Membership bodies are a vital source of support for their members, whether individuals or other organisations. They not only provide their members with knowledge, support and professional guidance, but also a community.
Although members are loyal, does the current cost-of-living crisis threaten this? Below, we highlight some of the key financial threats to membership organisations:
- Affordability of membership fees. With membership fees still contributing to over 45% of the total income to PARN’s 2022 Financial Benchmarking Survey, it is important to ensure that members are receiving the benefits they value to justify any increase in fees, especially where membership is not mandatory.
- Staffing. There continues to be many challenges and threats with staffing, from needing to ensure your offer is in line with the market, to recruiting and retaining talent; the affordability of potential pay reviews; employee demands for more flexible and agile working as well as, for some roles, a lack of available resource. Many organisations are turning to outsourcing for areas such as HR and payroll, parts or all of finance, IT, events and even managing membership subscriptions.
- Cost increases. Property costs, including upkeep and utility costs, continue to increase. Do you need all of your space or is there potential to sub-let? Consider the use of the property. Is there an option to enter fixed-priced gas and electricity contracts?
- Reduced training budgets of members. If members are attending less, the membership body’s income stream will reduce, even though the related costs may be fixed.
- Insufficient financial planning. Now more than ever, financial planning needs to look at various scenarios, changing assumptions and looking to the longer term.
Weaknesses
Other than the overreliance on membership income, one of the biggest challenges or weaknesses could be the complicated governance arrangements. Does this stop decisions being made quickly enough or does this mean that organisations become reactive rather than proactive? Is there a tendency for boards or trustees to be overly cautious as they do not want to make big decisions which may be unpopular, but necessary for a sustainable future?
Despite this doom and gloom, membership bodies have many key strengths that put them in great stead to overcome these uncertain times. From the last PARN Financial Benchmarking Survey, the total reserves held by the sector amounted to £3.3bn, with the average professional body holding £6.6m in reserves, being the equivalent of between five and 23 months of expenditure.
These levels of reserves provide membership bodies with a buffer to ride the wave of uncertainty. Their long history also means that they have survived past challenges and uncertain times. This can provide organisations with time to consider how best to utilise their funds, support their membership, and consider potential opportunities.
Some opportunities to consider are:
- Is now the time to consider investing? Is there a desire to place more or less on longer-term investments or hold it in cash? This will be driven by your strategy, but has your strategy been affected by the change in current economics? Or is now the time to use excess cash to make investments in the organisation?
- Do you have a defined benefit pension scheme? These often take up a lot of resource and are a large liability on a balance sheet. Do the current inflation and discount rates impact the assets or liabilities sufficiently, so that buy-out is an option?
- Is now the time to invest in your staff and consider their benefits? Do you know what your staff want? This may also change with an ever-increasing number of generation Z employees and their requirements differing from historic practices.
- Consider property. If you are leasing, have you considered the needs and space requirements or the potential to be a remote organisation going forward? If you own property, what is its value in use – do you need all of the space, or should you be considering opportunities to let parts of the building, re-utilise areas, or even sell?
While considering all these options, trustees and boards need to think about modernisation and how this could impact both the membership body and its members.
There will be a need for those in governance to be increasingly agile in their decision-making.
Kathryn Burton is partner, head of professional institutes & membership bodies, and Tom Wilson is partner at haysmacintyre
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