ESNZ’s financial strife

Financial situation for ESNZ Central (National Office) – this shows the surplus (in black) or the deficit (in red) for the last few years.

Equestrian Sports New Zealand has found itself in dire financial straits. Above is a graph showing the financial situation for ESNZ Central – previously known as National Office – using the publicly-available data on the annual reports (published on ESNZ’s website) to demonstrate just how bad it is.

One of the big influences in this sorry state of affairs has been the change of membership system, which came into force in August 2014. This was supposed to attract new members, and at the time the goal was to “evolve the way delivery of equestrian sport is funded.” This was to be done by “reducing the dependence on subscription income and increase income from products and services people value.”

ESNZ planned to use this increased participation to develop new revenue streams, including from bequests, and also collect revenue from selling advertising on its website. You can read more about the 2014-16 Growth Plan on this link.

The membership review was talked about for many years prior, under the guidance of then-CEO Jim Ellis, who left just as the new system was rolled out. There was a great deal of concern and conflict over the cumbersome new system with its variety of new levies, particularly around the collection of start levies for jumping, but eventually things settled down.

Under the new system, (as outlined in the ESNZ media release on this link) registration fees decreased from $170 to $125 and a flexi-start fee was introduced – the idea was for a lower upfront fee, and the addition of pay-as-you-go fees.

In July last year, membership fees were increased by $10 each for both horse and rider registrations, to $75 and $70 respectively, while officials/volunteers/non-competitor membership remained at $60.

One of the main reasons given for that rise was the reduction in the Community Sport funding (stated as dropping from over $200,000 per annum to $75,000 per annum), and the increased costs of running the organisation.

Just over a week ago, ESNZ published a discussion paper on the initiatives it is proposing to take to dig itself out of the financial hole. Have you seen it? Here’s the link. It’s worth reading, especially if you are an ESNZ member and want to keep competing at ESNZ events.

There is no simple fix, and a number of initiatives are suggested to improve the finances.

The main thrust of ESNZ’s discussion document is to look at fees and try to reverse the damage done by the membership model change in 2014, which did succeed in attracting new members, but unfortunately around 45% of all members do not pay any fees. This includes community members, first-year-free members and life members.

The new membership model has had a negative impact on ESNZ income (Graph from ESNZ Discussion Document)

Consultation on the suggestions in the document close at the end of March, and I urge people to have their say by actually responding to the document, rather than having discussions in the truck parks or on social media.

There were plenty of questions I had after carefully reading the document, and Chairman Nick Pyke has kindly responded (and I understand board members will be available at the ESNZ trade stand at the Horse of the Year Show to answer any additional questions you may have).

Transparency

I was interested to see the statement: “there is now a reasonable level of transparency regarding the costs of running ESNZ.”

I am a firm believer in transparency, and would like to see more, including publication of board minutes for the ESNZ and discipline boards. I was curious to find out what had been done to improve transparency recently. Nick replied: “As you can see from the document we have included all our income and expenses in a clear way. This has been further broken down in the dollars/member table.”

So, that is a good start and one that I am sure many would like to see continue.

I was also curious as to how far this transparency would go. Would feedback received, or at least a synopsis of it, be made available to members? Another tick with this reply:  “All feedback will be collated, summarised and analysed, and a report will initially be provided to the ESNZ board with recommendations. This will then be available to the members. This is an open and transparent process.”

Sponsorship & Grants

One of the areas of income that has been up and down like a yo-yo over the years is sponsorship and grants. Back in 2007 it was over $160,000, and yet in 2011 it was less than $20,000. In 2015 and 2016, it was also very low, even though it was supposed to be one of the solutions for making ESNZ more secure back in 2014.

The lack of income from grants and sponsorship has significantly contributed to the financial woes. Can this be turned around, and what is going to be done differently?

“Sponsorship partnerships were not actively pursued in the 2014-16 time-frame,” says Nick. “The staff we have on board now have a great success rate with sponsorship. There are a number of other initiatives that we have been working on over the past two years that we think will help ensure ESNZ has a great value proposition for potential partnerships.”

Let’s hope that this comes true, and the staff with a success rate (we presume with other organisations) can work their magic at ESNZ.

Converting the Non-Paying members

When the 2014 membership model was introduced, it was predicted that community members and those enjoying their first year’s free membership would convert to paying members. Unfortunately, this hasn’t been the case and, in ESNZ’s own words, “the financial impact has been brutal.” The predictions were far from accurate and while the discussion document works on the basis that about half of the current non-paying members will want to pay up, I wondered if this is realistic. Perhaps some polling had been done?

The response from Nick: “There is no secret that attrition levels are almost impossible to gauge. From the best analysis we have available, we believe the proposed attrition rates are more than will actually happen. The main point is that currently, community members pay nothing, so any introductory members who opt in and pay either the introductory rate or the full rate will be better than the large number of members paying nothing, but benefiting from the organisation’s resources.”

The new membership model has not worked out as anticipated by the Board

It will be interesting to see how many people do convert to being paying members if the proposals contained in the document are implemented. From some of the recent discussions on social media (admittedly mostly eventing-related), there is a lot of financial pain felt by many competitors. It seems that pony cub events, with lower entry fees and costs, are attracting growing numbers, especially those with young horses, at the expense of ESNZ events.

Event Organisers

I was also very interested in where event organisers stand on this discussion document. One of the issues with the introduction of the new membership model in 2014 was getting the show secretaries on board. I asked if this time they had been consulted as a special group, or if ESNZ was taking a look at how they would be affected, perhaps having learned from the last communication disaster.

Nick’s response: “Event organisers are welcome to provide their feedback and evidence of how they believe any change might affect their events; we are very keen to receive constructive feedback from all quarters.”

Proposed New Fees

While the document was written in simple and fairly clear language, I was a little confused when I reached the end to see the following in the list of consultation opportunity questions: “Do you think an increase over and above the reinstatement of $120 would be acceptable?”

While earlier in the document the reinstatement of the $120 was discussed, there was no discussion on it being more than that. Does this mean that membership may be more than $120?

Nick answered: “This relates to whether or not an additional one-off levy might be acceptable to members to deliver the technology development, or other special projects in the future.”

So, I take it that the one-off levy which was outlined could be in addition to the membership.

Website & Database

One of the technology developments mentioned is a new website and database management system. A request for proposal (RFP) has been issued with extraordinarily tight time-frames. The RFP closes on March 15, and the successful candidate is selected on March 16, plus all respondents are notified on that same day. Someone is going to be busy reading proposals overnight!

Also, usually prior to an RFP there is an ‘expression of interest’ phase, so that the possible respondents can determine the depth and breadth of the project. I therefore wondered if this actually meant that ESNZ had already got a technology partner firmly in mind, and was just going through the motions with the RFP.

But no, according to Nick, “Because this project is a reinstatement of our 2015 brief, we have been able to compress our time-frames. We absolutely are not working with a provider at the moment. We are working closely with Sport NZ on this project to ensure we have good advice. The RFP document was emailed directly to all previous submitters, to our current providers, to anyone who had registered their interest to us, and to a group of potential companies that Sport NZ recommended. It was also then placed on the website for all members to see and to send out to anyone they might know who might be interested.”

Those are still very tight time-frames, so I hope that the contract is awarded to someone who can deliver within them, and within the budget.

I also asked ESNZ how the database and website project will be paid for, given the current state of funds, and if the members don’t want to pay what is proposed in the way of a one-off contribution. “The organisation already has a sum set aside for this project in the form of a targeted grant from Sport NZ. This money is tagged for this project. Once we know the full costs of the project, we will implement the plans we have in place to secure the full amount required. The project is spanned across two financial years to ease the burden of the extra costs. In addition, the move to electronic online registrations and a more streamlined system will save ESNZ in operational costs, and these savings will be applied to the project in year two.”

The current version of the website went live on August 1, 2014. It certainly hasn’t had a great shelf-life but, to be fair, technology is advancing very quickly.

Website Income

The discussion document contains a number of mentions of increased revenue/commercialisation of the website. Perhaps the new website will be magic and conjure up vast advertising income, but I must confess to being very sceptical about this. There are many media companies, from Fairfax with its Stuff behemoth to our own NZ Horse & Pony, with our website barely a year old, who would dearly love to make a success of digital advertising.

We haven’t gone behind a paywall, but perhaps this is a suggestion for ESNZ?  I was cheeky enough to ask how ESNZ proposed to make their website financially successful and, predictably and understandably, was told: “There are a number of initiatives under way to generate revenue from the website, and they are all in commercial confidence at the moment as we move into a development phase of our digital platform.”

Fair enough. But then the response continued from Nick. “We see the ESNZ website as a key platform for our members and others interested in equestrian sport. We have recorded over two million views in the past 12 months and we believe the website will generate opportunities.”

Now the figure of two million had me mystified, so I looked up ESNZ’s advertising rate card on their website. The two million views was in fact two million page views. Not bad, and I hate to boast, but I had to compare that to NZ Horse & Pony’s 5.3 million website page views in the last 12 months. I could go on about our average visitor staying a lot longer, and our extraordinary number of unique visitors (ESNZ didn’t provide that figure but that is one that advertisers like to see), but that is in our own commercial confidence, so I won’t. What I will say is that if ESNZ can pull out a good (or any) return on their website, I will be the first to congratulate them.

Key Principles

The last point I will make on the discussion document is the apparent lack of mention in the key principles of keeping costs down for members. Perhaps it was a given, but it wasn’t mentioned, so I put this to ESNZ: while the financial stability for ESNZ is obviously important, is a key principle for ESNZ keeping costs down for its membership?

Nick’s response: “The members are of course our key priority, and all principles are aimed at serving them. Keeping costs down is very important, but we need to be able to effectively deliver the services our members require.

“We believe that the two principles – financial sustainability and transparency of costs – are indeed aimed at costs and members. If the members can see the costs through a transparent sharing of information, and they can see what the organisation needs, they will understand where their money goes and they will make their own judgment on whether that is acceptable to them. That’s what we are currently working through and how we plan to ensure members are well informed in the future.

“The costs need to be relevant to the cost of running the organisation; ESNZ believes that the lengths we have gone to, to cut all extraneous costs from the budget, represents our commitment to keeping costs down for members. Of course we need to be affordable as much as possible, but we also need to be realistic.”

The discussion document has some comparative fees, although the example originally used of NZ Pony Club fees had their members up in arms, and it has since been removed at the NZPCA’s request, and their members reassured that their levies were not about to go up.

So, now it is up to ESNZ members to give their national federation some feedback. What do you want to see happen? You need to get your feedback to general manager Dana Kirkpatrick by March 30 via email.

I suggest that you do give your feedback. If you are currently a community member, you may want to just indicate to ESNZ whether you will or won’t be paying for membership. If you are already paying, will you wear an increase, or be prepared to pay a little extra for the special database project? It could mean a better system (less manual) for you to register your horses.

You don’t have to give feedback on every aspect of the document, but do take up this opportunity.

Some other points to note:

  • Start fees are collected by ESNZ but are passed on to disciplines on a monthly basis.
  • ESNZ asked for Expressions of Interest for replacing the membership system/database in April 2015.
  • Justine Kidd served as CEO from 2004 – 2007.
  • Jim Ellis served as CEO from 2007 through to September 2014.
  • Vicki Glynn served as CEO from October 2014 to November 2016.
  • Dana Fitzpatrick is the current General Manager, appointed November 2016 on a one-year fixed contract.

 

 

Previous articleKatie wins another jumping title
Next articleA bad week for John Twomey