Cost Controls Boost the Bottom Line

By: Andrew S. Lang

How the American Society of Anesthesiologists found savings and revenue in unexpected places.

In last month's Associations Now, we took at a look at the American Society of Anesthesiologists in "Revitalizing Existing Revenue Streams" and its recent economic turnaround, which was largely based on revitalizing a number of its traditional revenue streams. ASA has done so well in so many ways that I would like to continue the discussion here.

John Thorner, CAE, executive vice president of ASA, took on his role in January 2008. After he had studied the situation, John realized that, like so many associations, ASA was largely doing things the way they had been done in the past.

ASA Sponsorship Net Revenue

With this insight, John concluded that much could be improved simply by bringing the organization up to date. Going after risky and costly new revenue streams would be put off in favor of reconstituting ASA's traditional sources of revenue and controlling its costs.

A notable example can be found in the way ASA changed the treatment of sponsorships. The society had traditionally shied away from seeking substantial sponsorships. Under its new, more aggressive approach, ASA has developed fewer but much more significant sponsorships. The result has been an increase in sponsorship revenue of more than $400,000 a year in gross income, much of which falls directly to the bottom line.

Another example involved sales of exhibit booths for the annual meeting. Previously an outside sales consultant was paid 22 percent of the gross fees for essentially selling the same product to the same exhibitors year after year. Bringing sales in house resulted in an increase in net income of approximately $550,000.

Cost Controls

Many association professionals are of the opinion that cutting costs does not raise new revenue, and technically it doesn't. However, in my experience it has proven to be the fastest and often the safest method of freeing up funds to build reserves or to create new products and services.

ASA has taken this proposition to heart and moved aggressively toward decreasing costs. For example, according to John, "ASA's outsourcing of information technology had essentially been running out of control." In this case the solution came by hiring IT staff and bringing the work in house where it could be more capably managed. He also introduced a competitive bidding process for work that could not be brought in house. ASA was able to save net costs of $550,000 per year.
ASA Staff Headcount

Another valuable cost-control effort, though a sad one, involved replacing certain members of ASA's senior staff. John reported that the society had been increasing salaries of staff based largely on longevity with the association. The inevitable outcome of this practice was that some senior leaders had received increases of income without a proportionate increase in their value to the association. John says that ASA "assessed the value of each of the higher-paid professionals and replaced those whose salaries were disproportionate to their skill level."

The result of increasing revenue and reducing costs has enabled ASA to significantly increase its bottom line while investing in key products and services, such as advocacy and education. According to John, "These investments will enable the society's members to operate even more successfully in the years to come."

While both its bottom line and member service areas have been increased, ASA has also invested in additional staff in such revenue-generating areas as advertising and sponsorship sales. In total, the staff has gone from 67 when John arrived to a total of 108 in the first quarter of 2010.

John summarizes his approach to boosting the health of his organization as "focusing on right pricing, cutting costs, and taking advantage of existing sources of revenue before taking on the much riskier opportunities presented by entirely new revenue streams"—excellent advice from a seasoned and successful association executive.

Andrew S. Lang, CPA, is with LangCPA Consulting LLC in Potomac, Maryland. Email: [email protected]