Low CostStrategiesforYourPAC TreyRichardson,Principal SagacPublicAffairs,LLC August2009 Alow coststrategyhaspavedtheroadtosuccessformanypoliticalaction committees.thekeytosuccessusingalow coststrategyistodelivertheexpected levelofvaluetomembersandemployeesatacostthatassumesanadequatelevelof continuedreceiptgrowth. ConsiderFigure1.1,whichisadaptedfromaneconomicmodeladvancedbyAdam BranderburgerandHarborneStuart 1.Theverticaldistancebetweenthewillingness ofdonorstogive(topline)andthecostofprovidingserviceitself(bottomline) representstherangeofgivingopportunitieswithinwhicheveryorganization operates.italsorepresentsthevalueofpacservices,suchasbenefitsand accomplishments,asperceivedbydonors.forpacs,thespreadbetweentheselines isnarrow.andthetopline whatdonorsarewillingtogive isgenerallyfixed, eitherbygovernmentrules 2 orthemarketwithinwhichyourpacoperates.for example,ifyouraveragepaccontributionhasbeenculturallyfixedfortwodecades at$10permonthor$120peryear,thedonors willingnesstogivemorethanthat amountisverylimited.muchtimeandattention includingaddedresources will berequiredtogrowthetopline. Figure1.1 ExpectedValue Valueasperceived bydonors Rangeofgiving opportunities Donors willingnesstogive Costofprovidingservices Toestablishgreaterreturnoninvestment,PACprofessionalsmustpushthecost ofprovidinglinelower.generally,thisisaccomplishedthroughoperationalefficiency, pressuringvendorsforlowprices,andothermeans.thisisagamethenational BeerWholesalersAssociation(NBWA)hasbeenplayingandwinningformanyyears 1BrandenburgerAM,StuartHW.1996.Value basedbusinessstrategy.journalofeconomicsand ManagementStrategy5(1):5 24. 2FederalElectionCommission,2007,CampaignGuideforCorporationsandLaborOrganizations. IS O L U T I O N SI
Page2of5 TheEfficiencyCurve Universe Cost Participation B A ExpenseSavings ParticipationIncrease inthepacmarket.ithassqueezedmorecostsoutofitsoperationsthanhasany othermajorpac.whatsetsnbwaapartfromotherpacsisthefactthatithasthe lowestaverageexpenseratiointhebusinesspoliticalactioncommunity.nbwa PACraisesnearlyallofitsmoneythroughoneannualsolicitationandsimple targetedletterstocompanyownersandsuppliers.in2008,forexample,nbwa s PACexpenseratiowas12percentincludinglabor,overheadanddirectexpenses. That slessthanone halfthebusinesspaccommunity saverageexpenseratioof26 percent 3.ThathastheeffectofgivingNBWAPACdonorsandmembersa54percent greaterreturnontreasurydollarsusedtosupportpacoperationsthanothers.by keepingmanagementandfundraisingcostslow,nbwainvestsandreinvestsmore ofamember smoneyintootheressentialassociationoperationssuchaslobbying. Alow coststrategycanbeachievedthroughseveralmeans.considerthesethree: Improveoperatingefficiency:Seekoutwaystoincrementallyimprovewhatyou aredoing.aonepercentimprovementhereandfivepercentimprovementthere quicklyaddup,givingyounoticeabletimeandresourcesavingsasseeninfigure 1.2.Process drivenfundraisingfocusingonqualitativeresultsprovidesaconsistent returnoninvestment,asyoufindbetterandbetterwaystoaccomplishthesame objectivesthroughtestingmarketsandideas.forexample,manygroupssend directmailsolicitationstoentirerestrictedclasseshopingforresponseratesof20 30percent,wheninfactlessthanfivepercentofanyaffiliatedclasstypically respondstoadirectmailappeal.spendingtimeidentifyingtheactivefivepercent (B)ofyourmembershiporemployeebasewhorespond95percentofthetime,and deliveringyourappealtothisqualitativeaudience,ratherthanaquantitative audience(a),isamuchmoreefficientuseofresources. Figure1.2 32004 2008TrendsinPoliticalActionCommittees,2008,SagacPublicAffairs,LLC.
Page3of5 Exploitexperience:Peoplelearntodothesamejobmorequicklyandwithfewer errorsthemorefrequentlytheydothejob.aheartoperationthattookeighthours tocompletethefirsttime,canbedoneinthreewithanexperiencedsurgicalteam. ThesameistrueforPACoperationsthatfocusonlearning.Theexperienceconcept holdsthatthecostofdoingarepetitivetaskdecreasesbysomepercentageeach timethevolumeofworkdoubles.thus,anorganizationthatlearnsquicklyor leveragesexperiencewillseelargergainsatamuchlowercostthanthosethatmake everysolicitationauniqueappealorgrowknowledgeinternallythroughtrialand error.considerthetwocurvesinfigure1.3.bothbeganatthesamecostlevelbut learnatdifferentrates.aisfurtherdownthecostcurvethanb.basedontimeto learn(t)theadvantageiscost(c).organizationbmusteitherlearnatafasterrate oraccepthigheroperationalcostsforitsmembersandemployees. Figure1.3 OneexampleofexploitingexperienceisfoundintheAssociatedBuildersand Contractors (ABC)2008priorauthorizationcampaign.Foryears,ABCPAC struggledtosecurepriorauthorizationformsfromits25,000member companies withverylittleresponse.solittle,thatalmosteveryattempttotalkaboutthepacat meetingsandconventionsincludedsanitizedinformationwithwatermarksthat read:samplepacmaterials.abcsoughtasolutiontothechallengeofexpandingits restrictedclassandfoundit.theyrecruitedadvicefromoutsidepacprofessionals. TheseprofessionalsallowedABCtoexpeditethelearningcurve,loweringcostsof implementingnewprogramsthroughtrialanderror,becausetheyhadrepeatedly implementedsuccessfulpriorauthorizationefforts.byexploitingtheexperience, tacticsandmethodsofothersinthemarketthatweresuccessful,abcsawnearly 11,000authorizationformsreturnedtothemduringtheeffort.Thisrepresenteda 340percentincreaseinqualifiedprospectsfortheirPAC.Mostimportantly,ABC staffgainedimmediateknowledgeofhowtoexecutefuturecampaignsusingsimilar tacticsinanefficientmanner. TheExperienceCurve Cost Time C T B A
Page4of5 TheSupplyCurve Cost Quantity D S1 S2 C1 C2 Q1 Q2 Reengineerservices:Hugecostreductionsareoftenachievedthrough reengineering.whencostschangeforagivenoutput,suchaslabor,thesupply curveshiftsinthesamedirection.forexample,assumethatyourorganizationcuts internaloperationalcostsbyreengineeringorreprioritizingservicesyouoffer throughyourpac,sothatthecostofperformingsometasksdecrease.otherwise stated,youfreeupmoretimeandresourcestootheractivitiesspecificallydirected atraisingmoney,ratherthanspendingmoneyandtimeoninternaloperationslike complianceorbookkeeping.thissituationshiftsyoursupplyoflabors1outward, tos2 anincreaseintimeandresources.thisincreaseinsupplyoflaborcausesthe costassociatedwithrunningyouroperationtodecreasefromc1toc2.inthiscase thequantityofdonors(d)increasesfromq1toq2.inasupplycurveshift,thecost andthequantitymoveinoppositedirections. Figure1.4 Backin1994,theNationalAssociationofRealtors(NAR)founditselfinadeclining economyandmembershiplossesasaresultofthehousingrecession.further,it hadaseriouscostliabilityinstafftimeanddirectexpensethatcouldnotbecuredby simplybeingmorethriftyandefficient.somethingmoredramaticwasrequired. Theassociationrespondedbyworkingwithitsstateandlocalassociationsto redesigntheentirepacfromoperationsandcommunications,togovernanceand benefitsprogramming.akeycomponentofthemakeoverwasanagreementthat stateandlocalassociationswouldadministerpacrecognitionandbenefitsformore than150,000donorsunder$1,000.narstandardizedandsupportedmajordonor givinglevels,whilestateandlocalassociationswerefreetoofferuniquedonorclubs andbenefitsattheirownexpensetolow dollardonors.tooffsetthenewexpenses stateandlocalassociationswouldbearbyhavingtoprovidethesebenefitsto donors,nargavebackanextrafivepercentofthepacfundsraisedtothestates. Theresultwasanetsavingstothenationalassociationofhundredsofthousandsof dollarsinoperationalexpensesoverjustafewyears.thiseliminatedanynumber offulfillmentitems,suchaspinsandribbons,aswellastheneedtohavestaff
resourcesfocusedondatamanagementandfulfillmentoflow dollardonorclubs. Theassociation sredesignmadeitpossibletocut60percentofdirectandindirect costsforpacrecognitioninthefirstyearofimplementation.moneythatwasfreed touseinmoreefficientrevenue growthactivitiessuchasaggressivegrassroots fundraisingassistance,majordonorprograms,andcommunicationsefforts 4. Asastrategy,implementinglow costinitiativesaremostappropriateandeffective amongpacswithlargeaudienceswhereeconomiesofscaleexist.continuous improvementinoperatingefficiency,exploitationoftheexperiencecurveand serviceredesignareamongthebestmethodsforyourpactoloweritscostsof operationswhileraisingdollarsandremainingcompetitive. # TreyRichardsonisprincipalofSagacPublicAffairs,anationalcompanyproviding communications,research,fundraisingandmanagementsolutionstohundredsof political,non profitandcorporateorganizations.sagacistheleaderinthepolitical communityforstrategyandimplementationofcandidate,committeeandpacfinance operations. 4HittingyourMark,2007,SagacPublicAffairs,LLC Page5of5