Getting On Track: Overcoming Our Fraternity Chapter’s $18,000 Debt
In the fall of 2010 I was elected to the position of Chapter President. I was elected via tie-breaker against another brother (who happened to be my little). It was an embarrassing display of a lack of confidence.
Within the first few days of my presidential term I learned that we were $18,000 in debt to our national office. It turns out that our chapter’s desire to have a semi-formal a year prior set us on a path of collecting dues early from some members and not collecting them at all from others. Long story short we ended up with an $18,000 hole in our budget, a bunch of members who had paid their semester dues in advance, and a bunch of members who were hundreds or thousands of dollars in debt to the chapter.
The newly elected treasurer and I set out to make sure the debt was paid, and we managed to close that $18,000 hole in four months. The basics of our approach were simple: Spend less, collect more. Our chapter collected a little more than double what we owed to our national office, and we needed to pay off the balance within a few months to be eligible for our Fraternity’s top award. Here’s what we did:
- Out-Of-Pocket Semester: Any expense which wasn’t absolutely necessary was converted to an “out-of-pocket” expense. Our spring formal, our big brotherhood retreat, our philanthropy events and our social functions. Nothing for any of those was paid with chapter dues. We found a free space to use for the retreat, our formal was more or less a well-coordinated weekend getaway, and our social events required some creative recycling as decor. In eliminating these expenses we freed up enough of our dues to make serious payments toward our debt.
- Eliminate Unnecessary Expenses: It can be difficult to overcome a debt when your chapter is paying for services which do more harm than help. We collected internally to avoid credit card fees through a payment processor, downsized our composite, and cut off our group voice message app in order to avoid spending money where it wasn’t needed.
- New Legislation: Among those who owed debts to the chapter were several members who had graduated and many who were going to graduate at the end of the term. These members had no reason to pay and so we passed new legislation which barred members from receiving alumni status, receiving an alumni jersey and participating in our alumni ceremony (more here) if they owed any sum to the chapter a few weeks prior to graduation.
- Alumni Board: In my fraternity the alumni corporation board has the power to expel undergraduate members, and Stetson’s Homecoming was (at the time) held in the spring term and just a week before our payment deadline. Our alumni members were, of course, caught off guard by the debt, and so we worked out a deal where they would hold expulsion hearings for any members with more than a $400 balance come alumni weekend. This prompted payment from many brothers, particularly when we warned them that the alumni didn’t care much about their feelings.
- Honesty Is The Best Policy: Part of our problem was that this $18,000 debt was not explained to the chapter back when it was a $10,000 or $4,000 debt. We had never before discussed it in a meeting. Our alumni, too, seemed mostly unaware. The only way we could get our chapter to take this seriously was to speak honestly about the situation and what we needed to do to avoid a suspension. People appreciate knowing what is going on.
Having debt as a chapter is not fun. You are constantly receiving notices from alumni, your national office and perhaps your school. It’s important to get the debt cleared early, as it can easily grow out of control (just a year later the chapter was back in debt for another 3 years!). It may seem difficult, but cutting your budget and sticking to your guns are the most effective ways to clearing bad debt as quickly as possible.
Although we paid off our debt, we were 1 day late on our final payment after that Homecoming weekend. That single day suspension (basically the time it took the money to transfer) prevented us from winning our Fraternity’s top honor even though we scored a 98% on the accreditation packet. . . That was basically the day I realized that fraternity/campus standards of excellence programs are faulty measurements of success or excellence.
Staying On Track: The Power Of Responsibility & Incentives
Fast forward to 2015 and I am promoted to the Director of Fraternity Growth & Services. In that role at our fraternity’s national office I oversaw 15 staff (approximately half of our national staff and just about everyone under 25 years of age) and managed the budget for two departments responsible for approximately 50% of our Fraternity’s strategic plan. It was awesome.
I received many suggestions regarding the budget of our department, and given an increase in risk incidents all of our budgets were tightened during my first year. Still, my liberty-loving self wasn’t going to give up on my principles, and so I managed my budget by managing less of it. At the end of the year my departments were the only ones to come in under budget (that’s not a slight on any of my former colleagues, there were other circumstances which caused their budgets to bend such as aforementioned risk incidents). Here’s how I maintained our strong budget performance:
- Look At Previous Years: Some items on our budget had been there for quite some time, and many of the expenditure items of our budget didn’t match with the way our departments operated or were structured. I was able to eliminate a few line items which didn’t fit or within which we didn’t spend money in previous years. Looking at past budgets helped me find some early breathing room.
- Responsibility: I left the budget for one department entirely up to my Associate Director to manage. We would check in quarterly or so. For our traveling consultants, I took the budget I had allotted for their use, divided it amongst the chapters of the Fraternity, and then gave them each set amounts based on the number of chapters they worked with. It was then their goal to remain within those budget constraints while planning their trips. Staff could notify the assistant director of that department if they needed to go over.
- Cushion: From those unnecessary expenditures I had built in a little cushion room just in case either department went over its budget, this was ultimately where our savings came from.
- Incentives: I restructured our bonus metrics to include budget management. The team would get a bonus if we all came in under budget and each individual would be graded on their budget management performance. We included in our summer training the best practices to budgeting for trips and distributed worksheets to help staff track the cost as they booked travel.
- Decision Rights: Who has the right to make what decisions? In previous years a supervisor might have to take note of whether individual expenses (hotel rooms, flights, car rentals) went over established caps. I decided that the only decision I would make was the total budget allotted to each staff member. He would then have control of how the money was spent so long as he remained within his overall budget. We provided guidelines, and so the staff largely stayed on track without my having to monitor how much everyone spent on every hotel room. Time is money, and wasting time on the nitty gritty of money didn’t matter to me. We did set some triggers. . . if a flight was over $500, for example, approval would be needed, but this ultimately freed up the number of questions I received to go over the hotel limit in big, expensive cities.
- Defined Expenditures: I had done the work of allotting a certain amount of money per staff member, per chapter, and so it was important that I shared how I came to that figure. We set up some standardized expectations of the length and cost of a chapter visit to serve as a template when staff planned their own travel.
Simply put, I gave my team budgets to work within and a little more freedom in terms of which purchases needed approval and we managed our budget pretty effectively. Not only did our consultants visit more chapters than in years prior (consistent with the trend of the Fraternity), but we ended up shaving off about 10% of our expenses from the previous year.
Whether you are dealing with $18,000 or almost $500,000, the vision and direction of ones work does not need to be complicated. Focusing on a direction (greater freedom, fewer expenses, personal responsibility) frees one up to try more tactics – all of which can lead to needed progress.
If you are facing a large debt or if you are in charge of managing or downsizing a budget, try some of the tactics mentioned above. That said, always focus your efforts on getting more bang for each buck and try to stay in the black. It is okay to go over-budget from time to time, particularly if there are unexpected but necessary expenditures, but you might actually do yourself a favor by not stressing out, setting some simple ground rules, and sticking to them.
Even when our chapter was $18,000 in debt we managed to put together about $2,500 to pay for recruitment, our homecoming weekend, a composite and our senior wills space. Beyond that the semester went particularly well for us.
Do you have questions about managing your chapter or professional budget? Tweet them to @FraternityNik.
Also, check out this post about my experience running Stetson’s biggest philanthropy event, Greenfeather, and cutting it from 14 days to 3 days, all while increasing our fundraising by 50%!