From the breakfast discussion, there is also some anecdotal information that newly acquired talent may be entering at higher salary levels; causing some associations who have been in a cost-containment mode to step back and re-examine salary level equity between new and long-term staff.