By Nancy Kaffer
As the Detroit Regional Chamber works to balance its budget, President and CEO Sandy Baruah says fiscal stability and long-term viability lie in realigning chamber programs with its core mission: economic development in Southeast Michigan.
"You're going to see much more focus on economic development programs, see a much more robust economic development staff," Baruah said. "And you're going to see more revenue coming in."
Facing a projected budget hole of "several hundred thousand dollars" -- Baruah declined to provide a specific figure -- the chamber began bolstering its financial situation, including laying off nine employees two weeks ago, leaving the chamber with 65 employees. The most recent cuts were necessary, Baruah said, to make budgetary room for a renewed emphasis on economic development.
"It's just like any other business," Baruah said. "We've got to focus on what's more important ... frankly, all of the functions that we cut last week in those very painful cuts are all things we would like to continue to do, but at end of day we have to focus on what's important, and what's important is to focus on economic development."
The chamber is composed of three related entities: the Detroit Regional Chamber, the Detroit Regional Chamber Foundation Inc. and a for-profit entity, Detroit Regional Chamber Service Inc. Revenue across all three entities was $18.1 million in fiscal 2010. The budget for fiscal 2011 is $15.3 million, CFO Karen Belans said last week. According to a federal tax filing, revenue for the chamber proper was $5.8 million in fiscal 2009, the most recent year available, compared to $6 million the year before. The chamber ended that year with an excess of $128,676. The foundation ended fiscal 2009 with $2.9 million in revenue and an excess of $5,278, according to the tax document.
Registrations for the chamber's signature event, the annual Mackinac Policy Conference, are up 39 percent over this time last year. The 2010 conference had 1,498 attendees, and Baruah expects this year's attendance to exceed that number. Baruah said the budget for this year's conference is $2 million, and the chamber expects profits of $100,000 or less.
Chamber membership, Baruah said, has started to rebound after a drop when the economy crashed.
"Sales have been up since late 2009," he said.
The chamber has about 20,000 members, including affiliates, or members of other chambers with reciprocal membership in the Detroit Regional Chamber, with just under 5,000 core members, whose dues are at a higher level.
Revenue from the insurance packages the chamber offers members through its for-profit arm has historically been more than one-third of its overall revenue. But the amount the program brings in is expected to drop from roughly $6 million to $4 million in fiscal 2012, Baruah said.
Further, health care reform changes due in 2014 mean the relevance of such a program to the small-business market could change, he said -- some recent surveys have suggested that post-reform small-business owners may stop offering medical insurance to employees, directing them instead to purchase insurance through the proposed state health insurance exchanges.
"The chamber has historically received a majority of the biggest single chunk of its revenue from its affinity programs, particularly the Blue Cross (Blue Shield of Michigan) programs. We're going to continue to do that, find products that are useful to our members, that provide a positive and reasonable return for us, but at the end of the day I can't count on any particular product to fund the chamber."
Barbara Allushuski, chairwoman of the chamber board and president of Right Management, said the chamber brought Baruah in because of his economic development experience -- his résumé includes the post of U.S. assistant secretary of commerce, during which time he led the federal government's Economic Development Administration.
"This is what we need, to help build the economy, to bring jobs back, and that's a huge focus for the chamber," she said. "There's no getting around that the health care reform means less revenue dollars coming into the chamber. Like other businesses, we are needing to change our business model. We need to have a strong value proposition for members."
Allushuski said the chamber is focusing on the value proposition it offers its members, especially its small-business members.
"We're going to have focus groups to make sure we have the services small business needs," she said. "I also believe that we need to be very focused on the state. We're very excited about the new governor and excited to partner with other chambers around the state."
Economic development programs Baruah is championing include:
• The reboot of the Detroit Regional Economic Partnership, a 10-county public-private partnership that works to bring business to the area, which was started by Baruah's predecessor, Dick Blouse. Baruah said he spent the summer working with the heads of metro Detroit counties and their economic development staffs to re-create the regional partnership.
In November, the partnership and the region's leading economic development organizations signed a letter of intent to work together on economic development.
"We went back to our investor group in the beginning of January and you are going to see a much more energized program" on regional economic collaboration.
• The MichAuto program, which became part of the chamber in July and is focused on bolstering the auto supply chain in the state.
• TranslinkeD, also started by Blouse, a project that would make Detroit a center for global and regional shipping.
"Logistics, the bridge, the energy cluster in Southeast Michigan that we should rebuild, because it's 70,000 jobs if we do it right," Baruah said.
A clearly defined mission is the right move for the chamber, said Beth Chappell, president of the Detroit Economic Club and past chairwoman of the chamber. She currently sits on the chamber board.
"I think Sandy's doing exactly the right thing," she said. "We're all doing more with less, which is pretty cliché though very true. Out of necessity, we're having to focus on what our core mission is and nothing else. There's all these ancillary things anywhere you go, and we're at a point in this economy where we don't have luxury of extra resources."
Nancy Kaffer: (313) 446-0412, firstname.lastname@example.org