Nearly half of all associations have components – a catch-all phrase for chapters, special interest groups and the like – according ASAE’s last benchmarking study. Back 2006, two research undertakings by Mariner and Whorton and by the ASAE Component Section Council sought to answer the question “are chapters worth the effort – do they have a defensible ROI?” 10 years and a much different economy later, we’re still hearing the question “How do we justify the cost of chapter support?”, and it’s getting louder. We can relatively easily identify the costs (financial and otherwise), but struggle to monetize the value.
This isn’t exclusive to chapters; for many activities in an association (or any business for that matter), it is often much easier to identify and track the direct costs associated with that activity than it is to assess the income resulting from that activity. We’ve all heard the classic statement, “I know that half my advertising dollars are wasted…I just don’t know which half.” Notably, only a handful of respondents to our 2016 Chapter Benchmarking Study indicated an attempt at calculating chapter ROI.
Despite this ambiguity, many associations continue to allocate resources to their chapter system without developing an objective financial rationale for that allocation. This allocation tends to expand over time until its cost butts into other association activities at which point the activity with the most influential advocate (not necessarily the greatest value to the mission or the members) gets the larger share of the budget.
So how might we approach this process in a way that replaces, as much as possible, the subjective assessment of value with objective financial measures against which resources can be rationally allocated?
Let’s start with a review of areas where chapters might typically generate value for the association:
- Distribution Channel through which products and services (training programs, publications, education, etc.) can be delivered/sold to members.
- Marketing & Communication Channel through which organizational messages regarding industry/professional issues, products & services, etc. can be delivered.
- Listening Channel through which HQ can pick up on and track emerging issues, trends, etc. that present opportunities or threats.
- Recruitment Channel through which the association can develop new relationships and attract new members.
- Advocacy Channel through which the association can deliver its messages to legislators through their constituents.
- Professional Development Channel through which the association can train and mentor students and entry-level professionals and prepare them for certification.
- Local Resource Channel which association can tap into for additional expertise, area knowledge and labor for the delivery of national programs at the local level.
- Product Development Channel, effectively an incubator in which the association can test new concepts (content, format, channel, messaging, etc.) before rolling those concepts out system-wide.
- Member Engagement Channel through which members can become active “citizens” of the association by volunteering on an ad hoc basis.
- Leadership Development Channel through which the members can develop and sharpen their leadership skills thus improving their readiness to participate on the national stage.
Each of these functions has an impact on the bottom line, but associations rarely attempt to monetize that value. As a consequence, the income side of the chapter P&L comes up short, woefully so in many cases. There are a variety of ways in which dollar amount could be assigned to these functions. They include:
- Calculate the direct value of the activity. If, for example, the chapters re-sell association publications, swag, etc. and
rebate some amount back the association, that sum can be easily identified.
- Price the service as if the association had to buy it on the open market. Though not completely straightforward, almost every one of the functions listed above has private sector vendors who will provide that service for a fee.
- Price the volunteer contribution – Estimate (or track directly) the hours put in by chapter volunteers to deliver these functions and assign a value based on the average hourly rate paid to regulatory affairs professionals or association management professionals. This has long been common practice among 501(c)3 organizations.
- Assess the influence of chapter activity on mission and or organizational metrics – These might include:
Three of the above have an easily identifiable financial value while the fourth (# connections), though mission-critical, is much less tangible. The relative chapter influence could be assessed through research tools that measure and cross-reference variables such as Net Promoter Score, retention, life-time value and member perceptions of their chapter.
The biggest hurdle will likely be the availability of data as many, if not most chapters keep (and frequently do not share) their member, registration and other activity records in a separate data system (frequently an Excel list) which lacks a common ID with the HQ system. So this leaves us with a couple approaches to valuation:
- We have complete data and can measure many of the metrics above directly.
- We have incomplete data, so what can we use as surrogates for these data points?
- We have incomplete data, so what can we can we sample by survey or limited census for these data points?
Other questions to address include:
- (How) Do we weight each metric? If so, how much?
- Where do we have correlation vs. causation?
- What metrics are redundant?
In isolation, none of the above can fully address the value issue, but when combined based on organizational capacity to execute and cultural acceptance of what, for many, will be a significant paradigm shift, they can form a model that meets the financial needs of the association as a whole while moving the mission forward.
If you’re interested in participating, please take a look at the Chapter ROI Project Plan and the Chapter ROI Valuation Matrix (Phase I) and the ROI Valuation Sample Formulas (Phase II). I can be reached by email (firstname.lastname@example.org) or phone (301-725-2508) if you have any questions and are interested in participating. This is not a heavy lift for participants, but the ROI should be well worth the effort.
Our ultimate goal is for the results of this project to be owned entirely by the association community and provide a sound financial basis for the rational allocation of resources to our chapters.
Do you calculate an ROI? How do you value your chapters?
Update: Several associations have used the valuation tool or similar and are seeing how the data allows for better decision making. Check out “How One Association Proved their Chapter ROI“.