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Growth and Positioning Strategies for Associations

Growth strategies, diversifying revenue sources, innovative approaches to member engagement, and technology initiatives were on the minds of association executives who gathered on April 19th at The Association Trends Finance Live Breakfast.

 

Armed with a sneak preview of the 2012 Association Operational and Financial Excellence (AOFE) Survey, David Kushner and I facilitated a robust discussion among attendees about the current strategic thinking of association executives. We explored how they are experiencing the shifting economy, their strategic initiatives, and implications for staffing and compensation. Interpreting the survey data, the dialogue, and what I’m seeing with Vertical Leap clients here’s my take on it.

Positioning to grow; sooner versus later: Some associations are already executing their growth plans, and a great number of others have assessment and planning efforts underway. As noted in the survey, 71% of the responding CEO’s 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 over $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 6 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% 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 non-dues revenue become a larger proportion of annual revenue. In the survey, 57% of CEO’s place “Revenue Diversification” in their top 3 areas of current focus. Overall, survey respondents see the majority of their non-dues revenue programs growing in the upcoming year. 59% of all respondents said they initiated a new non-dues revenue project in the last 12 months. So, are they wishing and hoping, or being innovative and managing risk? Our suspicion is that lessons-learned from prior efforts will cause associations to more thoughtful in their product development processes; testing the market in measurable phases.

Comparing internally-focused issues --- We thought it might be interesting to compare respondents’ current internal areas of focus (we read as “up-at-night” issues) --- to their major new initiatives planned this year. Perhaps most interesting within the relative comparisons is “expense/cost control” which clearly has their attention (50% made it a top 3 choice) but 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 3 in major new initiatives.

 

Priorities 
% who said this area fell within Their 3 most important focus areas % who said they had major, new    initiatives planned this year
Operational/Strategic Planning 64% 53%
Revenue diversification 51% 46%
Expense/cost control 50%  22%
Technology infrastructure 32% 43%
Financial management    28%  19%
Staff performance metrics 17%     18%
Helping board & senior management understand finances 12% 13%
Other internal issues  10% 8%
Staff compensation 8%               9%
Staff recruitment & job matching 7%  11%
Legal issues 4%  11%
Space management 4%     11%
Vendor management 4% 8%

What’s the Boss worried about?

When you get your copy of the AOFE Survey report, you will be able to identify with specific segments of respondents (by role, organization type and size, etc.). The following comparison suggests that CEO’s and the combined COO/CFO respondents may look at the internal focal areas somewhat differently. (Read as: 71% of CEO’s placed Operational/Strategic Planning in their top 3)

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”.

Additional Information on Revenue Diversification --- When asked what percent of current annual revenue is composed of member dues, respondents fell into the following tiers:

Dues as a %                                        Percent of Total

Of total revenue                               Respondents

Less than 20%                                    20%

20 to 60%                                             58%

61 to 80%                                             14%

81 to 100%                                          9%

As you might expect, larger associations tend to have a lower percent of their total revenue coming from dues. As an example, 28% of those over $ 5million in annual revenue selected the answer option of: “less than 20% comes from dues”--- whereas, only 15% of those under $2 million selected that answer option.

On the other hand, less than 8% of all respondent s are expecting decreases in any of their non-dues revenue categories, and 46% 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 6 months they expect to see an increase in the following categories of non-dues revenue:

  • Educational programs (excluding annual meeting) (48%)
  • Advertising/sponsorships (48%)
  • Annual meeting registrations (39%)
  • Exhibits (35%)
  • Products and Services (31%)

Perhaps another indicator is the projected revenue from annual meeting registrations over the next 6 months ---   with only 7% 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% expecting an increase) than at the State/Local level (34%).

Again, larger organizations are more bullish when it comes to increases in non-dues revenue coming from products and services, with 37 to 39% of respondents over $2 million in total annual revenue projecting an increase, versus only 23% of those under $2 million.

Projected Fiscal Year Expenses

When asked about non-labor 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% Website Development
  • 54% Technology (excluding website)
  • 47% Membership promotion/retention
  • 40% Member communications
  • 34% Product and Service
  • 33% Real estate

Vendor Management

Perhaps surprising, given the degree of interest in non-dues 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% rarely or never participate in a group purchasing program
  • 76% rarely or never use outside consultants to help with targeted expenditures
  • 62% rarely or never use a standard process for measuring key vendors
  • 60% rarely or never use a standard process for on-boarding new vendors

Compensation, Staffing and Talent Retention

While Association Trends has a detailed compensation survey in the works, the AOEF 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 6 months
  • 61% are expecting staff salaries to increase in the next 6 months

Specific to the individuals completing the survey

  • 91% expect to be in their current job over the next 12 months
  • Almost no one was expecting a decrease in compensation
  • 62% expect to receive an increase in compensation in the next 6 months; with this being…
  1. Somewhat higher for associations with a national/international scope (66%) than those with a State/Local scope (55%); and
  2. Significantly higher for those over $2million in revenue (79% over $5 mil, 73% between $2 to 5 million) than for those under $2million. (48%)

 

  • 52% of trade association responders said they expected to receive incentive compensation in the upcoming year, compared to only 35% of responders from professional societies.

Additional insights from the breakfast discussion

Attendees 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 associationchose 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.

About the Association Trends AOFE Survey

In February 2012, over 400 associations participated in this survey conducted by ORI and published by Association Trends. Participation demographics show a relatively even amount of trade associations versus professional societies, and approximately a 60/40 split in organizational scope between those who are international or nationally-focused, versus those who operate at a state/regional/local level. The results for many of the 30 questions in the survey are segmented by organizational type, size and scope.

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