November 2001

Finances, Societies, and Members

Peter Staecker

Director, Division IVElectromagnetics and Radiation

November 10, 2001

November 2001

State of the Institute

• IEEE Financial Performance: update

• Institute level• Society level• Volunteer level

• IEEE Reorganization (briefly)

November 2001

Background

• IEEE: a ~$200M business– Reserves: ~$120M (2000);– Roles of Major Boards

•TAB, P2SB, STDs: IP centers•RAB, IEEE USA: Member-centric

services•EAB: Educational Activities

• IEEE Corporate Infrastructure: the cost of doing business.

November 2001

IEEE Organization

Board of Directors Assembly

P2SB IEEE-USA

Standards Assoc.Educational Act.

Regional Act. Technical Act. Executive Comm.

Regions, Sections & R. Councils, Chapters

Societies, T. Councils, Chapters

Staff & Society Executive Directors

MEMBERS

November 2001

IEEE Financial Net ($M)

year budget actual1996 10.21997 1.1 20.61998 -3.8 10.61999 -5.9 22.92000 -5.1 -10.92001 -10.2 ?

November 2001

IEEE Financial Net + “core”

year budget actual “core”1996 10.2 26.21997 1.1 20.6 28.41998 -3.8 10.6 35.11999 -5.9 22.9 38.42000 -5.1 -10.9 40.72001 -10.2 ? 49.2

November 2001

IEEE Financial Net + “core” + init’s

year budget actual “core”init’s

1996 10.2 26.2 0.01997 1.1 20.6 28.4 1.31998 -3.8 10.6 35.1 3.61999 -5.9 22.9 38.4 6.62000 -5.1 -10.9 40.7 9.42001 -10.2 ? 49.2 9.22002 -1.7 ? 46.7 3.7

November 2001

So, at the end of ‘00

• Net IEEE losses had wiped out Corporate Reserves– How to absorb Infrastructure

Costs when investment income dries up?

November 2001

What to do?

1. Balance the budget2. Adopt new financial model

– Infrastructure (aka “core”) cost distribution among TAB S/C’s

November 2001

2002 Budget proposal (05/01)

Initial 2002 Budget (zero investment return) -$27,755

Item to Net

Core Functions & Continuing Initiatives 3,505Staff Compensation 2,140Service Reductions 150TAB/Societies 3,500P2SB 1,330Other Major Boards 1,000Dues & Other Revenues 4,130Investments/Spending @ 6% 12,000

IEEE Total Net $0

November 2001

Initial 2002 Budget (0 invest return) -$27,755

Item to Net 11/01 Core Functions & Continuing Initiatives 3,505Staff Compensation 2,140Service Reductions 150TAB/Societies 3,500P2SB 1,330Other Major Boards 1,000Dues & Other Revenues 4,130Total Ops 15,755 5,700Dividends & Interest 4,600Investment Spending @ 6% 12,000 1,700

IEEE Total Net $0 $0

2002 Budget proposal (05/01)

November 2001

Findlay Financial Model

Distribute IEEE Infrastructure costs equitably among all Operating Units

• Link direct costs to revenue streams wherever possible (pay-by-the-drink)

• Allocate the rest (by an agreed-to algorithm) to the OU’s

• Provide a revenue stream to replenish Corporate Reserves

November 2001

Core Functions

• Information technology & associated initiatives• Service initiatives• Member services• Customer services• Financial services• Sales & marketing• Corporate activities, awards & facilities• Controllers/Admin & Payroll• Business administration & financial planning• Human resources• Executive• Constituent communications• SPC & research• In-house investing & procurement

November 2001

Execution of Plan (2001)

May 5: 02 Budget/Findlay Financial Model (FFM) presented to IEEE ExCom

May 17: Budget “flowdown” by TAB FinCom to S/C’s

June 22: 02 Budget/FFM presented to TABJuly 13: IEEE BoD approves FFM application

to 02 BudgetAugust 27: TAB infrastructure distribution

group formed. Recommendations in November.

November 2001

TAB Infrastructure Cost Distribution (TID)

Methods under consideration

Methodology Reserves Blended Findlay Principles

Reserves: 100% 69.8% 26.4% 20.6% Membership: 0% 0% 8.9% 33.1%Expense: 0% 0% 13.6% 24.0%Package Revenue: 0% 36.2% 45.5% 16.5%Exec Offices: 0% 0% 5.6% 5.6%

100% 100% 100% 100%

Individual S/C Distributions may not match above distributions, depending upon their mix of Reserves, Members, Expenses, & Packaged Revenue.

November 2001

TID, evolution of methods

Methods under consideration

Methodology Blended Principles Simplified

Reserves: 69.8% 20.6% 39.7%Membership: 0% 33.1% 19.1%Expense: 0% 24.2% 19.1%Package Revenue: 30.2% 16.5% 16.5%Exec Offices: 0% 5.6% 5.6%

100% 100% 100%

Individual S/C Distributions may not match above distributions, depending upon their mix of Reserves, Members, Expenses, & Packaged Revenue.

November 2001

So many choices, so little time!

Society 01 Reserves 02 ops (B) Blended Principles Simplified

BT 311.0 112.2 51.0 45.5 58.5

AP 1,048.9 286.0 11.1 (67.9) (19.7)

NPS 2,634.1 914.0 367.3 646.1 550.5

CE 164.9 79.9 21.8 (28.7) 5.8

MTT 4,402.2 443.2 (335.0) (62.0) (138.1)

EMC 957.1 115.8 (67.2) (59.9) (53.7)

change in reserves EoY 2002

November 2001

2001 Outlook: Good/bad news

Feb SeptDec

Operations -$28M -$20M ?Investment $18M -$20M ?IEEE net -$10M -$40M ?

Bad news: The Market. 09/30: Portfolio is at -11%. (That would make the investment line –$20M)

Good news: Operations results improving (IEL, Societies, Corporate).

Total IEEE Authorized Staff LevelsFull Time Equivalent (FTE)*

0

100

200

300

400

500

600

700

800

900

1000

1996 1997 1998 1999 2000 2001 2002

Societies

Major Bds

Other Corp

Infrastructure

*FTEs = number of full time staff plus ½ the number of part-time staff

Change1996 - 2002

+57.5

+48.0

+15.5

+51.0

+172.0

Change2001 - 2002

+2.5

-6.0

0.0

-12.0

-15.5

2002 Budget for BoD

+3.0

-12.5

0.0

-19.0

-28.5

November 2001

Looking ahead

• 2002: – Aggressive budgets to S/Cs have been

adopted by TAB; Infrastructure allocation algorithm to each S/C is under consideration by Infrastructure Task Force.

– Global environment has changed.• 6% investment spending assumed.

– Member dues have increased

• 2003:– 5% investment spending assumed.

November 2001

Back to 2002: What can the S/C do?

• Qualities of a financially successful Society? – $ surplus/Member (range: $317 – ($14))– $ surplus/$ Reserves (range: 42% - (7%))– $ expenses/Member (range: $70 - $600)

• Models for best practices exist within S/Cs• In general, solid operating budget =

success

November 2001

Division IV Society Statistics

• Qualities of a financially successful Society?

–$ surplus/Member (range: $317 – ($14))–$ surplus/$ Reserves (range: 42% - (7%))–$ expenses/Member (range: $70 - $600)

society $S/M $S/$R $E/M members surplus (K)

BT 38$ 31% 23$ 2508 $95

AP 25$ 22% 117$ 9283 $227

NPS 318$ 33% 598$ 2776 $882

MTT 26$ 7% 270$ 12313 $324

EMC 18$ 9% 253$ 4907 $90

MAG 81$ 15% 487$ 2950 $239

2002 (Budget) numbers

November 2001

TAB/IEEE Challenges going forward:

• Question all assumptions regarding– Chapter, Society viability– Our portfolio of services– Conference income– Advertising revenue– Corporate support for volunteers

• Generate solutions or contingency plans

November 2001

Members/Volunteers

• Sources of IP, leadership– Chapters, Societies, Sections– SCI statistics validate IEEE IP strengths

• Require Employer Support– Industrial relevance and awareness

• Chapter, Section, Technical Activities• Spectrum• Educational Activities

November 2001

IEL Sales600% growth in six years

$0

$5

$10

$15

$20

$25

$30

$35

$40

IEL Sales

1996

1997

1998

1999

2000

2001F

2002B

$6.0M $7.6M

$8.8M

$13.7M

$19.9M

$29.6M

$36.1M

November 2001

On the horizon… IEEE re-org

• Re-constitute Board of Directors– Collectively, key competencies– Delegate responsibility & decision

making

• More nimble (2-3 major boards, not 6)– Technical Services Board, – Regional Services Board, – Standards Board

November 2001

IEEE Organization: to be

MEMBERS

Board of Directors

Standards Association (?)

Member Support Technical Support ExCom

Regions, IEEE USA, Sections & Councils

Edu, Pubs, Socs, Tech Councils

Staff & Society Executive Directors

Assembly