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This Is IOM
Aligning Money with Mission: Non-Dues Revenue Strategies for Associations & Chambers with Avi Olitzky
In this episode of IOM, we delve into the crucial topic of non-dues revenue for associations and chambers. We explore why reliance on membership dues alone is becoming increasingly unsustainable and discuss effective strategies for diversifying revenue streams while staying true to an organization's mission. Our guest expert, Avi Olitsky, President and Principal Consultant of Olitsky Consulting Group, shares his insightful perspective, drawing parallels between the challenges faced by houses of worship and similar organizations. We discuss:
The shift from obligation to benefit-based membership: Why members are leaving and how to address it.
The importance of aligning non-dues revenue with mission: Avoiding the "business of being in business" trap.
Strategic vs. tactical approaches to non-dues revenue: Focus on long-term vision, not just quick fixes.
Building a cross-functional discovery team: The power of diverse perspectives.
Balancing innovation and risk management: The "Three B's" of non-dues revenue: Bonus, Balance, and Basis.
Ethical considerations in non-dues revenue: Avoiding conflicts of interest and ensuring transparency.
Future trends in non-dues revenue: Including the emergence of incubation and equity sharing models.
This episode is essential listening for anyone involved in the leadership and management of associations, chambers, and similar organizations seeking to build sustainable financial models that reflect their core values.
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I think it's safe to say that we all like money. Organizations love making money because it allows them to do more XYZ things that make an impact on their communities and organizations. I also love making money so I can do XYZ activities, mostly travel and random technology purchases. However, should organizations be grabbing at every dollar they can, or should their non-dues revenue strategy align to their mission? For this discussion, I've enlisted the help of Avi Olitski, president and principal consultant of the Olitski Consulting Group. We talk a lot about the money and the So let's get to it. I'm Nathan Graham, and this is IOM. I want to get started with, can you share a bit about your background and what led you to focus on non-dues revenue strategies for chambers and associations?
SPEAKER_00:Sure. It's actually a much larger question with a bigger answer, but I'll try to give you the medium version instead of the long version, which is I'm formerly a congregational rabbi. I did that for close to 20 years. about a decade ago i co-authored a book on new membership and alternative revenue strategies for the north american synagogue part of that is because i was watching the evolution in society of the sense of belonging and why people belong to houses of worship and it was this evolution from obligation to guilt to a sense of benefit and if you couldn't articulate benefit and derive a sense of value, not the emotional side, not the community side, but really articulate the sense of benefit for one's membership, then in the past 20, 25 years, people were stopping their membership. They were no longer belonging. I saw that because houses of worship I felt about 10 years ago were more or less a beat behind society. And once I left the synagogue space four or five years ago, and launched a consulting firm and doing work and really backed into the association and chamber world because, hey, here are all these members and I'm happy to share that story as well. It made me realize that associations and chambers are a bit behind houses of worship. And so this conversation about articulating benefit and revenue and value translated to non-dues revenue because the movement of dues going away is surely afoot.
SPEAKER_01:And so why is non-dues revenue becoming increasingly important for organizations today? So you said that it's going away. So if it's going away, then the next thing is obviously non-dues revenue. Why is that so important?
SPEAKER_00:Perfect. In my opinion, Nathan, we once had best practices of dues within a budget representing somewhere between 50 to 75 percent of one's budget that was likely in that period of time where it was either membership out of a sense of obligation and loyalty or out of a sense of guilt now that we've articulated this sense of benefit especially from the precarious nature of what the ephemeral sense of belonging is or how fleeting someone makes a decision wishy-washy on one day different on another, we suggest best practices are closer to zero to 25%. And that just simply diversifies one's budget instead of putting all their eggs in one basket to use sort of the hackneyed expression. I would add that's a little bit of why we push this, why the thinking is there is because many organizations have not fully identified or translated those benefits to membership. What I mean by that is there's a difference between features and benefits. A perfect example of this is advocacy. You'll have a chamber who say, as a result of your belonging to our chamber, you will benefit from all the advocacy that we do on your behalf. The lobbying, we go to the city council, we go to the government, whatever it might be. That's incorrect. Everyone benefits irrespective of whether or not they're a member of the chamber. That's the notion of lobbying and advocacy. If I'm a chamber and I'm only lobbying for my members as opposed to the broader community, the industry, the trade community, That's a different story. That's a measure of exclusivity. And there are some associations and chambers and organizations that do that. But generally speaking, advocacy and let's call it lobbying or legislative action or encouragement, that's a feature of a chamber, not a benefit of membership. And so the idea of saying, can we truly articulate the benefits of membership in a way that is value-based for the member, well then you're also creating a transactional environment. And you want as a chamber, not for your members to say, I belong to insert chamber here, but I feel a sense of belonging participating in this chamber. And so we wanna also move away from those transactional relationships.
SPEAKER_01:Do you explain, whenever you're talking to people, Do you explain it in both a business sense and a religious sense as a connection and which one works better?
SPEAKER_00:It really depends on the client. Nine times out of 10, Nathan, it's the business sense more than the religious sense. Okay,
SPEAKER_01:that's fair. I just, that feels, so again, I grew up in a very religious context. So I was like, huh, I feel as though this might be something that works out. So you emphasize aligning the non-dues revenue initiatives with the organization's mission. And so why is that alignment crucial? And can you provide some successful examples?
UNKNOWN:Yeah.
SPEAKER_00:Yet another great question. You're 100% on the right track. The reason it's crucial is because if we don't align non-dues revenue with our mission, then we find ourselves being in the business of being in business instead of being in the business of our mission. So, for example, let's insert a random chamber of commerce. Name a city. Omaha, Nebraska. Omaha, Nebraska, lovely town. I was just there a couple weeks ago to see Hamilton when I was through. It's a great place. Let's say the Omaha Chamber says, we need$50,000. We wanted some alternative revenue. We want non-dues revenue. They could just host a car wash. They could have a bake sale. But that would be a quick way to get money. Why do that? The difference between an organization like a chamber is you do not exist to get more money, to balance your budget, to get more members. You exist to serve your members and to serve your community, and you want to leverage that and monetize that. It doesn't mean you need to be operating at a deficit. You should operate at a surplus and reinvest that into the mission. So a very good example, might be let's say and i'll leave some organizations explicitly out of this but let's talk about a chamber that homelessness and hunger in their city is major well what would it look like for that chamber to open a for-profit bakery well what if it is great in the sense where people are able to it's the best bakery in town okay Anyone who's hungry can come and benefit from it for free. You charge a surcharge, and it offsets because there's additional revenue. Now, that only matters if caring for the underserved and the hungry in the community are part of the mission of the chamber. And there are some communities where they specifically exist to service the underemployed as opposed to the employed. I'll give you the other side of that. what would it look like for a chamber to offer fee for service to non-members professional job transition coaching? That becomes alternative and non-dues revenue that begins to really service that mission because you're elevating everyone in that community and you're trying to reintegrate and bring people there. And there are other ways that we could think through some of that. But the key, Nathan, is I often will see organizations not only do non-dues revenue exercises and initiatives that don't serve their mission, but it's the deeper question of there's lack of clarity around their mission too.
SPEAKER_01:And in that strategy, does that help them avoid aligning it with their organization's mission? Does that help them avoid the public view that they're just grabbing money, that they're going for a mere cash grab? Is that the strategy to avoid that kind of public perception?
SPEAKER_00:Yes, it's not only about the public perception, but it becomes a doom loop. Because what ends up happening is any opportunity to make money is an opportunity to make money and it ends up distracting you from actually being in service of your mission. In addition, one of the things we work on a lot with our clients and I work on personally with a lot of colleagues is what does a strategic priority matrix look like? Do you have an operational scorecard so that if someone presents you with a decision, does this serve your mission is it aligned with your goals it is aligned with your vision do you have the bandwidth and should you move forward with it would it be very easy for a chamber of commerce to put on a battle of the band's benefit in the heart of town i don't know about easy but certainly a city could do that but what is the goal of that is that to make money is that to bring people to patronize the businesses that are members that are in the center of town How many employees and bandwidth need to be dedicated to that? And how much money are you investing on time to make the money instead of serve the members? Those are the bigger questions. So it's not just about perception. It's actually about mission creep.
SPEAKER_01:Yeah. And then you mentioned the talking about like the team to get everything. You mentioned the importance of assembling a cross-functional discovery team. How does this team contribute to finding the right strategy and overcoming those challenges?
SPEAKER_00:A cross-functional discovery team, Nathan, is about preventing an echo chamber. We often talk about an organizational chart, and that has to do with chain of command and hierarchy and the right people in the right roles. But when we look at experts like Patrick Lencioni and his six types of working genius, or Jim Collins saying the right people in the right seats on the bus, you want to make sure that every person who's going to ask the right question is in the room. So if I'm doing discovery and I have a clear mission, I might say my marketing person has a different type of lens than my facilities person has a different type of lens than my partnership or CVB connections or whatever it might be, as opposed to simply my director of development. In addition, those organizations should be pivoting not about member retention, but member engagement. And that should be the heart of all of this too.
SPEAKER_01:And then how can organizations balance the need for innovation with the risk of overextending themselves and what role does financial prudence play in ensuring sustainability?
SPEAKER_00:Perfect. I'm going to give you two answers to that question. The first is I tend to give a lot of talks around the difference between micro innovation and macro innovation. Macro innovation is doing something that no one has ever done before. Micro innovation is doing something that you've never done before. A lot of organizations think that they have to lean into macro innovation. And as a result, that's where they get a little bit of house poor on it. They're building money towards retirement and have no money for the rent. And that's where the financial prudence question ends. And that's a misfire. That's definitely misguided. The other side of it is when I talk about alternative revenue or non-dues revenue, talk about the three Bs, bonus, balance, basis. The very first time you start a non-dues revenue initiative, it is not in your budget. Sure, you want to budget the expense, but it's an incremental expense that matches incremental revenue. You should not be budgeting for a certain windfall. After one or two years or whatever your pilot opportunity is, and it's about a market segment, it's not a wholesale rollout, then you switch from bonus to balance. And within your budget, you begin to downscale the reliance on your dues revenue, and you balance the budget with a portion of this non-dues revenue. And after you feel that the market has been tested, you have a formula, you have recipe, you have success three, four, five years at a max. Now it becomes your basis and that becomes something you're budgeting for.
SPEAKER_01:Oh, okay. And then, so in some of your blogs that you've written for us, you've talked about non-dues revenue, but you've also talked about ethics and how do ethical considerations intersect with non-dues revenue strategies and how can organizations foster a culture that supports ethical consciousness while pursuing those diverse revenue streams?
SPEAKER_00:The first answer to that question is we should never have a structure where someone is fundraising in a nonprofit setting, so to speak, or a chamber setting where they're getting a commission or a percentage of of the money raised. That's the first ethical challenge. If I'm going out to raise$50,000 of non-dues revenue, I shouldn't be told that when I hit 50, I get a bonus for doing so, or I get 10% of whatever the number I raise or whatever it might be, because then my outreach and the initiative is disingenuous. Maybe I should get a fee for service. Maybe I should get a salary or some sort of stipend, but that's a different story. The second piece is every now and again, We look at opportunities to fill financial voids and shortcuts pop up. We need to ensure that even though there might be a shortcut to a financial windfall, even if we think it's for the right outcome, we can't take those shortcuts. And that's where you end up in those kind of ethical speed bumps. It could be about partnering with the wrong folks that are not mission aligned. It could be about making sure your I's aren't dotted or your T's aren't crossed. It might be saying, well, here's a person who's going to give us$50,000 of non-dues revenue and they're going to expect something in return and you want to make sure you're not carrying favors and that type of piece too.
SPEAKER_01:All right. And then... So looking ahead, so there's a little bit of like trend settings, like what trends do you foresee in the realm of non-dues revenue? And then what advice would you give to organizations just starting to explore these opportunities?
SPEAKER_00:Let me answer the question about organizations starting to explore first. The first path to non-dues revenue is not tactical, it's strategic. Coming up with ideas for non-dues revenue, that's tactical. Understanding what you should be doing and what is your role in the universe and the ecosystem, that's strategic. I often talk about an organization having a statement of competitive distinction. Why do we have to exist? But for this chamber, but for this association, but for this organization, the following would not be true. The following would not happen. If you can't articulate your statement of competitive distinction, then you have an existential crisis. If you can articulate your statement of competitive distinction, then you begin to flesh out the mission from there, and that helps you understand the path to take. The first question you ask is a different one. With regard to those trends I see in non-dues revenue, one of them that is popping up pretty common, and it'll be interesting how it continues to trend as the economy becomes quite volatile. That is the idea of incubation and equity sharing. And what I mean by that is every now and again, you'll see in a chamber or an association or an organization, they'll give some sort of seed money to a member. It might be a research grant. It might be a startup or an angel investment. It might be an interest-free loan, something along those lines. What would it look like, nations are already doing this, if in return for that effort, the chamber keeps a couple points of interest and equity in the outcome of whatever is developed as a result of what they contribute? It might be that they're only giving that to members, and Nathan, one of the topics that we didn't touch upon is what happens if the non-dues revenue is only gained from your members. It means your membership dues are an access fee for me to solicit you for more dollars, and that's problematic. But let's say we as a chamber, we have an incubation fund, and every year we're going to give, insert number here, to great ideas to help transform our city. Well, if some of those ideas are not nonprofits and some of those are marketable, fundable, revenue-growing companies, then there's no reason the chamber shouldn't have a separate area within the body that it could retain some interest in those expanded ventures. And that becomes passive income down the road.
SPEAKER_01:All right. Well, you've given me a lot to think about. So the final question we always like to ask is for a personal thing is like, how do you unwind from work? You do a lot of work. We all work a lot. I presume. I don't know. Maybe. But I'm assuming yes. So how do you unwind from it? And what what do you do to kind of separate yourself if you can?
SPEAKER_00:Sure. I have a bunch of different answers that really depends on the setting. The first of those is I love to go for a run. A run is great. The challenge is it's much harder to go for a run at the end of the day than it is at the start of the day. The second answer is I've got four children and sitting and watching an old TV show or an old movie from my childhood with them definitely takes me back and lets me cut out and have a good time. The third, although I'm on the injured reserve as a result of a dislocated shoulder, I love beer league hockey. I've been playing ice hockey for about probably close to 10 years now. I live in Minnesota. I grew up on the East coast, grew up playing street hockey and roller hockey. Didn't learn how to skate till I moved to Minnesota about 17, 18 years ago. And I play beer league hockey and there's no other activity in my life where for a straight 90 minutes, you cannot possibly think about anything else or you get lit up and laid out. And that's great for, it might not be great for the head, but it's great for the brain.
SPEAKER_01:Might be good for the heart eventually. It makes you feel good. Certainly good for the heart too. What's the favorite movie or favorite TV show to show your kids?
SPEAKER_00:That is a fantastic question. I'm a big fan of Goonies. I'm a big fan of all of the sports movies from the 80s and 90s, Rookie of the Year, Little Giants, Mighty Ducks, of course. But now that my kids have gotten older, my eldest are in high school. Now that they've gotten older, I'm really excited about watching some of the funnier classics like Friends or Seinfeld or some of those things that I really laughed out loud during when I was younger. Like a
SPEAKER_01:Cheers
SPEAKER_00:or something? Cheers. And now that... you know, Norm just passed away, George Wendt just passed away, all the more so I look forward to watching Cheers with them, but that's exactly right. Well,
SPEAKER_01:I recommend this. I love older. I mean, I grew up watching older shows because it was cable and like they're like Nick and I were showing older shows. So I watched The Nanny and Golden Girls and that was my entertainment before going to school in the morning. But anyway, this was an excellent conversation. Thank you, Avi, for being on the podcast today.
SPEAKER_00:For sure. Thanks for having me, and I look forward to part two. I know that there are so many other topics we can dig into, and I'm just excited for all of the listeners and participants to continue to grow and innovate as they can.
SPEAKER_01:That's the show for today. A special thank you to Avi for helping us align our money to the message. If you like what you heard, consider coming to Institute. Our Southeast and Northeast summer site registrations are still open. This podcast is a production of the U.S. Chamber of Commerce Institute for Organization Management. You can learn more about the program by listening to our other podcast episodes and by visiting institute.uschamber.com. If you have any questions, get the fast pass to the top of our inbox, iom.uschamber.com. From Karen, Raymond, Cece, Ivy, and yours truly, all the best today and for a better tomorrow. Bye everyone.