The more things change, the more they stay the same. That cliché certainly applies to the recent announcement by the Paddlesports Industry Association (PIA) and the Trade Association of Paddlesports (TAPS) that the two associations during Outdoor Retailer Summer Market 2008 had signed a Memorandum of Understanding (MOU) to pursue a merger -- again.
We remember another MOU, signed in early 2002, decreeing a new future of cooperation between TAPS and what was then known as the Professional Paddlesports Association (PPA). That came on the heels of the TAPS board deciding not to merge with Outdoor Industry Association. That relationship limped along, with a more formalized attempt at visiting a unification effort between the two associations beginning in 2005, until both PPA and TAPS decided to officially part ways in December 2006. (Click here to read a Dec. 18, 2006, SNEWS® story.) In January 2007, the PPA board then opted to change its association name to PIA, it said, to embrace the "strategic framework of the Paddlesports Industry Unification Workgroup." (Click here to read a January 2007 SNEWS story.)
Which brings us to 2008 and, once again, another MOU (click here to read). Again, the two associations are publicly proclaiming a desire to work cooperatively. It is important to realize that an MOU is not a legally binding document, and we're not sure this latest attempt brings us all closer to what the paddlesports industry really needs -- a singular, progressive, creative, inspired association with real assets that represents its membership by providing real, tangible benefits beyond promises of marketing campaigns and shipping discounts.
Let's be clear here: We are all for a singular, united voice behind which the paddlesports industry can and should unite. But after reviewing the details of IRS 990 filings for numerous non-profit associations, including TAPS, PIA, American Whitewater, American Canoe Association, OIA, SIA, Bikes Belong, as well as the TAPS financials available online, we're no longer convinced the unification of TAPS and PIA, at least as it is currently being proposed, is in the best interest of the paddlesports industry. PIA's financials are not a pretty picture. And TAPS isn't exactly tearing it up on the revenue front either, although at least it is not losing money.
The 2006 IRS Form 990 tax return for PIA shows revenue of $184,039 against expenses of $207,528 for a loss of $23,489. Matt Menashes, executive director for PIA, earned a base salary of $72,000.
In 2006, TAPS reported revenue of $242,171 against expenses of $187,396 for a net of $54,774. Executive director Michael Pardy was paid a portion of an annualized salary of $37,000, representing the last quarter of the year since the association operated without an executive director through Oct. 1, 2006.
By comparison, and during the same time frame, American Whitewater reported in its IRS Form 990, revenues of $920,895 against expenses of $763,017 for a net gain of $157,878. Its executive director, Mark Singleton, was paid $76,228.
According to various non-profit board professional sources, including Board Source, the national standard for calculating executive director pay scales ranges from 8 percent to 15 percent of revenues depending on association size.
The challenge facing PIA is that the board for some inexplicable reason entered into a long-term contract with Menashes that does not expire until 2010. This contract was signed shortly after a failed attempt by PIA to merge with America Outdoors in 2002, SNEWS was told. The long-term contract seemed to make good sense during a period that PIA found itself somewhat flush with money from running its own liability insurance program -- the Recreation Insurance Association. Unfortunately, in 2004, that revenue stream dried up as the insurance company underwriting the program pulled the plug. We were told by insiders at the time that this was because PIA (then PPA) was experiencing claims well above the industry average, but regardless, the association hoped to re-establish the Recreation Insurance Association with a new underwriter. That never transpired.
And this is how PIA, an association with revenues of only $187,000 in 2006, ended up paying its executive director 38.5 percent of revenue -- dramatically above industry comparables. Not that this alone should be perceived as an indictment of Menashes. For an executive director with experience necessary to run a national association, you're not going to be able to find too many folks with the skills and commitment necessary to do the job for much less than $60,000 these days.
Still, it points to a fundamental flaw in the merger plan. The MOU was not made public until TAPS board member Jim Moss (who is also a contract editor for SNEWS Law Review) posted the document on his blog. Moss said his goal with the posting was for members and stakeholders from both associations to be adequately informed. Upon reading the MOU, we find that it calls for the new merged association to "honor PIA's remaining contract term with Matt Menashes, and to retain Michael Pardy as a full-time or part-time contractor at a compensation level that is proportionate to full-time equivalent pay parity with Mr. Menashes."
Assuming a combined entity might be able to generate revenue numbers approaching $500,000 in 2009 from membership dues and events, as well as OIA and Outdoor Retailer trade show contributions (Outdoor Retailer paid TAPS $63,000 in 2006, but the money was withheld in 2007 and put, instead, into the Joint Marketing Agreement program between both PIA and TAPS), a responsible board could reasonably expect to pay an executive director no more than $75,000, which would be a compensation level of 15 percent. Keeping both Menashes and Pardy on the payroll as the MOU recommends would be irresponsible from a purely financial standpoint.
Who goes and who stays?
Who goes and who stays as executive director? To be fair and blunt, both Menashes and Pardy should resign if the membership votes to merge the associations. That is the only clean way to move forward. If you are to keep one, then from the perspective of who has been managing his association budget most effectively on behalf of the membership, that would have to be Pardy as PIA has lost money for the last three years under Menashes. Of course, if an association is losing money, responsibility does not rest solely on the executive director. The board also must accept a large share of the responsibility as it alone dictates to the executive director what he should or should not be doing -- even if that person has a long-term contract guaranteeing pay, as Menashes does.
Moving beyond the executive director issue, and looking purely at assets, we also wonder about the logic of merging. PIA is losing money and there is no sign that trend is turning around anytime soon. TAPS isn't doing much better and no TAPS board member should be crowing about a mere $230,000 in revenue. Still, TAPS is the only entity that can offer any tangible asset -- its West Coast Sea Kayak Symposium -- that can be built upon. And, TAPS has shown revenue growth, however miniscule, and not logged a loss in a 990 report in recent years. True, PIA can point to the now-defunct Recreation Insurance Association as having strong assets that are still on the books, but those cannot be touched until all liabilities from potential claims are resolved, and that is not an asset we'd want to build any future association upon.
In terms of liabilities, both associations have them, with PIA's having arguably more of a negative impact on the bottom line of any unified entity initially. However, we would also argue the most significant of all the liabilities in this proposed merger is not a tangible one -- it is emotional and that liability is shared equally. Evidence of the bubbling negative energy can be found in the apparent distrust swirling about the membership and surfaces all too often when we at SNEWS speak to paddlesports industry folk about either PIA or TAPS. That leads us to the next thing that must be done if both association memberships vote for a merger: Both boards must immediately resign, and a new board that contains no more than two former board members of either TAPS or PIA needs to be elected.
Goals for a non-merger
And what if a merger is not voted for? Then we would call for both associations to shut down and allow a new one to emerge from the ashes. It is what this industry needs. It is what it must have.
Yes, we are saying some folks -- all good and talented people with a passion for the industry they have served -- must do the right thing here for the good of all and step aside -- either by vote or personal decision. Board members and two good executive directors who brought the industry to this point must step aside and let the process take over and allow new talent to guide it. Egos must finally be put away, and axes that some keep bringing out to grind need to be dulled and used instead as hammers to pound out an inspiring new association the entire paddlesports industry can singularly embrace and support.
And what should this new paddlesports association, its board and its executive director be focused on as goals? We have heard from many folks over the course of interviewing and researching for this SNEWS View editorial, which we've compiled into a bullet-point summary:
- It should bring the paddlesports industry together around a common goal that is achievable given a small budget. We would argue expanding, developing and promoting consumer-oriented paddlesports events nationwide is such a goal. This can be done by tapping into the existing expertise of retailers such as Rutabaga, Kittery Trading Post, Jersey Paddler, North Cove Outfitters and more to turn the Sea Kayak Symposium into a program that generates much broader, larger and more passionate interest as well as establish a structure to run paddlesports events in urban centers around the country. This is the one thing, perhaps the only thing, that has real actionable meaning and can be both a method of generating real revenue for the association as well as growing the sport;
- It should work to provide networking and educational opportunities of value to both manufacturers and retailers. Here again, work with partners who already have existing educational programs of value, such as OIA, SNEWS, 3point5, etc.;
- It should establish a single voice for the paddlesports industry that is able to work in unison with other related associations, such as OIA, SGMA, AW, ACA and more, on important legislative issues, especially in Washington, D.C.;
- It should seek to leverage the collective knowledge and standing of the paddlesports industry to work with other associations, such as OIA, SGMA, etc., to promote healthy lifestyles and fitness through outdoor activities, including paddlesports;
- And, it should always be looking for programs that will increase awareness of the value of purchasing quality paddlesports products, to drive product sales of paddlesports equipment and to grow the numbers of paddlers.
This new association might also want to take a page from the board mandate of Bikes Belong, a national association with the sole purpose of bringing bicycle suppliers and retailers together to "put more people on more bicycles more often. Through national leadership, grassroots support, and promotion, we work to make bicycling safe, convenient and fun."
Bikes Belong generated annual revenue of $1.35 million in 2006, and paid its executive director $144,000 -- 10.6 percent of revenue. And, with that money, it grew the sport, awareness of the sport and participation in the sport, and benefited all members -- which is what a trade association should do.
Paddlesports can do this, too. It just needs to begin anew. Anything less will just be rehashing tired old arguments and ideas, and that just won't get it done or inspire anyone.