2012 Economic Impact on Associations: Resilience and Recovery

2012 Economic Impact on Associations:Resilience and Recovery mckinley-advisors.com

February, 2012Dear Colleagues:McKinley’s 2012 Economic Impact on Associations (EIA) Study marks the fifth installment in aseries that examines the impact of shifting economic conditions on our sector. The report pro-vides insight into key benchmarks of association success, measures the reality of the past yearand the outlook for the coming one, and provides data that validates how challenges and oppor-tunities can differ dramatically from one sector to another.While the series took root at a time when associations were experiencing some of the harshesteconomic conditions they had ever faced, each subsequent installment has provided a fascinat-ing and informed view of the association community and its resilience in times of both austerityand recovery. In this 2012 report, we continue to see a major theme of recovery—a continuationof the upswing witnessed in 2011. Both in the survey research and in our anecdotal observa-tions across a broad spectrum of clients, we see how associations have adapted to the challeng-ing climate by adjusting expectations, redefining strategy and, in many cases, creating a morestreamlined and efficient internal operation. As the poet and filmmaker James Broughton oncesaid, “Adversity is a stimulus.”We appreciate the time invested in this project by each of the 200 association executives whoresponded to the survey, and we look forward to continuing to deliver meaningful studies thathelp organizations understand the larger environments in which they—and their members—are operating. If you would like to discuss the data in more depth or arrange for a presentationfor your staff or Board, please be in touch.Best wishes for continued optimism and recovery.Jodie Slaughter Jay Younger Shelley Sanner, CAE Patrick GlaserPresident & Managing Partner & Managing Consultant Senior ResearchFounding Partner Chief Consultant Manager

2012 State of Associations | Resilience and RecoveryIntroduction Survey MethodThe EIA series has provided an interesting, if not McKinley developed and deployed an online surveyilluminating, view of associations through the lens to senior association executives on January 4, 2012of a dramatically shifting economic landscape. In the to collect key data around the economy and itspast four years, the data has shown the resilience impact on associations. The survey remained openof associations—from initial, drastic measures to until January 18, 2012 and resulted in 200 responsespreserve core infrastructure to the first signs of representing a broad spectrum of the associationrecovery as associations began (and continue) to community. It is worth noting that the personal andreinvest in critical core initiatives. Yet in 2012, just organizational characteristics of EIA respondentsas in 2011, optimism continues to be balanced by (e.g., budget size, sector, job responsibilities, organi-conservative behavior. The fact is that associations zational role, etc.) have remained roughly consistentare operating in a different reality today than they over the four year horizon of the series.did four years ago.So what has changed for associations? Among thekey findings for 2012: > Optimism is up and, in many cases, the reality of 2011 outperformed expectations. > Despite improving conditions, some association segments continue to face pronounced challenges, particularly associations whose members were deeply impacted by the recession (such as the building/construction industry.) > Associations are coming off of a period of extreme austerity, but they are continuing to show signs of reinvestment in staff (with hiring trends on the rise), major capital projects such as website enhancements and database upgrades, and “developing new methods for member engagement.” > Membership continues to be an area of focus for associations. Across all indicators, respondents report a deepening concern and investment in member recruitment and retention—or, more importantly, what might be called an improved, more deliberate member “experience.” If you wish to participate in future benchmarking studies or are interested in a tailored presentation of the EIA results to your senior staff or board of directors, please contact Shelley Sanner at ssanner@mckinley-advisors.com. McKinley Advisors 2012 Economic Impact on Associations | 2

2012 State of Associations | Resilience and Recovery accounting, food industry, legal, association manage-OrganizationsForty-six percent of respondents represent profes-sional societies (consisting mostly of individual ment and the retail industry.members), 34% are from trade associations, 14%from a “hybrid,” 3% from philanthropic or cause- The number of senior executives who responded torelated and 2% describe their association as “other.” the survey this year is nearly equal to 2011, with 91% holding a director level position or higher. TheSeventeen percent of the survey respondents remaining participants reflect the breadth of therepresent healthcare organizations; 16% describe profession and represent a variety of responsibilities.their organizations as scientific and engineering.Education and humanities associations account Fifty six percent of survey participants representfor 12% of respondents. The balance represents a organizations whose annual operating budgets arevariety of industries, including building / construc- less than $10 million, while 10% have budgets oftion, manufacturing, professional services, finance / over $50 million. Which of the following best describes the organization you work for? TABLE A Total Responses: 153 3% 2% Professional (mostly individual members) 14% Trade 46% and individual members) Philanthropic / Cause Related 34% Other McKinley Advisors 2012 Economic Impact on Associations | 3

2012 State of Associations | Resilience and Recovery What field/industry does your association represent? TABLE B Total Responses: 155 Other, please specify 23% Healthcare 17% Scientific / Engineering 16% Education / Humanities 12% Building / Construction 10% Manufacturing 7% Professional Services 5% Finance / Accounting 4% Food Industry 3% Legal 1% Association Management 1% Retail 1% 0% 10% 20% 30% 40% 50% Which of the following most closely describes your position within your organization? TABLE C Total Responses: 155 40% Senior Vice President / Vice President 19% Managing Director / Senior Director 13% Director 12% 8% Manager 7% Other 1% Coordinator 1% 0% 10% 20% 30% 40% 50% McKinley Advisors 2012 Economic Impact on Associations | 4

2012 State of Associations | Resilience and Recovery Which of the following best describe your areas of responsibility? TABLE D Please select all that apply. Total Responses: 155 55% Membership 39% 34% 23% Other, please specify 17% 16% 16% 16% 15% 10% 10% IT / Technology 9% 0% 10% 20% 30% 40% 50% 60% What is your organization’s annual operating budget? TABLE E Total Responses: 153 $100 million or more 3% $50 million t o $99.9 million 7% $20 million t o $49.9 million 16% $10 million t o $19.9 million 17% $5 million t o $9.9 million 22% $2 million t o $4.9 million 22% Less than $2 million 13% 0% 10% 20% 30% 40% McKinley Advisors 2012 Economic Impact on Associations | 5

2012 State of Associations | Resilience and RecoveryKey Finding #1Economic conditions were more favorable than expected in 2011.Despite a year of slow economic recovery, only about one-in-ten respondents (11%) report that the 2011economic impact on their association was worse than expected. By comparison, about five-in-ten respon-dents (45%) experienced an impact from the economy that was more favorable than they had expected. Looking back on 2011, what was the impact of economic conditions on your association? TABLE 1 Total Responses: 183 9% 11% Far worse than e xpected (0%) Worse than expected About what w as e xpected 35% 45% McKinley Advisors 2012 Economic Impact on Associations | 6

2012 State of Associations | Resilience and RecoveryKey Finding #2Most respondents are optimistic looking towards 2012.Almost all participants in the study indicated some level of optimism when looking at 2012 for their associa-tion. In total, about nine-in-ten respondents (88%) are optimistic about 2012. Only about one-in-ten (12%)are pessimistic when looking at the coming year.Notably, optimism appears to be somewhat tempered, with only about two-in-ten respondents (17%) notingthat they are “very” optimistic about 2012. In general, how are you feeling about the year 2012 for your association? TABLE 2 Total Responses: 161 12% 17% 71% McKinley Advisors 2012 Economic Impact on Associations | 7

2012 State of Associations | Resilience and RecoveryKey Finding #3Although optimism grows, the long-term economic impact of the recession is evidentin membership trends. Membership growth is primarily credited to growth inthe industry, a stronger membership proposition, and more strategic marketing;associations with declining membership attribute it to difficult economic conditionsand an aging membership.Only one-in-four respondents (26%) reported a lower average membership trend based on the past fiveyears. However, fewer respondents in this 2012 study (34%) reported a five-year positive membershipgrowth trend than did in 2011 (44%) or 2010 (44%). This is consistent with economic conditions over thepast several years. The National Bureau of Economic Research (NBER) placed the beginning of the recessionat the end of 2007. Thus, respondents from previous studies had the benefit of one to two additional pre-recession years to consider in five year trending.As might be expected, there are important differences in the five-year annualized trends reported by respon-dents coming from different fields. Participants that represent fields related to building and construction, forexample, indicated the worst five-year membership trend, with seven-in-ten respondents (70%) reportingfewer members. Is the annualized trend in full, paid memberships for your association over the past 5 years TABLE 3 (since January 1, 2007): Total Responses: 2012: 159 2011: 234 2010: 307 34% Higher 44% 44% 26% Lower 38% 28% 2012 37% 2011 Flat 18% 23% 2010 3% Don’t know 1% 5% 0% 10% 20% 30% 40% 50% McKinley Advisors 2012 Economic Impact on Associations | 8

2012 State of Associations | Resilience and Recovery Is the annualized trend in full, paid memberships for your association over the past TABLE 3B 5 years (since January 1, 2007) higher, flat, or lower? Annualized 5 Year Membership Trend Analyzed by Field Represented by Association 80% 70% 70% 60% 55% 50% 48% 41% 40% 40% 40% 38% Higher Flat 31% 31% Lower 30% 30% 30% 30% 30% 30% 30% 28% 28% 25% 20% 19% 10% 10% 5% 0% Building/ Educa on/ Professional Public, Manufacturing, Scien c & Healthcare Construc on/ Humani es Services Non-pro t, & Energy & Natural Engineer ing (N =27) Real Estate (N = 20) (N= 20) Cause-related Resources, Retail (N = 25) (N = 20) (N = 16) (N = 27) McKinley Advisors 2012 Economic Impact on Associations | 9

2012 State of Associations | Resilience and Recovery Over the past 12 months, has your retention rate: TABLE 3C 46% 45% 41% 36% 29% 27% 27% 23% Increased 18% Decreased Stayed the same Trade Professional Hybrid (N = 52) (N=71) (N=22) Is the annualized trend in full, paid memberships for your association over the past 5 TABLE 3D years higher, flat or lower? 55% 39% 38% 33% 32% 32% Higher 30% 27% Flat Lower 14% Trade Professional Hybrid (N = 52) (N=71) (N=22) McKinley Advisors 2012 Economic Impact on Associations | 10

2012 State of Associations | Resilience and Recovery What is the approximate annualized increase/decrease in full, paid memberships for your TABLE 4 association over the past 5 years (since January 1, 2007): Total Responses: 108 Base: Respondents whose 5 Year Association Retention Changed 31% 28% 12% 11% 10% 7% -10% -5 0% 0% 5% 10% or or less to 10% to -5% to 5% to 10% more McKinley Advisors 2012 Economic Impact on Associations | 11

2012 State of Associations | Resilience and RecoveryKey Finding #4Concern across all core association business lines continues to lessen, although thedecreases are less dramatic than in 2011. Two notable areas are corporate support(advertising and sponsorship), which continues to see significant decreases in terms ofthose who are concerned and membership (retention and recruitment) which still topsthe list as the issue of concern to the greatest number of associations.Respondents were asked to share their levels of concern across core business lines. Advertising and spon-sorship continued to show some of the greatest overall decreases in terms of numbers who are concerned(sponsorship showed the most significant drop of 11% from 2011 to 2012 while concern for advertising andannual meeting attendance decreased by 10%). Taken together, these two areas show optimism about therecovery of the private sector and the continued viability of corporations as a source of revenue support. Allother areas decreased between 4% and 10%. Volunteer participation, which showed a slight bump in con-cern from 2010 to 2011, fell 6% in concern.On the other side of the engagement spectrum is membership, which (for many associations) represents themost fundamental reason for existence. Throughout the survey, respondents expressed heightened concerns,reported flat or declining trends, and described investments geared specifically towards improving member-ship benchmarks and the member experience. When asked specifically about recruitment and retention, thesurvey respondents ranked these two issues of highest concern. McKinley Advisors 2012 Economic Impact on Associations | 12

2012 State of Associations | Resilience and Recovery Considering the current economic situation, how concerned are you TABLE 5 with the following issues? (Percentage who answered “extremely” or “somewhat” concerned shown based on a four-point concern scale) Total Responses: 2012: 162 2011: 237 2010: 340 2009: 283 72% Membership reten on 78% 84% 88% 72%Membership recruitment 78% 78% 86% 65% Sponsorship 76% 88% 88% 59% Annual mee ng 69% a endance 79% 83% 58% A endance at other 68% educa onal seminars 74% 74% 49% Adver sing 59% 80% 74% 46% Product sales 50% 66% 58% 36% Volunteer par cipa on 42% 36% 29% 0% 20% 40% 60% 80% 100% Concerned 2012 Concerned 2011 Concerned 2010 Concerned 2009 McKinley Advisors 2012 Economic Impact on Associations | 13

2012 State of Associations | Resilience and RecoveryKey Finding #5While associations continue to show improving budgetary outlooks, there areindications that the recession has caused them to behave more deliberately andconservatively when it comes to internal operations.The majority of cost-savings activities that participants were asked about appeared to be less popular in2012 than in previous years. However, exceptions include staff reorganization and outsourcing of staff func-tions, which have remained relatively stable for several years. Still, significant fewer participants in 2012 and2011 signaled a hiring freeze than in previous years. What do you expect to happen at your association in 2012 as a result TABLE 6 of current economic conditions? Total Responses: 158 IS DEFINITELY PROBABLY PROBABLY DEFINITELY DON’T HAPPENING WILL WILL WILL NOT WILL NOT TOTAL KNOW NOW HAPPEN HAPPEN HAPPEN HAPPEN Layoffs / elimination 3% 1% 11% 51% 32% 3% 158 of positions Hiring freeze 6% 3% 13% 39% 33% 6% 157 Freeze on 3% 3% 12% 45% 32% 5% 159 salary increases Staff reorganization 8% 7% 20% 44% 17% 5% 158 Budget cuts 7% 7% 20% 42% 18% 6% 159 Reduction of 4% 3% 12% 48% 28% 6% 158 programs and services Change in 5% 3% 15% 40% 16% 21% 159 investment strategy Outsourcing of 8% 5% 16% 44% 17% 10% 158 staff function McKinley Advisors 2012 Economic Impact on Associations | 14

2012 State of Associations | Resilience and Recovery What do you expect to happen at your association as TABLE 7 a result of current economic conditions? (Percentage answering: happening, will happen, probably will happen) 34% 36% 44% 36% 34% Budget cuts 44% 70% 84% 29% 23% 27% 25% 23% Change in investment strategy 24% 35% 51% 2012 22% 2011 Hiring freeze 24% 53% 2010 58% 2009 18% 18% and services 45% 45% 18% Freeze on salary increases 20% 54% 44% 15% 12% 22% 26% 0% 20% 40% 60% 80% 100% McKinley Advisors 2012 Economic Impact on Associations | 15

2012 State of Associations | Resilience and RecoveryKey Finding #6Improving economic conditions have shifted some focus from member retention tomember engagement strategies.Focus on improving member retention continues to fall among respondents in 2012. Only about three-in-tenrespondents (34%) indicated retention as a priority in the 2012 study. This represents a drop of 16 percent-age points over the preceding four years. By contrast, interest in new strategies for member engagement,website enhancements, new product research and development, and diversifying membership has grown inrecent years. What are your three highest priorities for 2012? TABLE 8 (Limit 3 responses per participant) Total Responses: 160 37% Developing new methods 28% for member engagement 27% 34% 34% 40% 49% 50% 29% Website enhancements 22% 18% 28% Branding / 27% Increasing Awareness 32% 36% 23% New product research 18% 2012 and development 14% 2011 19% 2010 Diversifying membership / 14% 16% 2009 15% 19% 23% 30% 26% 14% 14% among younger members 9% 12% 11% 15% results 17% 22% 0% 10% 20% 30% 40% 50% McKinley Advisors 2012 Economic Impact on Associations | 16

2012 State of Associations | Resilience and RecoveryKey Finding #7Membership retention rates are stronger in the past two years than in the previoustwo, signifying a potential recovery for associations.About four-in-ten respondents in the 2012 and 2011 EIA studies reported a member retention rate of 90% orhigher for the preceding year (42% and 39%, respectively). By contrast, only about three-in-ten participantsto the year 2010 and 2009 studies said the same (32% and 33%, respectively) What is your current membership retention rate? TABLE 9 Total Responses: 153 18% 95-100% 19% 12% 11% 24% 90–94% 20% 20% 22% 27% 85-89% 21% 22% 20% 16% Percen t 2012 80-84% 15% 18% Percen t 2011 21% Percen t 2010 7% 10% Percen t 2009 75-79% 10% 11% 5% 70-74 9% 10% 7% 3% Less than 70% 5% 7% 8% 0% 10% 20% 30% 40% 50% McKinley Advisors 2012 Economic Impact on Associations | 17

2012 State of Associations | Resilience and RecoveryKey Finding #8Associations continue to plan to hire in 2012.Plans for hiring almost doubled from 2010 to 2011 and the 2012 survey revealed that associations continueto plan for adding positions. The brunt of hiring is projected to be in the areas of education / professionaldevelopment, marketing, IT, membership and goverment affairs. Does your association plan to add new staff positions in 2012? TABLE 10 Total Responses: 159 50% 41% Yes 24% Percen t 2012 37% Percen t 2011 44% Percen t 2010 No 60% 14% 15% Don’t know 16% 0% 20% 40% 60% 80% 100% McKinley Advisors 2012 Economic Impact on Associations | 18

2012 State of Associations | Resilience and Recovery In which of the following areas does your association plan to add staff in 2012? TABLE 11 Please select all that apply. Total Responses: 77 30% 21% 31% 30% 32% 30% 26% IT / Technology N/A N/A 22% Membership 19% 28% 21% N/A N/A 16% 22% 17% Percen t 2012 Percen t 2011 13% N/A Percen t 2010 N/A 12% 11% 9% 12% 12% 15% 10% N/A N/A 8% 6% 6% 0% 10% 20% 30% 40% 50% McKinley Advisors 2012 Economic Impact on Associations | 19

2012 State of Associations | Resilience and RecoveryKey Finding #9Market research and building an online presence continue to dominate the marketingfocus for associations in 2012, while more traditional efforts such as direct mail, printadvertising and trade show marketing enjoy comparatively less emphasis.Respondents consistently report declining or weak investment levels in traditional marketing channels suchas trade shows, direct mail and print advertising (all of which saw steep declines of at least 7 percentagepoints from 2011 to 2012). On the other hand, survey respondents anticipate growing investments in areasthat are likely to reveal- and align- more closely with members’ current behaviors and expectations. Marketresearch, social media, email communications and online advertising all rose in priority for associations. Do you anticipate that your budget for each of the following will increase, decrease TABLE 13 or remain the same in 2012? Total Responses: 2012: 160 2011: 240 2010: 316 2009: 258 INCREASE 2009 2010 2011 2012 Web site modifications 61% 62% 71% 73% Social media (blogs, Facebook, Twitter, etc.) 52% 56% 57% 59% Email communications to members 56% 49% 43% 45% Online advertising (Google adwords, banner advertising, online 22% 31% 42% 42% sponsorships) Word of mouth marketing 40% 39% 34% 33% Market research 13% 17% 26% 32% Trade show attendance / marketing 16% 23% 36% 28% Public relations 30% 26% 29% 28% Direct mail 10% 14% 23% 14% Print advertising 7% 6% 15% 8% McKinley Advisors 2012 Economic Impact on Associations | 20

2012 State of Associations | Partial List of Participating Associations AcademyHealth American Message Canadian Institute of Therapy Association Mining, Metallurgy and American Academy Petroleum of Dermatology American Physical Therapy Association Center for Association American Academy of Leadership Medical Administrators American Psychiatric Nurses Association College and University American Academy Professional Association for of Pediatrics American Society for Human Resources Clinical Pharmacology and American Association for Therapeutics Constructionthe Study of Liver Diseases Specifications Institute American Society American Association for for Quality Council of IndustrialLaboratory Animal Science Boiler Owners American Society American Association for of Civil Engineers Council on Foundationsthe Advancement of Science American Society of Ecological Society of American Association Interior Designers America of Motor Vehicle Administrators American Speech- Endocrine Society Language-Hearing American Association Association Entomological Society of Physicists in Medicine of America American Water American Association Resources Association Global Association of of Physics Teachers Investment Professionals American Water American Association Works Association Hardwood Plywood and of Snowboard Instructors Veneer Association Association ConnectingAmerican Chemical Society Electronics Industries Independent Office Products and Furniture American Dental Association Forum Dealers Association Hygienists’ Association Association Industrial Supply American Forests Management Center Association American Industrial Association of Pool Interlocking Concrete Hygiene Association and Spa Professionals Pavement Institute American Institute Association of Public International Association of Architects Health Laboratories of Movers American Institute of Building Owners and International Code Council Chemical Engineers Managers Association International International Food American Library Information Council Association McKinley Advisors 2012 Economic Impact on Associations | 21

2012 State of Associations | Partial List of Participating Associations International Franchise National Federation of Society of Manufacturing Association Humane Societies Engineers Irrigation Association National Fluid Power Society of Nuclear Medicine Association Kitchen Cabinet Manufacturers Society of Tribologists and Association National Investor Lubrication Engineers Relations Institute Manufacturers Alliance for Solar Electric Power Association Productivity and Innovation National Precast Concrete Association Southern Association of Medical Group Independent Schools Management Association New Jersey Society of CPAs Special Libraries Association Missouri State Teachers North Carolina Association Nurses Association The New York Academy of Sciences National Affordable Housing Northwest Food Management Association Processors Association United Nations Associations of the USA National Association for Pennsylvania Gifted Children Institute of CPAs University of KentuckyNational Association of Counties Produce Marketing University Risk Management and Association Insurance Association National Association of Criminal Defense Lawyers Promotional Products Washington Area New Auto Association International Dealers Association National Association of Educational Procurement Reinsurance Association of America National Association of Enrolled Agents Risk Management Society National Association of Society for Marketing Home Builders Professional Services National Association of Society for the Advancement Independent Schools of Material and Process Engineering National Association of Local Boards of Health Society of Chemical Manufacturers & Affiliates National Association of Social Workers Society of College and University Planning National Association of Theatre Owners Society of Consumer Affairs Professionals in Business National Business Officers Association Society of Hospital Medicine McKinley Advisors 2012 Economic Impact on Associations | 22

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2012 Economic Impact on Associations: Resilience and Recovery

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