Benchmarking Finance and Business Operations
The Finance and Administration Roundtable
May 24, 2006
PRESENTERS
• Bron Prokuski
VP, Business Operations
National Defense Industrial Association
• Nat Bartholomew, CPA
Principal
LarsonAllen
FRAME THE DAY
• What is Benchmarking?
• Group Benchmarking Exercise
• Sources of Benchmarking Data: Sample Financial Benchmarks Sample Policy Benchmarks
• Demonstration on Use of Benchmarking Data
WHAT IS BENCHMARKING?
• Comparison of like attributes or metrics from similar demographic data samples– People, process, technology, business
processes/practices/strategies
• A baseline for performance improvement
• Opportunity to gain best practices – Measurement by fact rather than opinion
Benchmarking - When You Want To…
• Answer “How do I compare?”
• Determine financial health
• Obtain a single version of the truth
• Make better informed decisions
INTERESTED PARTIESA DIFFERENCE IN PERSPECTIVES
• THE BOARD - Profitability, Reserves, New Business Ventures, Mergers & Acquisitions
• THE STAFF - Compensation, Benefits, Working Environment
• THE AUDITOR - Financial Health, Risk Assessment, Management Advisory Services - Best Practices
• THE MEMBERS - Needs, Service, Value, Measuring Your Industry - Sector Analysis
• SERVICES AND SUPPLIERS - Quality, Performance, Competitiveness
• EXPLORE POSSIBILITIES -
STRATEGIC PRIORITIES
• Financial Health• Quality Events for Member/Sponsor Needs• Awareness/Action on Advocacy Issues• Member & Participant Growth and Activity• Knowledge and Information Transfer• Broadened Programmatic Coverage• Professional, Positive Work Environment
OBJECTIVE / GOAL DETERMINATION
Int
eres
ted
Part
ies BOARDSTAFFAUDITORMEMBERS
SERVICESSUPPLIERS
Financial Health
Quality Events for Member/Sponsor Needs
Awareness/Action on Advocacy Issues
Member & Participant Growth and Activity
Knowledge and Information Transfer
Broadened Defense & National SecuritySector Coverage
Professional, Positive Work Environment
Business/Mission Success
Strategic Plan
Goal 1 Goal 2 Goal 3 Goal 4
CANDIDATE AREAS
• Service quality• Asset use• Staff performance• Program performance• Operating efficiency• Customer satisfaction• Return on investment• Project time to benefit
GROUP EXERCISE
• What are you trying to measure?
• How do your currently measure it?
• How often do you measure it?
• Is it helping you to improve performance?
• If not, how can you fine tune your measurement?
Sources For Benchmarking Data
• ASAE & The Center’s ORR
• ASAE & The Center’s P&P
• Compensation & Benefit Studies
• GuideStar – More than just 990s
• Customized Data Collection
USE OF BENCHMARKING TOOLS
ASAE’s Operating Ratio Report
Twelfth Edition, Vol I & II
What’s In There?
What is ASAE’s ORR
• Compilation of financial data from participating associations
• First published in 1953
• Collected via Federal Forms 990 and survey supplements
What Data is in the 12th Edition?
• Approx. 7,000 associations were requested to send in data in April 2003
• Reminders sent in May and June• By the end of June 628 valid surveys were
utilized to compile the statistics enumerated in the 12th Edition – 9% response rate
• Therefore 95% certain that results are within +/- 4% (when data is supported by the full sample size)
How Do I Extract Data That Is Relevant to My Association?
Data Categories• Membership Type• IRS Tax Status• Total Ass’n Gross Revenue• Geographic Scope (Int’l/Nat’l or
Regional/State/Local)• Metropolitan Area (e.g., DC, NYNY, etc.)• Industry Sector/Interest Area
Content Sections – Vol I
• Revenue and Expense Information
• IRS Form 990 Information
• Balance Sheet Information
• Specialized Sections– Industry Sector– Metropolitan Area– Geographic Scope
Content Sections – Vol II
• Expense Information
• 10-Year Trend Analysis 1993-2003– Revenue and Expense– IRS Form 990 Schedule– Balance Sheet Information
• Reserves and Investment Information
Dues As Percentage of Revenue(Dues Reliance)
By membership type (all organizations):Mainly Company/Institutional Members = 39.2%Mainly Individual/Professional Members = 30.1%
By size / by membership type & size:Gross Revenue All Orgs C/I I/P$500K or less = 62.4% 63.5% 56.4%$500K - $1M = 30.1% 37.0% 25.8%$1M - $2M = 35.5% 38.2% 29.5%$2M - $5M = 35.0% 36.1% 34.1%$5M - $10M = 29.2% 32.2% 29.0%$10M+ = 30.4% 41.4% 23.7%
Dues as Percentage of Revenue(Dues Reliance)
38.20%44.60%
62.90%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
Company/Institutional Members
Educational
Healthcare/Medical
Social / Cultural /Recreational
Dues as Percentage of Revenue(Dues Reliance)
19.20%
32.10%
26.50%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
Individual/Professional Members
Educational
Healthcare/Medical
Social / Cultural /Recreational
Salaries & Benefits
• Average Salaries - Geographically
• Average Benefits - By Size ($)
• Average Salaries and Total Revenue per Staff Member – By Industry Sector
Average Benefits By Size ($)
$4,625
$6,668$7,187
$9,000$10,019
$11,935
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
Up to $500K
$500K - $1M
$1M - $2M
$2M - $5M
$5M - $10M
$10M+
Trend Analysis - Investment Composition
(as a percentage of total assets)
0
10
20
30
40
1993 1996 1999 2003
Invested Securities
Invested Cash
Trend Analysis – Meetings Sponsorship Revenue
(Percentage of Total Revenue)
1 1.1
7.4
1.7
0
1
2
3
4
5
6
7
8
1993 1996 1999 2003
Trend Analysis – Periodical Advertising
(Percentage of Total Revenue)
3.1
4.13.6
2.6
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
1993 1996 1999 2003
Trend Analysis –Personnel Benefits(Percentage of Total Revenue)
3.7 3.73.9
4.4
3.2
3.4
3.6
3.8
4
4.2
4.4
4.6
1993 1996 1999 2003
Trend Analysis –Personnel Benefits(Average Benefits per Staff Member)
$4,774
$6,917 $6,729
$9,010
$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000$9,000
$10,000
1993 1996 1999 2003
Trend Analysis – Printing & Photocopying Costs
(Percentage of Total Revenue)
6.2
5.8
5.5
5
5.2
5.4
5.6
5.8
6
6.2
6.4
1996 1999 2003
Average Reserve Target
Reserves defined as total net assets and as a percent of annual operating budget
• 501(c)(3) 76%
• 501(c)(6) 59%
Investment Policies
All Assns 501(c)(3) 501(c)(6)
Cash Investments 21% 24% 20%
S-T Investments 23% 19% 26%
L-T Investments 53% 58% 53%
Other Investments 3% 0% 1%
USE OF BENCHMARKING TOOLS
ASAE & The Center’s
Policies and Proceduresin Association Management
(A Benchmarking Guide)
P & P
• 7,403 membership organizations were sent questionnaires in mid-April 2005
• Responses were closed on June 30, 2005• 1,111 associations responded (15%
response rate compared to 8% in 2001)• Over 600 tables of benchmarking data in
seven volumes• 95% confidence of 4% margin of error (just
like 12th Edition of ORR)
Respondents
• 46% Trade Associations / 54% Individual Member Organizations
• 56% 501(c)(6) / 37% 501(c)(3)
• 68% budgets <$5M
• Median annual budget = $1.9M
• Median FTEs is 10 (actual FTEs 1 – 182)
Best “Average” Measure
Median – ½ respondents above; ½ belowMean – sum of all cases / total # of respondents
Median is a better measure for average when the upper limit is theoretically infinite (e.g., # members, annual budget), as the mean can be strongly affected by very high values.
# Members (Mean = 58,687 / Median = 1,500)Annual Budget (Mean = $6.4M / Median = $1.9M)
International Benchmarking Trends
37%
42%
34%
35%
36%
37%
38%
39%
40%
41%
42%
2001 2005
International Members
5%
17%
0%2%4%6%8%
10%
12%14%16%18%
2001 2005
International Offices
61%
39%
45%
55%
47%
53%
0%
10%
20%
30%
40%
50%
60%
70%
Healthcare All Other Total
Yes
No
Related Foundations?
24
76
49 51
36
64
0
10
20
30
40
50
60
70
80
%
IMO Trade Total
Yes
No
ARE MEMBERS PERMITTED TO PAY DUES IN INSTALLMENTS?
HOW MUCH OF REVENUE IS MADE UP OF DUES?
2001 2005
Median percent of total revenue derived from member dues
40% 35%
• Dues as a percentage of total revenue are inversely related to size by number of FTE’s
ACCEPTING ONLINE PAYMENTS
39% 39%
54%
71%
0%
10%
20%
30%
40%
50%
60%
70%
80%
2001 2005
TOTAL
IMO
TRADE IMO TOTAL
CURRENTLY ACCEPT MULTI-YEAR MEMBERSHIP
19% 43%* 32%
EXPECT TO ACCEPT MULTI-YEAR MEMBERSHIPS OVER THE NEXT TWO YEARS
82% 79% 81%
* Up from 26% in 2001
MEMBERS ARE PERMITTED TO UPDATE THEIR
OWN RECORDS
MEMBERSHIP RECORDS ARE
THE RESPONSIBILITY
OF THE MEMBERSHIP DEPARTMENT
WHO UPDATES MEMBER RECORDS?
46% 51%
MEDIAN I.T. BUDGET
33,500
62,250
50,000
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
TRADE
IMO
TOTAL
BALLOTS ONLINE FOR DIRECT VOTING
37%
20%
29%
0%
5%
10%
15%
20%
25%
30%
35%
40%
ACCEPTANCE
IMO
TRADE
TOTAL
TELECOMMUTING
• 55% - TELECOMMUTING FROM HOME IS PERMITTED
• 64% - ORGANIZATIONS WITH MORE THAN 30 FTE’S ALLOW TELECOMMUTING
• 43% - PROVIDE COMPUTERS AND EQUIPMENT
TECHNOLOGY TRAINING
0%10%20%30%40%50%60%70%80%90%
100%
<2 3~5 6~10 11~29 30~99 100<
# of FTE's
YES
NO
MEMBER COMMUNICATION
98% 95%
74%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
TYPE OF COMMUNICATION
WEBSITE
VOICEMAIL
TECHNO-MARKS
• 68% - USE WINDOWS XP
• 62% - USE # OF WEBSITE HITS TO EVALUATE EFFECTIVENESS
• 33% - USE SURVEYS AND ONLINE FEEDBACK TO MEASURE WEBSITE EFFECTIVENESS
• 44% - UPDATE WEBSITE DAILY• 31% - UPDATE WEBSITE WEEKLY
Financial Policy Metrics
• 56% of the reporting associations have fiscal years coinciding with the calendar year
• Median liquid reserves are 26%• 79% of the reporting associations publish a
flagship periodically issued publication• 87% report that their organization is subject to
an annual independent audit• 5% report they have been audited by the IRS in
the last three years• Median percentage of non-deductible dues is
estimated at 11%
Sarbanes Oxley (SOX)
• Whistleblower Policy– 22% have– 74% adopted after SOX
• Audit Committee– 52% have– 24% in place after SOX
• Staff Ethics Statement– 48% have– 18% adopted after SOX
Board of Directors
• Respondents report a median of 16 voting members
• 63% report that their chief elected officer serves a term of one year or less
• Most organization’s boards meet quarterly (27%) or semi-annually (21%)
• 12% pay elected officers for their service• 74% of volunteers receive “on the job”
training
ASAE Association Compensation& Benefits Study
Questions?
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