When Nancy Berg became executive director and general manager of the Society of Manufacturing Engineers in 2000, she inherited an association at a crossroads. The economy was tanking, manufacturing jobs were going overseas, and the association was losing about $6 million per year.
Structurally, the association had become bloated from the success it enjoyed in the 1990s, when SME was raking in revenues from its successful trade shows, three of which — EASTEC, WESTEC, FABTECH — were on Tradeshow Week's list of the top 200 shows. From 1990 to 1999, gross revenues from trade shows grew from $12 million to $28 million. It was the strength of Berg's leadership as director of expositions that led to her being tapped for the top spot at the association.
But Berg realized that the roaring '90s were over and that wholesale changes were necessary to compete in the new decade. So she changed things. Everything.
On thefront, she eliminated some underperforming shows and reduced the number from 12 in 2001, which generated $26 million in revenue, to five in 2004, which generated just over $11 million. But the step back was necessary to move forward with a new “mega-event” strategy that would yield a big increase in revenues in 2005 (up to $18 million) and pave the way for new shows in the future (seven are planned for 2006). Internally, she reduced staff by approximately 40 percent over a four-year period and streamlined the organization from 13 business units to four, aiming to create an organization “that runs more like a business than a not-for-profit association,” she says. Berg tore down old silos and rebuilt the association — from the ground up.
How did your trade show experience prepare you for a reorganization?
I had worked in the trade show division since 1984, literally from the ground up, starting in event development, transitioning to sales, and then into financial administration and strategic planning. So when I got to the expo director's role, I was able to look at the division as a whole, the strengths and weaknesses, and to try to move it forward.
We first transitioned what was an order-taking organization to a professional industry sales environment. There was never a sales function within the exhibitions area. We hired some industry salespeople who knew our business, and we refocused our staff on building business rather than personal relationships. At the time, SME did a really good job of maintaining personal relationships, but not necessarily business relationships.
What do you mean by order-taking environment?
We were in an environment where the manufacturing industry was very strong and our shows were among the only ones in the industry. But as manufacturing began to become more global, competition increased and customers were doing business in other places. So we had to link the investments we were making to the changing needs of the market. We made it our strategy to be the low-cost producer in each of our major markets. We had package plans and some unique ways of lowering costs because that was very important to the manufacturing suppliers who were our exhibitors, as their margins were being affected by global competition.
Also, when we had an environment where the customers were knocking down our door, we weren't focused as much on developing repeat business and customer loyalty. So we did quite a bit in the '90s to create a better sales and service environment.
What role did trade shows play in SME's reorganization?
Previously we were looking at trade shows as a marketing service to manufacturing companies — they were both a way to generate revenue and provide buyers and sellers with a customer engagement activity. But looking at them from an organizational perspective, what we've done is broaden the focus of our trade shows, not just to be that sales and marketing platform for our companies, but to be the single thing that we do that has the most significant reach. We're using them now as an industry engagement platform where SME speaks to the manufacturing industry.
We had some really basic trade shows that we were producing in the 1990s. Some of them had only a very minor conference component and didn't have much press activity. We weren't always engaging our members the way we might have, so to be able to use these trade shows as our primary means of reaching out to all of the industry has been very successful for us. It's had a positive impact on our business.
How has the reorganization affected show revenues?
Back in the 1990s, the shows generated 90 percent to 95 percent of the society's net revenue, so we describe our trade shows as the engine that fuels SME. We have three shows on the Tradeshow Week 200 and they are among the largest produced by an association.
The expositions are still by far the single largest generator of surplus revenues for the association, although the total revenue has been affected by lots of things — the economy, the shift in the manufacturing industry overseas, and competition. They still bring in roughly the same percentage of revenues.
What kind of political issues did you face in the reorganization effort?
The organization had always done strategy and leadership by committee. Well, it takes a very special group of members to be objective in a strategy committee. Our experience in a strategy-by-committee setting is that everybody wants to see their personal needs articulated. But what you end up with is a very broad and unfocused plan. So we had to break away from that to help the organization grow. We had to understand that it's okay to focus on one target segment over another.
In addition, we didn't do marketing very well, primarily because we attempted to satisfy too many audiences. We still do that sometimes. We had a newsletter that goes to our members that was just not working for me. I read the newsletter and I really didn't understand what it was targeting. So I sat down with the marketing group and when they outlined that they were trying to satisfy eight segments, I said, ‘We can't satisfy eight different customer segments in one communication piece.’ We have to decide on a target audience and speak to them. Even though we've made great strides in that area, we still tend to slip back into bad habits, especially when you ask for member input and the feedback suggests that you need to do everything for everybody. The reality is that you can't.
Did you base the SME reorganization on a model of another association?
We really developed our own model. Everything focuses on leadership being employee-centric.
As we launched the change process, we began both employee and environmental assessments. I hired an organizational development person to work with me to perform some of the assessment work, and the conclusions led to the revelations that we already knew: that our product development wasn't linked to the critical customer segments, and that our image and brand were confused because we were trying to serve so many different communities. Different areas of the organization actually presented the society in different ways.
In response, we established “One SME” strategies and keystone initiatives, where we set out to build product — trade shows, publications — that was linked to industry; build new communities within the association; centralize marketing and communications; hire some public relations and branding people to build consistency in our message; and launch a Customer-Service Initiative, which we later changed to the Leadership Initiative.
As we were investing lots of money to build this new philosophy of treating customers well, we realized that customer service was not the issue. Rather, the issue was our leadership on staff and their ability to communicate a common philosophy and display a consistency of vision. So we built a model that helps insure that employees who influence people are leaders and decision-makers. We encourage employees to be a part of generating ideas and taking risks and solving problems. It's really about building a sense of ownership so that employees see themselves as stakeholders in the organization.
We believe firmly that employees should understand how their job fits into the bigger picture. Previously, that was difficult in an organization that had 13 business units, each of which considered itself a separate business and not linked to any bigger objectives.
I think the Leadership Initiative is the single most important component of the reorganization because it has to do with establishing a vision, reinforcing it, and having consistency in practices. It's also about making sure the organization acts like one organization rather than 13 silos.
How are SME's trade shows different now?
We're looking at trade shows as a way to engage the industry. We're doing that through a mega-event strategy which includes lots of different activities taking place, not only produced by SME but other organizations as well, so that they become truly industry events. [See sidebar for more details]. We are also doing a number of smaller forums, and we are managing some company-specific events and cosponsoring some of our seminars with companies. This was unheard of in the past because we were so focused on the importance of SME, as a nonprofit, remaining completely unbiased and fair: we took that too far. For example, what would GE's competitors think if SME cosponsors a program that's essentially designed to leverage the image and the visibility of GE? Well, we are thinking beyond that now. I think we can be a service to the manufacturing industry in a number of ways, and that will include custom and corporate events.
What were your biggest challenges during the reorganization?
The biggest challenges were helping the organization focus on the big picture and keeping the employees motivated while all the changes were taking place. For me, personally, as I went from being the revenue generator of the organization to the key integrator of the member and the staff operations, I experienced some issues around differences in background. My background is sales and marketing, and our members are all engineers and manufacturing business leaders, so there were some cultural and lingo issues to overcome. There were also some gender and age issues because I was considerably younger than the average member at the time. [Berg is 46.]
Have you made any mistakes along the way?
Some of the change initiatives were launched too early, before the organization was ready to handle them. For example, the Customer-Service Initiative was the right outcome, but it wasn't going to come without first driving the leadership philosophy. Also, while we were launching some self-directed teams, one of the teams was going to be responsible for doing regional marketing strategies and integrating the plans of all the various divisions. The organization wasn't ready for that. We launched it in 2001 at a time when those groups barely spoke to one another, so to think they were going to come up with regional marketing plans was really out of the question. As we've moved toward a new culture and we've broken down the silos, we are now in the process of re-launching the concept. Looking back, I guess timing is everything. And I certainly would have changed some of my leaders a little bit sooner had I gone through this experience before.
What was your most difficult decision?
Terminating employees. Throughout waves of staff reductions, I made a point to personally involve myself in many discussions with employees and communicate very openly with the remaining employees about the business reasons for the cuts — and what our goals were going forward. Whenever you sit in front of someone and it involves termination, you're involved in something that affects their family and their career, and it's very difficult. If you don't feel for them, no matter what the motivation for the termination, then I don't think you're human.
What are the differences between managing a business and managing an association?
In an association, a high percentage of expenses are designated for member and mission activities, and these expenses are often outside the control of the CEO. So as you're managing the business and you see that you may experience a revenue shortfall, it's often impossible not to go exclusively to some of those commercial operations for your expense reductions because you can't always reduce member programs. That makes commercial activities vulnerable to underfunding. Associations are very people-centric — there are lots of different ego, power, and money motivators.
How do you measure the success of a reorganization?
You have to measure it against your expected outcomes, which could be cultural, financial, or image and visibility. Establish objectives as you gather knowledge, get input, and then leverage your intuition, get buy-in, execute, and most important, be prepared to change direction to reach your objectives. We certainly did that on some very big initiatives in order to meet objectives, and while the change in direction was difficult to communicate to our employees, and even to our members, we look back now and are glad we made changes when we did.
- Founded: 1932
- Membership: 33,000
- Staff: 200
- Annual Budget: $28 million
- Annual Revenues: $28 million
Forget the Cash Cow: Rethinking Trade Shows
The Society of Manufacturing Engineers' reorganization has brought a different view to the function of trade shows within SME, says Karen Manardo, director of communications. They're no longer simply the cash cow. “We're looking at them even more as a strategic vehicle to achieve our organizational mission.”
That mission was laid out in Plan 2010, with its five goals: to position SME as the technology information resource throughout the manufacturing industry; to be the leading resource for manufacturing education; to engage members in their areas of interest; to create loyalty and visibility for the SME brand; and to be lean and mean as an association.
The society's three largest shows — WESTEC, EASTEC, and FABTECH — remain cornerstone events, but several smaller, less profitable regional shows were eliminated and will be replaced by new or expanded events. For example, WESTEC, held in Los Angeles each year, will be broadened in 2006 as the Total Manufacturing Experience, a new concept for SME and the trade show industry. During this event, attendees will be immersed in a complete learning experience — with a focus on automation and assembly — that moves from the classroom to the exhibit floor to networking activities. SME is also launching the Manufacturing for Performance show next year targeting a growing industry segment: motor sports engineers and suppliers.
Another new strategy is to create alliances with other organizations to further extend SME's reach. For example, for the first time this year, the American Welding Society will co-locate its show at FAB-TECH, to be held in November in Chicago. The new name will be the FABTECH International/AWS Welding Show.
The Route to the Top
The route Nancy Berg followed to the top spot at SME is one that's not often traveled, says Doug Ducate, president and CEO of the Center for Exhibition Industry Research, Chicago, and a longtime veteran of the exhibition industry.
“In the professional society ranks, most of the leaders are either engineers or doctors or whatever the membership is, or they have come up through the publication side of the business,” Ducate says. Quite frankly, they prefer someone who speaks their language, he says, and it's rare that someone with a sales, marketing, or exhibitions background becomes chief executive at a technical society.
Ducate spent 26 years working for the Society of Petroleum Engineers, as both assistant executive director and trade show manager.
“She had a lot to overcome both because of her age and her gender,” Ducate continues. “She persevered in what is pretty much a man's world, in an organization that was governed by men, many of whom were probably old enough to be her father. It's a real tribute to her leadership skills that she overcame all those biases and now has accomplished a great deal of what she set out to do. And I know she's not through and resting on her laurels.”
Ducate credits Berg for seeking new alliances and partnerships to boost revenues and market SME's trade shows rather than resurrecting the old formula, which had been successful in the past. “Nancy has showed a lot of vision in realizing the way we've done things in the past isn't necessarily going to be the successful route in the future.”