Four Strategies for Dealing With Today’s Rising Costs
Prices are rising all around, impacting associations’ bottom line. From revamping product pricing to encouraging nimbler boards, an expert offers ideas that associations can employ to manage inflation.
Everybody is talking about the impact rising prices are having on their lives, but fewer are talking about how they’re dealing with it. To learn what associations can do to keep economically healthy during this time, we turned to C. David Gammel, FASAE, CAE, chief practice officer at McKinley Advisors.
Gammel recommended a few strategies to help deal with inflation. Among them: increasing revenue by revamping prices, budgeting accurately, retaining talent, and having nimble decision-making processes.
Revenue and pricing
“The key thing we’re seeing with organizations is they’re paying attention not only to the cost side but also the revenue side,” Gammel said. “Associations really went through a lot of cost-cutting over the last couple years as they adapted to COVID, so there’s probably not a lot left to cut. They’re going to have to have the revenues in place to deal with an inflationary environment to cover costs.”
When looking at ensuring there’s enough revenue, start by evaluating current pricing.
“We always recommend doing a pricing strategy approach—where you’re not just looking at individual products, but really looking across the board at how you are charging for services and products that you offer,” Gammel said.
A recently released Marketing General Incorporated report noted that 30 percent of associations had instituted dues increases, likely to deal with inflation. Gammel said raising dues, especially if an organization doesn’t do it frequently, can turn “political” and be “challenging to put through.” That’s why an across-the-board pricing approach can help.
“It’s not necessarily all about increasing fees,” Gammel said. “Sometimes it’s asking, ‘Can we package things differently?’ Maybe we can turn some of the content and services we offer into a subscription model.”
With no signs that inflation will wane soon, it’s important to factor higher prices into new budget cycles. Now is an ideal time to assess, as many associations have fiscal years that close in the fall.
“Make sure they’re reaching out to their vendors and partners,” Gammel said. “Ask them, ‘What are your fees going to look like next year? Should we just assume it’s going to be pretty similar to what we’ve had in the past, or do you anticipate increases? And if so, what’s the scale and scope of that?’ That will help so [associations] don’t have surprises when they get into their next fiscal year.”
If it’s not possible to reach out to vendors, research where price increases are likely to occur, so they can be budgeted for.
Within this process, priority setting may need to occur. “They’ll be asking, ‘What can we afford and therefore, where do we need to prioritize? And what might we deprioritize based on what our strategies are on the revenue side?’” Gammel said.
The Great Resignation is also a factor to consider. When staff leaves, it’s often for higher pay. The cost of replacing an employee can be six to nine months of an employee’s salary—an expense associations especially don’t want in an inflationary period.
“There’s all sorts of factors influencing salaries going up and the competition for talent being really high,” Gammel said. “Organizations are taking a look at their compensation for their teams and making sure they’re still competitive and going to retain their talent.”
For example, a new survey from the Society for Human Resource Management notes that more than half of employers are considering inflation when determining annual pay raises.
Boards Be Nimble
While nursery rhymes aren’t typically known for life lessons, one offers a good strategy for association boards: be like Jack—nimble. Many of the tactics and flexibility boards adopted during the pandemic should continue during times of inflation and uncertainty.
“What we’re working on clients with is how they can be much more nimble in decision-making,” Gammel said. “Associations have a consensus-based governance model, so decisions are often made in year-long cycle processes. We’re going to have to make decisions probably a little more frequently and adapt more rapidly to our environment as it changes around us.”
This will require staff leaders to educate boards and come up with a plan to address problems in a timely fashion.
“Boards don’t like surprises,” Gammel said. “Educate them about, ‘Here’s what we’re seeing in our environment. Here’s how it’s impacting our operations. Here’s how we’re planning to adapt to that so we can still meet our strategic goals and serve our mission effectively.’ Then the board can be positioned to really partner with the staff to make the most effective decisions they can for the organization.”
How is your association dealing with inflation? Share in the comments.
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