DIRECTOR'S CORNER

By RICK FRITZ

AAPG Continues to 'Dig' for Future

There is a Chinese proverb that says "Dig a well before you are thirsty." This is certainly true for business.

Four years ago we built a business plan for AAPG, because we could see that the dynamics of professional association income streams were changing.

Two key areas were identified: industry consolidation, and the change in information distribution.

Our primary area of concern was, and still is, the continued consolidations of support clients for professional organizations -- petroleum E&P companies and vendors. It was clear that over time this would erode income for associations by eroding membership and sponsorship.

Over the past few years, overall membership erosion has been reversed -- partially as a result of increased benefits, and partially as the result of the increased need for a professional home that provides networking, resources and a sense of community.

AAPG membership is volatile. During the last decade nearly 2,000 members were dropped each year for non-payment of dues. Most of these drops were related to changes in student's status, retirement or deceased members. We are developing new programs to retain retirees and encourage students to stay with AAPG for their professional development.

In recent years, more than 2,000 new members are joining AAPG each year for a net gain in membership. AAPG now has over 32,000 members. Many of the new Active members are reinstatements.

Although AAPG's membership is growing, it is increasing through Associate and student membership. Active memberships erode each year, mostly due to the aging of the Association. It is important that we focus on finding new Active members worldwide.

Revenue for a professional society such as the AAPG comes from annual dues paid by its members, sale of its products and services, and corporate and philanthropic support.

A major area of income change for the Association has been in corporate support and sponsorship. For example, if two companies were providing $50,000 each in annual sponsorships, that amount is usually less after a merger -- often as low as the original amount per company.

Mergers have affected vendors as well. Instead of two or three companies exhibiting at the annual meeting, only one merged company now exhibits.

When we predicted this case four years ago we also projected that we would not see an appreciable effect on AAPG's bottom line until 2005-06. In 2000, AAPG reduced staff by 17 percent and cut costs across the board to prepare for the future. As a result, we reduced an expected loss of $1 million in 1999-00 to a loss of $300,000. In 2001-02 we were able to develop a net gain of almost $700,000.

Unfortunately, "9/11" and the poor world economy accelerated the pending problem. Income from interest and dividends fell sharply. Costs related to security have climbed at all our meetings, and the costs of convention centers and hotel rooms have increased.

Also, last year we sustained about a $880,000 expense on our defined benefit plan as a result of low interest rates and a poor stock market. As many of you know, this is a shock that has reverberated throughout American industry. Currently, a joint member-staff committee is reviewing the plan to help us reduce and predict future expenses.

As a result of these factors, the gains that we made in 2001-02 were negated.

Fortunately, the changes and programs dictated by our business plan made in 2000 helps AAPG's budget shortfall during these tight financial times. Also fortunately, due to past planning, AAPG has the savings to pay for these financial "rainy days."

The following are a few of the business plan-related programs that have been approved by AAPG's executive committees that are designed to increase membership and improve AAPG's financial position:

• Membership Enhancement and Development program -- designed to educate members about AAPG benefits and encourage members to find new members.
• Print Expense Reduction program -- designed to reduce the cost of editing and printing both the BULLETIN and EXPLORER.
• Datapages/GIS-UDRIL program -- designed to provide easy digital access to information and develop additional income streams.
• APPEX-Houston and London -- new member-driven service that is expected to help AAPG's bottom line after payout this year.
• Training Partners program -- designed to provide custom education for the oil and gas industry.
• Fund-raising program -- working with the Association, AAPG's Foundation has started a major fund-raising campaign designed to help defray the cost of many of AAPG's programs that provide a service to members and the general public, such as publications and education.
• Intersociety Cooperation -- designed to develop joint programs to collectively enhance member benefits.
• Strategic Planning Initiative -- a self-evaluation by members and staff to determine the most productive course for the future of AAPG.

One of the most important aspects of the strategic planning is program assessment. We are examining which programs AAPG should keep, grow, seek a partnership for or delete. We will complete the strategic planning at the end of this fiscal year.

World economic conditions have made the last two years tough financially. I saw a quote that said, "a man isn't a man until he has to meet payroll." I certainly believe that!

The good news is that we had a plan and started "digging the well" over four years ago. Although the financial times are tough now, we continue to dig and prepare for a future that still looks very good for AAPG.