A Battle of Budget Priorities

By: Lisa Junker, CAE

When your initial draft budget leaves you in the red, it's time to take a good look at your association's needs and priorities. In an Associations Now case study, a senior management team comes together to debate what can be cut and what has to stay. (Titled "Stretched Thin" in print version.)

Editor's note: See guest commentary by scrolling your mouse over the speech bubbles that appear in the text. This month's commentary provided by Don Klein.

The NSTS senior team waited while their CEO and COO positioned two flip charts at the front of the conference room. One listed the four key areas the board had designated as top priorities for the next fiscal year; the other had "$140,000" written at the top. This is a situation that virtually all of us have faced recently and may be experiencing right now as we move toward a new year. The process is full of traps and opportunities for discouragement. It is also full of opportunities for affirmation and creativity. Having a clear set of multi-year strategic initiatives and annual goals related to those initiatives is where to start.

The key to addressing this situation is to stay focused on the initiatives and goals and bring the leadership team, and full staff, into the process of accomplishing those goals. The clearer and more compelling the goals are, the more energy and creativity is generated and released to get them accomplished, even if in new and different ways.—Don Klein
Great idea for Craig to have the four key priorities clearly visible in the room as the budget challenges are being discussed. It should help everyone realize that this is not simply a numbers conversation.—DK

Normally, before a senior-team meeting got underway, there would be chatter around the table. But today everyone was quiet. Kate, the CFO, flipped through some papers, while Gina, the marketing and communications director, jotted notes on a legal pad. Hal, the director of meetings and research, and Holly, the membership director, both checked email on their smartphones.

"OK, folks," said Craig, turning to face the group. Hal and Holly set their phones aside. "Here's where we are. As you know, our initial draft budget put us in the red. We all took a second look and made changes, but we're still $140,000 off from a break-even budget. I want to talk about our options and come to consensus about what needs to be cut, or what revenue streams can be enhanced or developed, to get us into the black." The "second look" by the management team does not refer to including staff in the search for solutions. Those closest to the front lines often have the best insights for improvements for efficiency.—DK

Patricia sat down as Craig was speaking. "Kate," she said, "maybe you can go first. Are there any expenditures or projected revenues you're still questioning?"

Kate said, "'Questioning' is a strong word. I think we've made all of the easy or obvious cuts that can be made. Now it's down to the hard stuff." She gave Hal an apologetic look. "I think the first place we have to look is personnel. The CFO initiating the suggestion of personnel cuts may not be received well. Reductions in benefits for everyone might be better for the CFO to suggest, as those running departments that depend on more staff might be sensitive about suggested cuts.—DK Tracey's position in meetings is still open. What if we held it open for the year and planned to bring in a temp for the month or so leading up to the annual conference? We'd be looking at a solid savings, once you take overhead into consideration."

Hal frowned. "Even with a temp, that's a huge increase to Dan's workload. I'm concerned we could burn him out. Not to mention the fact that he's taking the lead on the new symposium we're launching for next spring. We want that to be a home run."

Patricia tapped her pencil against the table. "What if we offer Dan a raise, and potentially a promotion in six months, to recognize the additional work he'll be doing? That cuts into the savings, of course, but Hal's right that we don't want to lose Dan. He's a great team player, and that symposium he's launching has a lot of potential." Giving Dan a raise and a promotion (which should not be delayed) may not keep him from being burned out. Support is needed.—DK

"Maybe my team could help with some of Tracey's old duties, too," suggested Holly. "I know she spent a lot of time on the phone with volunteers. It's a little different than answering the questions we usually handle, but I'm sure we could get trained up pretty quickly." Great attitude from the membership director to help across departmental lines.—DK

Hal nodded slowly. "I suppose that all makes sense," he said. "Assuming we do decide to hold that position open, I'll sit down with Dan and see what he thinks and what Holly's team could help with."

Education vs. Membership

As Craig updated the shortfall total written on the flipchart, Kate went back to her notes. "Another area we should look at is marketing. It's the only area where we have an expense increase from last year …"

"In support of the revenue goals in meetings and membership," Gina interjected.

"Is there anything more we can do to bring those expenses down, though?" asked Kate. "Could we look at more electronic marketing, or fewer or cheaper printed materials?"

Gina sighed. "I'm nervous about increasing the electronic marketing more than we already planned for, but maybe we can squeeze on our print costs a bit. Just off the top of my head, we could cut the preconference program down from 24 to 12 pages." She made some quick calculations on her legal pad. "Maybe we could cut back on membership mailings, too." While the scenario starts with a tip of the hat to both cuts and revenue enhancements, no real attention is given to creative enhancements. Strategic partnerships, grants, and other approaches can make a major positive difference.—DK

Holly shook her head. "What about the goals the membership committee set? They're still looking for two-percent growth this year. If we cut back on mailings, we're even less likely to hit their target."

Hal gestured toward the flipcharts at the front of the room. "The board did make education our top priority for the year," he said. "It's a bad economy, members are struggling, and education can help them expand in new areas and potentially find new jobs. The membership committee will have to understand that the board's priorities come first." There seems to be a silo situation here, at least between the membership and education initiatives. Combining the information in at least some of the mailings might create some efficiency. And providing education to nonmembers might attract new people and help achieve the membership-recruitment goal.—DK

"But those new members are also new prospects for educational programs," Holly protested. "We know that members are more likely than nonmembers to come to our meetings and events." She turned to Gina. "Can we hold that idea off to one side for now? If there's no other option, we can go there, but I'd really like to see if we can get to 140 without hurting our chances at reaching our membership goal."

"Sure, if it's OK with Craig and Patricia," Gina said. Craig nodded and jotted a note on one side of his flipchart.

Expense vs. Revenue

"Well, what other ideas do you have, Holly?" asked Hal. "Feel free to share."

"Hey," said Patricia. "We're all making sacrifices here, Hal." The mood in the room feels awkward. Craig needs to find a way to diffuse it. At least some of the members of the senior management team are becoming territorial and protective, rather that working together on creative solutions.—DK

"I feel like my department's making most of them," Hal said. "We're the ones being asked to work short staffed for the rest of the year, and Gina's looking at cutting our marketing budget, too."

"Meetings and research is our biggest budget area," Patricia pointed out. "Therefore, you're probably going to have bigger cuts than other departments, too. It's not personal."

Hal subsided, while Holly took a deep breath. "I do have a few ideas," she offered. "The way Cameron has been bidding out design more often has worked really well. He probably saved $10,000 in eight months—does that sound right, Gina?" Gina nodded. "What if we all try to be more aggressive in bidding things out? I bet we could shave some expense that way." The process of an RFP can sometimes reduce costs, but it can also create great inefficiencies and lower staff productivity. Experience and insight with customers is what should make agencies, designers, and so forth more valuable.—DK

"Cam did find some good cost savings," Gina said, "but keep in mind the amount of time he's put in bidding out more projects."

"And some of our vendor partnerships are long standing for a reason," Hal said. "The company I work with for logistics at the annual conference has worked with us for almost 10 years. They know the show almost as well as I do. Bringing a new company up to speed could take more staff time than we'd save in direct dollars."

"Those are almost the exact same objections we discussed when we talked about bidding out design more often," Kate pointed out. "But I haven't seen a significant drop in the quality of our design work. And Cameron seems to be managing the RFPs and the new vendors well."

"His regular designer still wins a lot of the projects," Holly said. "Bidding out doesn't necessarily mean going with a new vendor every single time."

"That's true," Gina said. "Cameron has a nice set of criteria he's developed to help balance cost and other factors. It's worked fairly well so far."

Holly looked down at her list again. "I was also wondering about our board meeting costs. They just recently updated state law to allow electronic voting, right? Maybe we could consider holding one of our board meetings virtually. If we can work out the technology, it would save us a ton of travel costs." A wise person once explained to me that "things happen in context of relationship." The hotel space for board meetings has value beyond just the cost. Personal relationships among the leaders need to be strong, and that means spending time together—especially now, as challenging issues are addressed. Perhaps reducing the number of meetings would be good, but to eliminate them would be costly well beyond the related expenses.—DK

"We're already under contract for hotel space for next year's board meetings," Patricia said.

Hal cleared his throat. "We are under contract," he said, "but Dan has good relationships with some of those hotels. If we agreed to give them some other business down the line, I bet they'd be willing to move that contract to next year. It's not a huge room block, anyway, so we wouldn't be leaving them in the lurch necessarily."

There was a pause as Craig and Kate conferred and Craig updated the total on the flipchart again. "Great work so far, everyone," he said. "But we've still got about $80,000 to go. What other ideas do we have?" This is a great exercise and very timely. It challenges us to think beyond standard approaches and timeframes. Reserves and other resources should be considered for use in times like these. Positive, active, aggressive action now strengthens membership support and value, and it creates more opportunity for growth when times improve.—DK

Lisa Junker, CAE, IOM, is editor-in-chief of Associations Now. Email: [email protected]

Don Klein is CEO of the Greater Nashville Association of Realtors. Email: [email protected]

This article is part of a series of fictional case studies developed for Associations Now. All people, places, and budgets contained herein are hypothetical and based entirely on the imagination of the author. No real events are intentionally reflected.

What Should NSTS Do Next?

This case study is last in  a five-part series of articles focusing around the (fictional) staff of NSTS. How should Craig and his senior team approach the tough decisions that still need to be made about the organization's budget? Leave a comment below with your thoughts. Also see: