PMA’s annual convention and exposition is always extraordinary, and the recent edition in Anaheim is no exception. Although Fruit Logistica in Berlin is larger in both exhibit space and attendee count, it is also disjointed, playing out over many buildings. PMA is large but compact. It is also warmer — and not just because Berlin in February can be mighty cold. It is because PMA is a convention, an assembly of members, and that gives it a flavor that Fruit Logistica doesn’t match.
Many people boost their careers through long term networking on various PMA boards and committees or long term learning through various educational programs, so they feel some debt to PMA, some connection. Though people attend Fruit Logistica, they support PMA, and that is a powerful difference.
We’ve had the opportunity to work with associations in and out of produce, across the country and around the world. PMA is, by a substantial margin, the most professionally managed and best run of any of the associations we’ve come across. Members of the produce trade should realize how extraordinary an operation PMA really is.
Yet it has also become a very staff-driven organization. We remember attending the PMA board of director’s meeting at the Wig-Wam resort in Litchfield Park, Arizona. Bob Carey was still the chief staff officer – the role Bryan Silbermann plays today — and he asked this insipient Pundit if we were interested in learning the key to running a trade association.
The Wig-Wam is a Southwestern resort, and we walked a long way down adobe-like hallways, on Mexican tile floors and came to a locked room with a door made of dark roughhewn wood bolted together by iron. Bob Carey removed an old skeleton-style key from his pocket and opened the door. He shut it behind us, turned on a lamp, and visible along the walls were various poster-sized sheets of paper pasted on the walls, each one containing a proposed foursome for the golf tournament among the directors that began the next day. He was telling us that out on that golf course, engaging with each other, the directors would discover new priorities and develop plans for execution.
Today the staff is large — between PMA and its Foundation getting up to almost 100 people — and most are highly trained and extremely professional. Serving on the PMA board is an education for the board members, a kind of privilege that is a wonderful experience, but the very nature of professional executives matched with volunteer board members makes it difficult for the board members to tell the association what to do.
The PMA chairman changes every year, whereas the CEO of the association has had that job for 18 years and was at the association for 13 years before that. When you have staff that knows it is going to have a new boss every year, it is easy to keep things going in the direction the staff wants.
This is not an issue unique to PMA. When we had the collapse of the last round of talks on a possible PMA/United merger we saw the enormous influence of the CEOs of both associations on their own boards. The shocking thing was that the obvious solution — to fire (and take care of) both Tom Stenzel and Bryan Silbermann and replace them with a neutrala third party, a top ranked association executive — was never even on the table.
Bryan has done a great job, so it is no offense against him and there is no reason to think Cathy won’t, equally, do a great job if she becomes CEO which seems to be the plan. But as a matter of good governance and structural reform, one wonders if we shouldn’t look at changing the role of chairman with its annual rotation. Governance experts in corporations have pressed on the need to separate the chief executive and chairman functions. It is no longer considered best practices to have a combined chairman/CEO. But practical experience has also taught us in the corporate world that it is not sufficient just to have separate functions; a company needs to not merely have a separate chairman but have a chairman with the personality, experience and gravitas to stand up to the CEO..
We wrote a great deal about Tesco’s efforts to enter the American Market under the Fresh and Easy banner — a corporate catastrophe that Tesco is still paying for. After years of studying the matter and trying to understand how such an incredibly resource-rich organization — in people, money, experience, etc. — could make such a mistake, in the end, we would probably point to a change of Tesco’s Chairmen.
In the early years of Sir Terry Leahy’s CEO role, Tesco’s chairman was John Gardiner, a dynamic man who rescued a big shipbuilding firm and was often outspoken, lambasting investment bankers and government officials. Gardiner could and would credibly council Sir Terry and rein him in.
He retired in 2004. From then to 2011, David Reid, who had been finance director for Tesco for many years, was chairman. In 2011, the chairman role was changed to Richard Broadbent, who was a government guy and recently resigned in the wake of poor financial performance and an accounting scandal. It is fair to say that neither Reid nor Broadbent had the personal heft to constrain someone like Sir Terry Leahy. Whether there would have been a Fresh & Easy debacle had John Gardiner remained Chairman is a question that shall always remain unanswered. But this idea that a Chairman must have the weight to restrain his CEO is an important one.
Bryan Silbermann is excellent as PMA’s CEO. He is highly intelligent and has a three-decade focus on the broad industry issues. It is very rare for PMA to have a chairperson who is better versed in these issues than Bryan. Very few have a large staff on their own that can challenge the information put together in staff reports and, of course, they will only hold the job for a year anyway. So the dynamic of the staff/chairman relationship is something the industry ought to study. How do we buttress the power of the chairman so that he or she can usefully restrain the staff?
PMA is enormously successful, it has a great business model, but it is unclear toward what goal.
That is why the recent dues increase and reorganization has not been handled in the most satisfactory manner. We dealt with it in two recent pieces:
In the first place, it is almost as if PMA doesn’t have the courage of its convictions. The key thing about the dues change is that it is an increase — it was designed to raise more money for the association. Yet in all the speeches that is never said. Sure, in doing so, the association looked to make the plan more fair and modern, but the association could have done all that in a revenue-neutral manner. So the key issue is the increase in dues.
Now there is no amount of dues that is a priori the correct number. This is a decision for the industry to make.
The issues are obvious:
1) What do we want the association to accomplish?
2) How much do we want to spend to accomplish these things?
3) How much money do we want to keep in reserves?
Among the many comments we received following our previous pieces on this subject, many were focused on this paragraph we wrote detailing PMA’s financial situation:
2. Even many who support PMA and believe it does important work may question the need for PMA to raise more money. PMA has a very successful business model. At the end of 2012 (the latest figures available), for example, PMA had over $12 million in cash and investments, plus it owned its headquarters, both land and building, free and clear. In contrast, leaving aside pre-paid membership dues and advance payments for events, etc., PMA had less than $3 million in liabilities. Although PMA’s bottom line can vary widely depending on things such as if the board decides to make a big donation to another group that year, in 2012 PMA’s bottom line was a profit of $1,840,713.
Now PMA being extremely professional relies a great deal on metrics that are established by the American Society of Association Executives as to how much the association should have in reserves, what percentage of revenues should come from dues, etc.
It is always useful to have this kind of information, but there is no research evidencing that when associations do these things, it causes the industry members to be more profitable. These metrics are about what makes an association strong, not what makes an industry profitable.
One could make a case that having an association with deep reserves is a bad thing, as it means the association need not be as responsive to the industry members. After all, if an association has no reserves it has to prove its worth every year to gain support; if it has lots of resources, it can be indifferent.
We should be clear: We are not saying that PMA should not have raised dues, nor are we saying that its expenditures are excessive. We are saying that there was an industry discussion that would have been helpful to take place that was skipped over.
PMA adopted four strategic pillars – but, maybe, if a dues increase could have been avoided, the membership would have preferred to pursue three pillars. Or, perhaps, instead of thinking the industry association needed XXX million in assets plus XX more in the Foundation, the industry would have said let’s not have a dues increase and reduce our liquid assets to $10 million total. In other words, maybe the industry members would want to hold onto their money a little bit and let PMA spend some small portion of the association’s assets.
These discussions need to go beyond the board to the membership. The board represents the industry — and most of the people on the board take on a thankless task and do a lot of work for free — but they are not really representative in any way. There are no contested elections in which people have platforms, etc.
The way dues are set up, where membership is a requirement in order to get deep discounts on the events, means that it is highly unlikely we will see any reaction to a dues increase. If there is any, it would probably come in a reduction of sponsorships as firms try to stay “PMA Neutral” in their budgets. There are so many variables here — including how many salespeople PMA hires — that one could never trace the matter down.
At the end of our first piece on the matter, we quoted from an old ASAE guidance to associations on how to introduce a new dues structure:
Discuss anticipated changes to the dues structure using a variety of communication vehicles, calling for input and discussion. Conduct a town meeting to discuss the issue at an upcoming conference or via conference call. This will ensure that the association has provided every opportunity for input and discussion prior to the board taking action or the issue being put to a vote by the membership.
The PMA board and the staff decided that PMA’s activities justified higher dues payments. They may well be right. Forthrightly presenting this case to the industry, giving the industry a chance to provide feedback before a decision is made… this type of transparency would build support for the PMA and set the course for an industry to move ahead together, aligned behind a vision.
Now it is just coming across as a dues increase.