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Your Business Commentary

Mike's often irreverent, thought-provoking analysis of the industry-- with an occasional guest columnist.

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An Interview with Mike McCooey

CHA's finances, staff, shows, and the future.

by Staff Report (July 5, 2010)

Mike McCooey has been President/CEO of Plaid Enterprises since 1994. Before coming to Plaid he was President/CEO of an industrial sister company of Plaid’s, and prior to that he had spent his entire career in decorative products manufacturing, specifically wallcovering, paint, and home decor fabrics.

He was elected to the ACCI Board of Directors in 1995, and after chairing several committees became Board Chair for 1999 and 2000, at which time he was elected to the HIA Board. He was a member of the merger task force which ultimately resulted in the creation of CHA. He was elected Chief Governance Officer (Chair) of the Board last year. His term will as CGO will expire at the end of this year.

CLN: CHA ended its fiscal year in the red by $492,566.00. Why so much? What happened?

McCooey: As a non-profit, established to support our membership, CHA ends in a typical year as close to break-even as possible. This means that we are spending the revenues we have collected on programs to benefit membership. CHA also is required by our by-laws to carry a “reserve” to be used only in difficult times or for emergencies. We are required to maintain that reserve at between 20% and 50% of annual revenues. That reserve currently stands at over $2,000,000.00.

2009 turned out to be a difficult year for the overall global economy and for our membership specifically. Because our membership struggled, our revenues were down. The Board in May 2009 authorized a $500,000 loss for 2009, which allowed the staff to continue to invest in important programs (consumer shows, CPSIA initiatives, and international expansion) previously approved in January of 2009. The Board thinks this was the right decision, and we are already seeing some of the fruits of our efforts. It is important to note that, even with this investment spending, we continue to maintain a reserve at well above the 20% minimum required level.

CLN: Are there any specific steps being taken to improve the situation this year?

McCooey: In fiscal year 2010 the Board has directed the staff to return to break-even spending. Despite the continuing effect the economy has had on our members, CHA continues to fund initiatives to educate our members and to grow the craft business. We always try to strike a balance between good fiscal responsibility and delivering value added services to our members.

CLN: The Board of Directors’ management style is what’s called “policy governance.” Could you explain what that is and how it differs from the traditional way of overseeing the staff?

McCooey: Policy governance is basically setting out a series of desired results for our membership (ends), while leaving the method of attaining the results (means) to the staff. In directing the staff, we tell them what they cannot do (proscriptions), then measure their performance on a regular basis (monitoring reports). It essentially recognizes that a volunteer board (all with other jobs) cannot efficiently run the day-to-day operations of an organization as big and complex as CHA.

CLN: Reportedly, membership has dropped. Is it inevitable, given the decline in the number of independents and the merger of so many companies? Is there anything that can be done to reverse that trend?

McCooey: Yes, it is true, CHA membership has declined in the past year. We have lost members in all categories of membership due to store closings, mergers, decline in certain product categories sales, and the general economy.

However, tough times also represent an opportunity. We believe, done correctly, that we can form alliances with other creative organizations (art materials, quilting, etc.) and actually grow membership to the benefit of all of our current members. As an example, we have created a “Toy Pavilion” that you will see at the Rosemont show this summer. If it’s successful, and we think it will be, look for more alliances like this in the future.

In providing exclusive member benefits including robust buy-sell venues, best practices education, legislative updates, compliance resources, and other business resources such as public relations tools and consumer research, CHA can continue to focus on giving its membership the tools to succeed. As the economy improves, we believe the money we continue to invest in these programs will reverse the current trends.

CLN: The trade shows appears to be smaller, too, as are so many trade shows these days. What, if anything, can be done to reverse the trend?

McCooey: While many exhibitors are taking less space, our retention rate is very good when compared to other trade shows. The association continues to strive to improve the value of our shows for both buyers and exhibiting companies.

Also, we have to be creative with our marketing for exhibitors, because they are all more aware of their ROI. CHA has introduced Show Biz Connections, which is a matchmaking program for exhibitors, at no cost to them, to set up meetings in advance of the shows with buyers who are looking for their particular products.

New for the summer show is Exhibitor Invites – another free program that allows exhibitors to invite their data base of customers to come to the show and allows for pre-populated, self registration for attendees.

These are just two of the initiatives being developed to help the association grow our trade show events. The staff is currently working on other initiatives for member retention and member growth which will be introduced later this year.

CLN: According to the CHA tax return, CEO Steve Berger makes $400,000+ a year and two vice presidents make $200,000 each. Could you explain how CHA arrived at those figures? Are those competitive rates?

McCooey: Our tax return is accurate. CEO Steve Berger’s total compensation package is slightly over $400,000, which includes not only salary but also the value of other compensation including health benefits, retirement benefits, life and disability insurance, and others. The same is true of the Vice Presidents’ total compensation.

What is important in this question is what compensation is appropriate to pay the CEO and Vice Presidents of our organization? To better understand this, in 2008 the CHA Board conducted a national compensation study for CEO’s of trade associations. This study was performed by Organizational Consulting Group of Avon, Ohio. The study confirmed that trade association CEO’s are highly compensated, because their business acumen has proven to be good for their respective industries. We found that our CEO and the Vice Presidents were within the appropriate salary ranges (in fact, at the lower end) when comparing similar type and size associations. Several factors including budget, revenue, staff size, and geography were also used to determine appropriate compensation.

In 2008, due to changes in the IRS rules affecting non-profit associations, the Board also retained Robert Johnson, an attorney specializing in CEO Compensation for non-profit associations, to review our compensation practices. With the help of Mr. Johnson, the Board initiated new practices to review and determine compensation for the association’s officers that will keep us in compliance with IRS rules.

CLN: There aren’t as many members involved in the association since the committees were eliminated. Is there any thought to reviving the committee structure?

McCooey: Actually, the number of members involved in the association has grown. Through a wide range of task forces, member teleconferences and surveys, more members have contributed input to CHA than ever before. Last year, 504 members provided input to CHA, +54% vs. prior year.

CLN: How much money was spent on the consumer shows in Orlando and Anaheim? Together, they attracted 16,000-18,000 people. Was the cost worth it?

McCooey: The Orlando consumer show, the first one we ever attempted, had a net loss of $258K. The show was a test to see if we could hold a successful consumer show. Based upon the knowledge we gained, we held our second consumer show in Anaheim which had a net loss of $44K.

Our goal is to ensure that the show is profitable for the exhibiting members and the association. We believe the shows are worth the cost, because we are introducing consumers to new crafts, and post -show research supports the fact that consumers try new crafts at these shows and intend to purchase items related to the new crafts.

This is very exciting. If we can continue to perfect the “consumer show model,” we should be able to offer more of them at no cost to the association. In turn, this could really lead to a boom in crafting.

CLN: What is the plan for future consumer shows? Will there be one in conjunction with the winter show in Los Angeles? In conjunction with the 2011 summer show?

McCooey: As I mentioned above, we are very excited about the potential that consumer shows hold. CHA will be holding a consumer show immediately following this year’s Summer Show in Rosemont. Following the show, the staff will be presenting to the Board a comprehensive three-year strategic plan for review concerning the future of CHA sponsored consumer shows.

CLN: Is the summer show going to stay in Rosemont? The winter show will be in Los Angeles in 2011 and Anaheim in 2012. What about 2013?

McCooey: No decision has been made regarding future shows at Rosemont. We will review the results and make the appropriate decision after this year’s show. We do have tentative hold/options on future summer show dates in Rosemont. As far as the winter show is concerned, we will be in Los Angeles in 2011 and Anaheim in 2012. No decision has been made in any of the out years. Again, we will let our results drive these decisions.

CLN: Where do you see the industry going from here for the rest of 2010 and beyond?

McCooey: We believe the craft & hobby industry is strong and vibrant ($28 billion U.S. retail sales). While we are certainly not immune to global economic conditions, we have fared significantly better than most other industries. It is clear in our own businesses, as well as not-for-profit trade associations; it can’t be “business as usual.” We are reaching out to other related industries and investigating better ways to leverage members’ time and money.

Through it all, the bottom line is that we are a healthy organization, with strong leadership at the Board and staff levels, but most importantly we have a passionate and committed core membership – and that will allow us to thrive and prosper into the future.

xxx

 

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