At smaller associations, the board often makes the financial decisions. Are your reports to it relevant, or a big data pile-on?
“If I had more time, I would have written a shorter letter,” goes a line that’s often attributed to the French philosopher Blaise Pascal. There’s a lot of truth in that irony: In a rush, we tend to throw all the information we have on the table (or in the report) and hope the recipients have the time and energy to separate the wheat from the chaff.
Something similar appears to happen at smaller associations: If the leadership and staff had more time to clarify financial data, they might produce reports that are more user-friendly and less intimidating. And it’s the smaller associations that could use that help the most.
“They don’t want to appear uninformed in front of their peers.”
In the latest issue of Associations Now, I wrote about the role of finance committees at small associations. Earlier this year the ASAE Foundation, collaborating with ORION Investment Advisors, published a report on financial stewardship, Association Investment Polices, Practices, and Performance, and one point it spotlights is the relative lack of dedicated investment committees at smaller associations. For instance: While 76 percent of associations with reserves above $10 million give its primary investment oversight to an investment or finance committee, only 45 percent of those with reserves under $1 million do so.
That means more of the oversight role at smaller organizations falls to the board of directors—who may not know association finance as well as they know their association’s industry—or to an individual staffer who may lack the kind of collaboration and backstopping that can keep the organization from making poor investment choices.
That has consequences for an association that may have other strategic priorities. Katherine Pankratz, marketing manager at VTM Group, an association management company, suggests there can be a likelihood of drifting focus. “From a financial side of things, people seem to be less hands-on and less involved when things are going well, and once [finances] take that downturn, then people want to say, ‘Hey, what’s going on?’”
In response, the associations I spoke with made an extra effort to bolster their financial knowledge, pursue more conservative investment strategies, or both. But boards still need to keep an ongoing watch on the numbers. And one way to avoid that kind of drift Pankratz describes, especially if you don’t have a dedicated finance committee, is to not just deliver regular finance reports to the board, but to ensure that those reports are clear, concise, and actually penetrating the consciousness of the people charged to act on the information they contain.
Kim Robinson, president of Frontline Association Management, says that the group dynamic of a board, especially one with limited finance knowledge, means people often would sooner keep its mouth shut and go with the herd than ask necessary questions. “If you don’t understand the finances, you don’t ask,” she says. “They don’t want to appear uninformed in front of their peers.”
But while the board bears the responsibility for any decision they make based on the information they have, it’s the responsibility of association leaders and their staffs to tailor the information for their needs. And Robinson says many associations don’t take on that task. “I think if there’s one thing I have time and time again thought led to the best outcome, it’s a willingness from the staff side to say, ‘I think we’re providing too much information to you, we’re not getting it in the right format. If I gave you a report that looked like this, would it help you understand better?’ Almost universally, it has been an improvement.”
One client of Robinson’s was regularly delivering finance reports that were 20 to 30 pages long, she says, before it decided that it needed clearer and shorter reports. It can be risky to have a group of lightly oriented board leaders steering an association’s finances. But it’s riskier still for the CEO and staff to not take charge of that group’s understanding of the numbers. So ask them what they need to understand.
What do you do to keep your finance reports relevant, digestable, actionable, and memorable for your decisionmakers? Share your experiences in the comments.