by Dave Bergeson, Ph.D., CAE
Vice President of Client Relations
Association Management Center
It would be cliché and perhaps too obvious to say that for nonprofits and associations, this year is unlike any other. And yet, here we are. Most of our in-person conferences have been canceled. Many if not most of us are implementing virtual meetings and conferences. Our traditional forms of content delivery and traditional revenue streams have been disrupted.
One of the consequences of this disruption is significantly decreased revenues in 2020. A secondary consequence is an increased likelihood that associations will have to access their reserves this year. A recent survey from ASAE shows that just under 80% of responding associations will have to dip into reserves this year. This survey also shows that 6% of responding associations do not have enough reserves to get them through the year.
The cruel reality in 2020 is that those associations with little or no reserves may have no choice but to make really hard decisions in order to sustain themselves. These choices may include deep cuts to staff and/or deep cuts to programs or services.
What is harder to understand are those associations with extensive and strong reserves, who nonetheless make deep cuts to staff or services in order to avoid using even a very small slice of these reserves. Unfortunately, many Boards view dipping into reserves as a measure of the management competence of the Board and/or staff. They view dipping into reserves as some sort of ripcord that should unleash a parachute of judgment and perceived failure.
To these Boards with healthy reserves, let me say this: Congratulations on generating strong reserves. Well done. Now, use them. Using your reserves does not mean that you have failed, nor that your association or nonprofit is dying. Please do not burn the furniture, layoff half your staff, or hold a bake sale in order to avoid dipping into reserves. You’re going to need your furniture and staff when you emerge from this crisis.
Clearly, associations need to change one or more elements of their business plan if they find themselves dipping into reserves several years in a row solely to support ongoing operations. But one of the primary functions of reserves is to be there to occasionally use in case of an extraordinary, unusual event, such as COVID-19. Using your reserves to supplement income lost due to the COVID-19 pandemic is common this year among associations and is no cause for shame. That’s what they’re there for, folks.
Reserves are also where you should be going to fund new products or services, such as a web site redesign or Learning Management System, to help meet your mission. McKinley Partners make a strong point that leading organizations actively use their reserves, rather than simply sit on them. Association Forum has a good professional practice statement on reserves in which they advocate that one of the primary functions of reserves should be the “…addition of promising new programs or services.”
Success in associations is like most things; it is a long-term game. It can be measured by any number of things, including volunteer engagement, member satisfaction, and most importantly the degree to which the association meets its mission and makes an impact on its community and/or profession. One thing is clear: success should not be measured as a series of one-year thumbs up or thumbs down judgments based on one-year net operational revenues or the extent to which you had to dip into reserves.