Membership Space Blog: Insights for Effective Management

Most membership associations have periodic expenses that can be a substantial portion of the operating budget. If property is owned, there could be a parking lot needing resurfaced. There could be a key piece of software that needs to be replaced every 10 years. It is important to plan for these significant expenses by setting up a reserve fund for each project. 

 

When the board creates a savings plan for a reserve fund it is normally based on how far into the future the special project is expected to happen and the total costs that would be required. The necessary dollar amount to be added to the reserve fund each year can then be calculated by taking the expected expense divided by the number of years remaining. The membership association's treasurer can then add a line item for each special project in the annual budget.  

 

 

Because reserve funds are based on something that is expected to happen several years in the future, many variables can change during that timeframe. The cost of building materials could increase. New companies could enter the market and drive down prices. The needs of the special project could also increase or decrease.  Because of this uncertainty, it is important to have the mindset that a reserve fund is intended to help the association have a majority of the money it may need to survive the large, future expenditure. 

 

Some associations get into financial trouble because they focus only on the short term when spending money and creating the annual budget. As a result, reserve funds and large future expenses are not taken into consideration. While some membership associations may think they are keeping annual dues low, they are actually putting the association's viability at risk. So, what should be done?

 

 

It is up to the board to focus on long term and maintain the financial viability of the membership association. While all members would like to keep expenses and annual dues low, any short term gain would be short lived. Once it comes time to accomplish the special project, a lack of funds will certainly upset the association's members. In these situations, a special assessment would need to be passed to the members to raise the necessary funds. This can likely lead to members leaving and refusing to pay which will lead to the inability for the membership association to continue to operate. 

 

It is important for the board to realize that members want to be part of the association and want the association to succeed. By communicating the financial plan to the membership, an increase in dues to cover operating expenses and setting aside funds for special projects will be well received. To increase transparency and provide better documentation for these plans, it is a good idea to create a special page on the membership association's website that provides all of the details. 

As a member of a membership organization it is important to know the bylaws and how they benefit the members. Bylaws are the rules and guidelines for how the organization is to operate and the structure of the leadership roles. Bylaws also provide specifics for making changes to the bylaws.

 

It is important that the bylaws and all other established rules are accessible by the members. Members most often reference the bylaws when there are questions regarding leadership responsibilities, voting rights and representation at meetings. The membership organization's website is the perfect place to provide this information.  

 

 

Members may or may not agree with the wording in the membership's bylaws. Even when there are negative reactions to the bylaws, it is important that the board continues to follow the wording. Otherwise, accountability and trust within the organization will break down.

 

Bylaws should not be considered to be set in stone. Organizational needs and industry trends will result in the bylaws needing updated to effectively address the needs of the members. The board should periodically review the bylaws and seek input from the other members regarding when and if the wording is needing changed.

 

 

Requests to change the bylaws can also be initiated from the members. The most vocal member wanting the wording changed should be strongly encouraged to become the project champion. This will place the person in charge of determining the new wording, following the process outlined in the bylaws and getting the required number of members to agree with the new wording. This will also prevent the person from complaining about how the board is handling the change request.

 

The board will also need to work with the project champion to determine if the project is worthy of the legal expense to change the bylaws. When the changes are proposed to the members, it is important to explain both the pros and the cons for the change so that members cannot later claim they did not have all of the facts when they voted. Membership management software is a good tool to help the board communicate the project to the members and conduct online voting.