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Chamber Executive Article Archive

Mick on Money: Fuzzy Math



By Mick Fleming

Fall 2013

In my often-used “Deathbed Confessions” speech, which I delivered for the last time in 2012, I talked about the seven deadly sins of chamber management and community leadership. These were lessons I had heard, scrubbed, categorized and enhanced over 20 years. These lessons – just stories really – came from folks who were leaving the profession due to retirements, firings and career changes.

Many of you heard the speech during its five-year life cycle, or at least heard of it. It was good for laughs, knowing nods and embarrassed blushes from audience members who recognized their own realities in my tales from long-departed peers.

Alas, the time had come to retire that road show, but one of the deadly sins seems more relevant with each passing season: Financial Denial.

Why is it that soon after a chamber CEO succession, there’s an “Oh my God!” moment when the fiscal realities of the organization become painfully obvious to the new boss?

Why are membership retention rates so hard to track during the last few years of a chamber exec’s career? Why are there unstated restrictions on the balance sheet’s “unrestricted net assets?” How can the value of chamber-held real estate or capital campaign pledges be so high when a position is pitched to a CEO candidate, but 30% lower a month later? Shouldn’t verbal agreements for severance payments to former employees appear on financial statements? Why are a third of the members paying a lower dues amount than is called for on the board-approved rate card?

This denial problem is not just related to periods of transition. What good is a line of credit from the friendly banker serving on the board if the chamber can’t draw upon it when cash is tight? What does that big festival actually produce in net revenue for the chamber after paying staff? Why doesn’t the accounts payable line on the financial report include all the vendors who need to be paid?

In too many cases, the answers to these questions are the same: Staff and board leadership don’t know and they don’t want to know.

In my experience, very few such financial difficulties reflect villainy (are nefarious). They’re just denial. CEOs and membership VPs don’t lie about the most recent renewal rate; they simply hang onto a number from long ago when they suspect slippage in the current year. They don’t steal money; they simply borrow money from Peter to pay Paul (in legal but risky ways) and delude themselves into thinking that eventually they’ll be able to pay everybody.

Don’t misunderstand; these problems are not confined to the chamber world. Similar questions were asked of financial firms that turned their books over to the Feds following the crash in 2008, and are posed routinely to national charities during IRS audits. Such concerns are the reasons that M&A law firms make so much money on due diligence prior to takeovers.

One of the primary reasons many of us struggle desperately to appear bigger than we are can be traced to some leadership guru with really nice hair who preached decades ago that if you’re not growing, you’re dying. To which, I usually respond, “If I’m adding rolls of flab and double chins, I’m growing AND dying.”

The important work of running a chamber of commerce can be scaled to almost any budget size, provided the fuzzy math is kept to a minimum. Resist the temptation to deny reality, especially to yourself. Tell your leadership and staff what they need to know, even if the reality is scary.

It’s not a sin to be poor or small, but it is a sin to not know whether you’re rich or poor.

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