Doc.# 23

The American Radio Relay League
Report of the Administration and Finance Committee
2002 Annual Meeting

Committee Members: Director Walt Stinson, W0CP, Chairman; First Vice President Joel Harrison, W5ZN; Directors Director Jay Bellows, K0QB; Coy Day, N5OK; and Bernie Fuller, N3EFN; Vice Director Jim Fenstermaker, K9JF, Secretary; Executive Vice President and CEO Dave Sumner, K1ZZ; CFO Barry Shelley, N1VXY; Treasurer Jim McCobb, W1LLU; and President Jim Haynie, W5JBP (ex-officio).

Introduction

The League is a vibrant, healthy organization and the balance sheet remains strong. Investments in information technology and organizational development should begin to pay modest dividends by mid 2002. Deficits are expected for the next several years, as we continue to support an expanded agenda of advocacy as well as a broad selection of tangible member benefits. These are planned deficits and, as such, they are no cause for alarm. However, the committee continues to critically examine all of our programs to ensure that they justify the resources that they consume. In this era of increased competition for resources, those programs that do not have an associated revenue stream must present a clear and compelling case for continued funding. Fortunately, our magazines, DXCC programs, Emergency Certification, VEC, and the QSL bureau are completely or substantially self-funding.

Enterprise Software System

Implementation of the enterprise software system will create an opportunity to significantly increase our volume of on-line sales. Management will be challenged to find ways to leverage this system into new product lines and to increase the sales of existing lines of product. Another example of this leverage at work will be in the DXCC program, which is a database reliant program. We are concerned that we may not yet have an adequate sales and marketing capability to fully exploit the opportunities that will be revealed by the system. If we do not, we will work with management to strengthen that area of the organization.

Development

We are planning for deficits for the next couple of years as we transition to a new organizational structure that places a new emphasis on contributed income. We should not underestimate the cultural shift that this represents. In the past, we were able to fund our agenda out of income earned from sales of goods and services, and generate a surplus. Today, that is simply not possible. In the past five years, our agenda has grown considerably, while our revenues have remained stagnant. A development department was created and our executive management structure was reorganized to improve effectiveness and to accommodate the new department. Faced with the choice of curtailing member programs, under-funding advocacy, or running a deficit, the board has chosen to run a deficit. Of course this cannot be done indefinitely. The plan presented to the board calls for three years of deficits.

Eliminating these deficits will require a significant increase in our contributed income. We may reach our goal faster than three years. It might take longer. In any case, we must not waiver in our commitment to the success of this new initiative -- failure is simply not an option. We must expand our advocacy programs if we expect to produce future generations of amateur radio operators. We face threats from real estate developers, local governments, spectrum use competitors, and environmental extremists; as well as RFI from part 15 devices. Meeting these threats is expensive. Failure to meet these threats could destroy the service.

So, we continue to press forward. QST is much improved. The Lab now has a full time employee focused on RFI threats. Our Washington office is fully staffed. We are implementing an enterprise software system. Our new training programs are successful. We are giving close to 70% of all exams. Our DX program is the foremost in the world. We are on shuttle flights and on the international space station. A whole new slate of books is in the cue.

Long Term Outlook

However, despite all of the exciting things happening at the League, the long-term outlook for amateur radio is not very promising. Our demographics indicate that our core members are aging and are not being replaced by newcomers. Ham radio stores, publications, and manufacturers are struggling. Amateur radio is stagnant, both as an avocation and as a business. We are on the cutting edge of technology and yet we are viewed as "old hat". Our ad revenues have been steadily declining for several years. Moreover, local municipalities and residential developers are increasingly hostile toward our activities, business interests are after our frequencies, and national politicians and bureaucrats are largely indifferent to our plight. We are being squeezed out of existence by developers and builders who don't want to loose even one sale to antennas that spoil the homogeneity of their projects. While we are doing a lot of positive things to offset these negative factors, we need to be careful not to over extend our League. There is only so much that we can attempt to do to mitigate these factors, lest we be guilty of "trying to boil the ocean".

If the fundamentals of amateur radio do not change, it is likely that some future board (and not too distant future, either) will be facing a completely new set of challenges -- to curtail the scope of our agenda. While that day has not yet come, it is never too early to critically assess the way we expend our resources. Should we discover areas that are no longer as relevant to our objectives as they once were, we should reduce their funding and re-deploy the human and capital resources associated with them. But, we already know that there is nothing we do that isn't valued by someone, and that means there will be a fight over what gets cut and what does not. In for profit companies these disputes are resolved by profit and loss results. In a non-profit, the money we spend on intangible member benefits (that have no significant associated revenue stream) is money that would represent the retained earnings or dividend outlays of a for profit company. (We call this money "net available income".)

Conclusion

There is no accounting system yet devised that can tell us how to spend this money wisely. It falls to the collective wisdom of the board of directors to ensure that League funds are spent appropriately. However, what the board determined was appropriate yesterday, should not mean an indefinite entitlement. Board members, especially committee chairs, must regularly re-evaluate the activities they oversee in light of today's (not yesterday's) priorities.

The League has responded to the changing landscape for amateur radio by charging more and more for the tangible benefits and spending a higher and higher percentage of our "net available income" on intangibles benefits -- especially the advocacy activities that have been given a high priority by the board. The focus of this committee over the last six months has been to find ways to accommodate the board's agenda within the context our overall financial picture. Moreover, the committee has facilitated and helped orchestrate the reorganization of the executive management. Our continuing mission is to help develop the funding and organizational capability to fulfill the League's strategic mission, goals and objectives.

Respectfully submitted,

Walton Stinson, W0CP
Chairman