1. November 2001 Finances, Societies, and Members Peter Staecker Director, Division IV Electromagnetics and Radiation November 10, 2001

2. November 2001 State of the Institute IEEE Financial Performance: update Institute level Society level Volunteer level IEEE Reorganization (briefly)

3. 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.

4. November 2001 IEEE Organization Board of DirectorsAssembly P2SBIEEE-USA S tandards Assoc.Educational Act. Regional Act.Technical Act.Executive Comm. Regions, Sections & R. Councils, Chapters Societies, T. Councils, Chapters Staff & Society Executive Directors MEMBERS

5. November 2001 IEEE Financial Net ($M) yearbudgetactual 1996 10.2 1997 1.1 20.6 1998 -3.8 10.6 1999 -5.9 22.9 2000 -5.1-10.9 2001-10.2 ?

6. November 2001 IEEE Financial Net + “core” yearbudgetactual“core” 1996 10.226.2 1997 1.1 20.628.4 1998 -3.8 10.635.1 1999 -5.9 22.938.4 2000 -5.1-10.940.7 2001-10.2 ?49.2

7. November 2001 IEEE Financial Net + “core” + init’s yearbudgetactual“core”init’s 1996 10.226.20.0 1997 1.1 20.628.41.3 1998 -3.8 10.635.13.6 1999 -5.9 22.938.46.6 2000 -5.1-10.940.79.4 2001-10.2 ?49.29.2 2002-1.7 ?46.73.7

8. 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?

9. November 2001 What to do? 1.Balance the budget 2.Adopt new financial model –Infrastructure (aka “core”) cost distribution among TAB S/C’s

10. November 2001 2002 Budget proposal (05/01) Initial 2002 Budget (zero investment return)-$27,755 Item  to Net Core Functions & Continuing Initiatives3,505 Staff Compensation2,140 Service Reductions150 TAB/Societies3,500 P2SB1,330 Other Major Boards1,000 Dues & Other Revenues4,130 Investments/Spending @ 6%12,000 IEEE Total Net$0

11. November 2001 Initial 2002 Budget (0 invest return)-$27,755 Item  to Net 11/01 Core Functions & Continuing Initiatives3,505 Staff Compensation2,140 Service Reductions150 TAB/Societies3,500 P2SB1,330 Other Major Boards1,000 Dues & Other Revenues4,130 Total Ops15,7555,700 Dividends & Interest4,600 Investment Spending @ 6%12,0001,700 IEEE Total Net$0$0 2002 Budget proposal (05/01)

12. 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

13. 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

14. 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 TAB July 13: IEEE BoD approves FFM application to 02 Budget August 27: TAB infrastructure distribution group formed. Recommendations in November.

15. November 2001 TAB Infrastructure Cost Distribution (TID) Methods under consideration MethodologyReserves 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% Individual S/C Distributions may not match above distributions, depending upon their mix of Reserves, Members, Expenses, & Packaged Revenue.

16. November 2001 TID, evolution of methods Methods under consideration MethodologyBlended 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.

17. November 2001 So many choices, so little time!

18. November 2001 2001 Outlook: Good/bad news FebSeptDec 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).

19. Total IEEE Authorized Staff Levels Full Time Equivalent (FTE)* *FTEs = number of full time staff plus ½ the number of part-time staff Change 1996 - 2002 +57.5 +48.0 +15.5 +51.0 +172.0 Change 2001 - 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

20. 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.

21. 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

22. 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)

23. 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

24. 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

25. November 2001 IEL Sales 600% growth in six years $6.0M $7.6M $8.8M $13.7M $19.9M $29.6M $36.1M

26. 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

27. November 2001 IEEE Organization: to be MEMBERS Board of Directors S tandards Association (?) Member SupportTechnical Support ExCom Regions, IEEE USA, Sections & Councils Edu, Pubs, Socs, Tech Councils Staff & Society Executive Directors Assembly