September 26, 2003
Dear President Marinello,
To Advance the Growth of Chess –
On the Future of the United States Chess Federation
You have asked what others have to say about the future of the United States Chess Federation (USCF). Vice President Hanke has proposed a new business model for the USCF that in concept is workable. This business model or financial plan is however simply a means to an end. Ends should define the purpose for which the Federation exists from the viewpoint of the owners of the organization. What results should the Federation achieve? That will be the focus of this response to your question.
Since 1980 the USCF has ended up with a negative annual fund balance at least fifteen times. Some would argue this has occurred more often as Life Member Assets and other segregated funds were commingled with operating funds masking the annual result.
The USCF is a not-for-profit membership organization devoted to extending the role of chess in American society. During this period it seemed the USCF mission was limited to running prize money tournaments. To the cynical it just appeared the USCF was focused on making sure tournament organizers or related service providers would not lose money. The politics surrounding this effort superceded everything. The rallying cry was PROMOTE CHESS. Recently the rallying cry seems to be CHESS PROFIT. In practice these two cries are not that dissimilar and do little to extend the role of chess in America.
For all intents and purposes the real members were the delegates and voting members who were selected by the State Affiliates. The actual membership was treated more as customers, but the service was inconsistent or poor. There was a preoccupation with the sales program. Apparently, it was thought that the business of the USCF was member services and that they were to be extensively underwritten by this program.
The folly of the last decade for the USCF has come from a focus on increasing the number of members and the amount of sales revenue without regard for expenses. Overly optimistic revenue projections and artificially inflated reporting have been additional problems. The USCF must learn to ground its budget and report processes in reality.
There are old adages that if something is not broken don’t try fixing it or don’t throw out the baby with the bathwater. At this point however the USCF needs to be transformed and the old ways left completely behind. In this case we really need to think beyond the present to contemplate new worlds. We should however, create visions of the future that can be pulled back to the present and be used in subsequent planning. To properly create this future we must explore new options by changing the rules by which the business (yes - the USCF is a not for profit business) has always played.
In order to transform, the USCF needs a vision for the future centered on a refocused mission, financial empowerment centered on an improved financial reporting system, and a businesslike board of directors centered on a successful governance model. Though not original, this response is based on proven practice and outlines a few starting ideas that can form the seed for a better-focused and more viable vision for the USCF.
Themes for the Future
Towards a Refocused Mission
It has been said that a vision is something to be pursued, while a mission is something to be accomplished. The USCF is a mission-based business, not a charity. For profits chase profits – not for profits pursue their mission. The mission is what the organization does and its reason to exist. Excellent organizations know their mission. It should be on the tip of everyone’s tongue and needs to be visible everywhere. The first rule of not for profits is mission, mission, and more mission. A mission-based organization needs to follow its mission, and to do so it needs a mission that is focused, motivates, is understandable, supportable, up to date, and needed. Without a mission there is no point. A suggested revised and refocused mission for the USCF is:
The United States Chess Federation (USCF) is the national governing body for chess in the United States devoted to expanding the role of chess in American society by advancing the development of chess as a means of healthful recreation as well as an amateur sport. The USCF encourages programs and partnerships that provides value for all chess players, increases chess participation, or furthers chess excellence. We believe the study and knowledge of chess is of benefit to people and society.
Rallying cry: MORE PLAYERS, BETTER PLAYERS
All actions of the board should be focused on advancing the mission. If the action does not grow chess by facilitating creating more players or better players than it is not central to the mission.
Core Values to Guide the Mission
Values represent the core priorities in the organization’s culture, including what drives members’ priorities and how they truly act in the organization, etc. Values are increasingly important in strategic planning. They often drive the intent and direction for “organic” planners. Establish no more than a dozen core values from which the organization would like to operate. Consider values of customers, members, employees and the community. A suggested set of core values is:
Future Goals to Accomplish the Mission
Goals are statements describing what your organization wishes to accomplish, stemming from your purpose or mission. Goals are the ends toward which your efforts will be directed and often change from term to term or year to year, depending on the nature of the group. Goals help define your organization, give direction and avoid chaos. Goals can help motivate members by communicating what the organization is striving for as well as providing a basis of recognizing accomplishments and successes. Organizations that set goals are more effective in recruiting members. A suggested set of longer-term goals is:
Developing Core Programs
Programs are developed to help accomplish the organizations’ goals. Once an organization has identified its core programs – those that benefit the mission as a whole and that can be provided most effectively by the Federation – it can target dues revenues at a level necessary to cover their baseline costs and establish user fees for remaining program costs. Of course distinctions like core programs are not always clear. At times, subsidization or partial underwriting of programs that clearly only benefited a segment of the membership are considered necessary if it advances the mission in a significant way. Nevertheless the distinction between core and noncore programs provides a rational method for establishing dues and justifies fees or self-support for special-interest programs. Its important to note that some programs become cash cows and generate substantial amounts of net revenue. This income should not be used to underwrite core programs because they are less reliable than dues revenues. If nondues revenues are used to underwrite core programs, the quality and quantity of core programs may fluctuate, which could have a negative effect on the membership. Nondues net revenues however can be redirected for special one time funding of special events, grants or added to the endowment for future use.
Using targeted allocation of dues revenue for core programs proactively answers the question “Where does my dues money go?” It also establishes program scope by the funding base and budget the program must operate within. With this method the board allocates dues to programs using a formula based on its current priorities at advancing the mission. The Program must live within this allocation plus any fees and donations it receives. If all core programs are treated this way how are shared costs handled between programs? The most common method is that all programs (both core and noncore) must return a percentage of their total revenues, be it from dues or other funding to cover general obligations or common cost pool items. A figure may be something like 15-20% to help cover the facility, utilities, common payroll, accounting, legal services, etc. Below is an example of how dues could be allocated to support core programs. One must be careful that each membership has some funding going towards mission advancing core programs to continue to enjoy a tax exemption on those membership dues.
Enhancing Membership Accountability
In the for profit sector, we can easily see that a board of directors is the voice of the owners (shareholders) of the corporation. It is not always apparent that nonprofit organizations also have owners. Most modern governance models conceive of the governing board as being the on-site voice of that ownership. Just as the corporate board exists to speak for the shareholders, the nonprofit board exists to represent and to speak for the interests of the owners. A board that is committed to representing the interests of the owners should not allow itself to make decisions based on the best interests of those who are not the owners. Hence, boards with a sense of their legitimate ownership relationship should no longer act as if their job is to represent themselves, staff, volunteers, customers, or special interests.
Who are the owners of a nonprofit organization? For a membership organization, its members are the owners. It is the board as a body that speaks for the membership, not each board member except as he or she contributes to the final board product. On behalf of the membership, the board has total authority over the organization and total accountability for the organization. The leadership is accountable to the membership for producing results towards advancing the organizations mission. The board is responsible for sustaining the mission, ensuring the organization has the resources necessary to fulfill the mission, and providing oversight as well as independent verification ensuring fiduciary and legal requirements are met. Board members represent the membership and should be individually and collectively responsible to them for the sound and proper performance of their duties.
Better accountability will be necessary to succeed in the future. Accountability can exist in any environment as long as the membership can truly and directly have the final say if necessary. In other words, if any delegation of authority occurs by the membership the basic question is whether the delegation of authority is reversible -- controlled by those who delegated it. Various ways to become a more accountable organization include:
· Survey the membership regularly.
· Keep the membership well informed.
· Have your board commit to representing the interests of the owners.
· Make your 990s easily available.
· Publish and make widely available an annual report with financial data.
· Rely on annual independent audits and assessments.
· Create necessary board policies and enforce them regularly.
· Avoid and manage conflicts of interest or the appearance of conflicts.
· Understand your board's role and responsibilities.
· Be familiar with intermediate sanctions.
· Keep good records and keep them organized.
· Know the federal regulations and your state laws.
· Embrace inclusiveness and encourage participation.
· Apply best practice.
Don't treat your membership like mushrooms-keeping them in the dark. The more you can share about your business, the more members can contribute to helping advance the mission. If you have dark secrets, you're in the wrong business. Be truthful to yourself and others. People want to know what is going on in the organization. Talk to them! Organize a consistent system of passing on information.
However, accountability to the membership is more than just reporting results information or disclosure; it is a means to improve performance. An accountability framework identifies intended results, ensures the measurement of actual performance and assigns responsibility for using this information as the basis for making changes to achieve the intended results. Reporting includes current results compared to planned objectives, plans for improvement and performance trends over time. Increasingly, the membership is asking for better information on what they and society are getting for their membership dollars. Moreover credible information on performance is needed even more to ensure that membership dollars are being spent well. Accountability is enlightened by independent third party oversight and review of corporate actions.
The Importance of Reputation
Due to the past a major issue is the current image of USCF. Most top players perceive the organization as incompetent and directionless. The USCF needs strong leadership and people with business background on board; people that know how to generate revenue, plan forward, spend accordingly, have contacts in the business/charitable community and can help with funding issues. As this is done, much effort must be expended by the USCF to share the new direction with top players and others while soliciting their help.
How to Measure Success
challenges for the USCF are accountability and self-assessment. How do we
track and measure the success of our efforts -- and, even more important, how
do we align our efforts with the needs and priorities of our stakeholders?
Just throwing resources at programs or providing SASP funding does not guarantee
organizational results. Ultimately the big questions to answer are "What
will be the organization's results in changed lives?" and "How will
the organization measure success?”
Ideas to Improve Programmatic Focus
MORE PLAYERS – Foundations for Growth
The USCF needs to
leverage its unique capability to officially certify titles, events and jobs.
To that end the USCF should establish a Chess Instruction Certification
Committee and a multi-tiered certification process, along the lines of the
current TD certification. Charge a processing fee for every
application. Local Chess Instructors, may need to demonstrate knowledge
of the moves and of notation, pass a short Principles of Chess Instruction
test, and submit three letters of recommendation, with at least one an adult
member. Regional Chess Instructors may need to demonstrate knowledge of
basic tactics, mates, etc. pass a longer test.
The recommendation letters may be waived, if nominated by an ANCI.
An Assistant National Chess Instructor would have additional
requirements, as would a National Chess Instructor.
Chess in the Schools*
Facilitation of chess in the school style programs addresses the important question “what will be the organization's results in changed lives?” Such programs enhance K-8th grade education through after-school chess programs. They also advance the growth of chess through the development of more chess players.
Chess instills in children a sense of self-confidence, patience, self-control and responsibility. The challenge of the game stimulates critical thinking and teaches the important connection between actions and consequences. Students feel successful as learners when they see rapid gains in their own chess skills. Teachers report profound changes in self-esteem, concentration and behavior. Research shows increases in academic and reading scores for chess club members. Participating in a chess club gives students a sense of belonging to their school and gives them the opportunity to participate in something that is intrinsically interesting.
Chess teaches social skills, sportsmanship and problem-solving skills, how to work as a team, control anger, and learn from mistakes. Chess is fun, exciting, challenging, rewarding and thought provoking. Chess can also inspire in our children an enduring love for learning, and prepare them to contribute as citizens of a diverse, multicultural and international community. Chess can truly change lives.
This type of program can be used for all types of elementary and middle schools however the biggest impact on children’s lives can come from such programs in some of the 46,969 Title I eligible schools. It may be most appropriate to process this function through the US Chess Trust.
The USCF can have an important role in helping to encourage and empower these programs in the nations schools. Some of the way the USCF can help include:
i. Guidelines on how to form a nonprofit
ii. A template on how to get the program started
iii. Teaching manuals
Helping Clubs Help Themselves
The chess club has been the backbone of recreational chess be it a local over the board style club or and Internet based entity. Clubs can be metro based, regional based, state based, or national based. Clubs can be physical entities or virtual entities. The affiliate-USCF relationship is a partnership. Thus it is useful that the club concept be equitably assisted rather than stifled or subsidized.
Thus the USCF should provide clubs with a range of services and benefits. The affiliate rates can be adjusted to reflect any new benefits. A team of experts dedicated to helping clubs provide easily accessible and comprehensive advice on areas such as Club Help, development of local events, volunteers, and much more.
Other benefits might include a business advice phone line service, a coupon offering chess equipment and club software at special prices, a manual on how to attract and retain volunteers, Tournament Life Announcements, a national facility arrangement with Borders Group, Inc., and a new ratings scheme to operate at club level. There might also be a video that sets out the USCF plans and how they can assist clubs to invest in the future.
If we want the affiliates to flourish and bring in more memberships, we will need to empower the affiliates as well as make membership more attractive to the club player. What can be done to improve participation and communications within the USCF? A few starting suggestions are based on a comprehensive club membership kit.
A sample membership kit might include information as follows:
BETTER PLAYERS – Towards Improved Performance
A Universal North America Rating System
It will be important to the USCF penetration into more markets to have a highly automated rating system that can be used to measure chess improvement. This may also be a significant future revenue source if branded and marketed properly. The following areas in North America would all benefit from a standardized and centralized rating system.
Embracing the Challenge
As Yogi Berra once said “If you don’t know where you are going, you will wind up somewhere else.” Organizations that succeed, organizations that thrive, organizations that are going to be providers of services in the next decade all know where they are going. A vision for what you want your organization to be, and a road map of how you want to get from here to there, is absolutely essential if you are to be a good steward of your organization’s resources. Without such vision the USCF will at best be destined to only survive (see Coping with Cutbacks). If this is the case, please do not prolong what we have had to endure for the last two decades. The USCF membership deserves much, much better.
It has taken more than twenty years to bring about the current Federation situation but there is now an opportunity to change the organizations course towards the better. The very first steps involve listening to the membership, encouraging their participation, and respecting each other. The sooner one starts in this direction the sooner one can accommodate a more inclusive approach and remove the obstacles that stand in the way of improved organizational results. You cannot build value for customers, membership, or the community without a vision and values for your organization. We must move beyond simply surviving and build an organization with people who share a common aspiration and have the tools and wisdom -- the vision and values -- to achieve something great. This board has the opportunity to leave this as its legacy.
Yours for Chess,
Wayne Praeder with Jim Eade and George John
* Special thanks go to Julie Young and Georgi Orlov for their input to this response.