Yesterday I was reading an MLS-related online forum in which one of the contributors remarked that originally the MLS was a simple concept costing very little to run and maintain: just a bunch of brokers getting together for coffee and holding a marketing session.
“But of course with all the refinements the MLS has accumulated over the years,” the writer remarked, “The MLS has gotten much more expensive to maintain.”
Refinements. THAT'S what those are! IDX policies, anti-trust laws, NAR mandates: those are refinements! (I knew that.)
Don't get me wrong. I am not belittling any of these 'refinements'. What I am saying is that refinements do consume association resources—money, staff, volunteer time. Seldom is thought given to the cost of administering policies and programs (or 'refinements', if you will). A perfect example is the NAR quadrennial ethics training mandate of some years ago: what would it cost local associations to administer a compliance programs? Who knew? Who even asked?
As an association strategic planning facilitator, one of my favorite questions is, “What's the cost of maintaining your local professional standards program?” Usually, leadership replies with a blank stare. AE's nod sagely and mutter, “Lots.” But nobody has ever replied with a specific dollar figure, cost per member, or ratio of program expenditures to total budget.
Interesting, isn't it? No matter how many grievances and arbitrations you actually process in your association, the fact of the matter is that training the staff, maintaining skilled volunteers, and educating members in code of ethics principles is a significant expense for any size association. And if we as staff and leaders isolate those program expenses, articulate them, and judge their effectiveness in sustaining our association mission, we may be in for a few management surprises.
The same is true of association governance. It's important, I think, to know how much it costs your association to maintain its governance structure, and to evaluate whether or not the return on your investment is worth the cost.
Let's examine the first part of this issue: how much does it cost to maintain your association governance structure? Start by collecting the following information for the past five years:
A. Historical expenses of meetings such as board meetings and retreats, leadership training, annual meetings, and participation in other levels of the organization such as NAR meetings and state gatherings;
B. Direct expenses the association pays for volunteer attendance at meetings (industry meetings, trade shows, ethics or RPAC training);
C. Governance expenses associated with maintaining chapters and specialty groups such as Women's Council, Resort Real Estate, International practitioners;
D. Records of expenses related to committee maintenance, including staff allocation.
You'll undoubtedly think of other areas that will be appropriate to your own organization, but you see the point—just maintaining your association governance is a consuming resource. ASAE ratio reports suggest that the appropriate percentage of governance cost to dues income should be about 10%, but my suspicion about the Realtor organization is that the percentage of governance cost is much higher in many local associations, at least. (This is where an operating expense ratio study would be of great assistance to professional association managers.)
At any rate, the next step is to spend some time with leadership and staff analyzing the effective of your governance expenditures. This process is always difficult, because it includes questioning some long-held practices and inherited values. Here are some possible questions:
A. What is the length of time it takes our organization to make a major decision? Analyze this by identifying 3-5 major decisions the group has considered over the past five years. How long was it between the time the issue was first introduced until a decision was made? Was the decision made in a timely fashion or was it made too late to be really effective?
B. How many people or layers of input are involved in the decision process? Of those layers, how many make little or no real contribution to an effective decision, but were included to be polite or politically correct?
C. How many standing committees does your association maintain? Could they be more effective as work groups, called upon only when needed? Is one of the standing committees charged with overseeing governance effectiveness of the organization and suggesting infrastructure changes? Is another charged with business development?
D. Are there committees whose function might be better served by specialists such as website designers or public relations professionals, or by user groups such as MLS software users?
Everyone in our industry, and indeed in the association world in general, is talking about 'hard times'. Responses to economic challenges vary from raising dues to cutting staff and programs, and the person most often hurt by these cuts is the source of our organization's main attention—the member.
But just as citizens demand that government and corporations dispense with high-salaried executives and bloated middle management structures, so we as associations must examine our own internal workings. It's time to examine our own governance costs and our organizational return on investment in maintaining tradtional ways of conducting business.
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