Expense Reduction Treadmill Trend Explored
Recently we read about the American Bar Association’s struggle to strike the right balance between cutting expenses and increasing revenue. This problem is of course, not unique to the ABA, nor any other business in ordinary times let alone times of crisis. Properly credited, Michelle Behnke, the former treasurer of the ABA pointed to their pickle as the “expense reduction treadmill”.
All too often organizations are faced with tough decisions around how to maintain profitability while retaining key staff and innovating service and product offerings. Associations have a particular challenge in competing with a highly connected marketplace that sees member dues as an expense on their own P&L that they may need to trim, requiring associations to get more innovative with their value proposition and increasing their non-dues revenue. In reading the article about ABA’s dilemma, we hear the tail of two ways to stabilize your finances. On one hand, they spent years slicing and dicing ways to reduce overhead costs, specifically in the human capital arena within the organization, on the other they crafted new tiered membership pricing to attract new members.
These two tactics can feel exhausting, two sides to the same coin. Reducing headcount, and the cost of membership are both reductive measures. We feel Ms. Behnke’s pain. In a time when there is so much uncertainty, our instincts are often to slash and burn, but we would argue that times of crisis can often be rich times for innovation. Constraints can offer us unique opportunities to push ourselves outside our comfort zone to explore new territories.
We know that associations and non-profit organizations have long been wrestling with how to generate non-dues revenues. In the recent past, events and conferences were an enormous boon for these organizations to build up their market presence while also filling the coffers. In the world of virtual events, is this still a sustainable model? How will these organizations pivot and reinvent such an enormous stream of non-dues revenue? Affinity programs provide an easy high-value, low-risk avenue to passive revenue but in the age of browser extensions like Honey and Amazon dominance, how are you pushing your providers to innovate in adoption?
These aren’t easy questions to answer, but we at Advancea believe that with creativity, technology, partnership, and yes, maybe even a little sweat, there are pots of gold awaiting us the other side of the rainbow.