December 2002
The June-September swoon in the stock market sharpened the focus on investments at the November 2002 IEEE Board of Directors (BoD) series. Will the October-November market rise continue through the end of the year? You will probably know the answer by the time you read this, but it will not minimize the concentration on the IEEE portfolio in the months to come. In retrospect, one of the smartest financial reporting changes implemented two years ago was the separation of operations from investments. Operations have been under intense scrutiny, and will continue to be. The results are positive and noticeable. Now it's time for investment policy to have its turn in the spotlight.
But there are more, larger issues. Our accounting consultants reported their thoughts on IEEE's Corporate Infrastructure (CI) at the November IEEE BoD Series, which is of strategic importance to the Institute. It's at the end of this article. First, let's review updated recent financial issues.

Infrastructure Expenses
Direct infrastructure expenses have been identified and a distribution algorithm was passed in February. Now that we know what they are, we can work on cutting them. It is beginning to happen. In November, TAB passed the motion from TAB FinCom to distribute 2002 indirect costs in TAB according to the default methodology, excluding co-sponsored publications, for 2003 and going forward:

The important issue here is NOT the algorithm, since others give pretty much the same share, but the amount of the distribution. In 2002, the indirect infrastructure amounted to $21.7M. These are scheduled to be reduced to $18.5M in 2003, through work on cost-cutting and business rule simplification. In case you have not skipped to the CI section yet, the consultants want to transfer as many indirect functions as possible to direct charges. This makes it easier to identify and validate as either necessary or unnecessary.

Business Rule Simplification
In November 2001, the BoD charged RAB and TAB with identifying business rule changes to realize a possible $3M annual savings in infrastructure charges associated with membership services. RAB and TAB Business Rule Simplification teams have been working the details since February 02. TAB committee discussions have focussed on simplifying the options available for Society membership, and the subscription process for members regarding optional Society publications.
In June, TAB endorsed the concept that, in general, member fees and prices should at least cover the relevant variable costs. In November, the Cost-of-Membership task force reported back on three metrics to measure membership costs; these metrics will be made available to each Society for their use in running their membership "business," starting with the 2003 budget cycle. Further details can be found in the TAB Caucus Treasurer's Report. (See link below.) This same group has also been looking at business rule simplifications, and at their suggestion, also in November, TAB passed a motion which will consolidate student, retired, minimum income, and unemployed member categories for the purpose of providing a single discount to Society membership dues and Society optional publications. Details of this and other business rule simplification efforts in the membership area are in TAB agenda item V.C. Both actions are located in https://www.ieee.org/organizations/tab/tco_tabagendas.html. Three items remain on the membership business rules table. The first is how to simplify the offerings of Society optional publications. The second is simplifying the Technical Interest Profile selection procedure. The holy grail of membership business rules simplification is web renewal, because this would take away the need for the print membership brochures and costly reminder mailings. Web renewal is just about at the 50% mark, and Regions 7-10 are leading the adoption of this service. When fully adopted, electronic renewal can save over $1M annually. This committee and IEEE staff will continue to work on these issues. You can do your part by renewing your IEEE membership electronically.
In case you have not skipped to the CI section yet, the consultants are fully behind this and other simplification efforts. Cut the complications, save money.

2002 Forecast (Update): Focus on Investments
As the year winds down, operations for the S/Cs are very close to break-even. The infrastructure cuts made early in the year have relaxed pressures on the Societies to deliver revenues in a down economy.
Unfortunately, the 2002 economy has taken a slice out of the investment portfolio, and while October and November were strong months, equity indices are down for the year, and it does not look likely that they will recover to parity with January 02 by year-end. It is clear that efforts by staff and volunteers to normalize operations over the past two years have paid off. Now the elements of our investment portfolio strategy have come under scrutiny as the market continues to droop. Specific questions have been asked, all of which have a strategic nature. What is our investment policy and how do we benchmark it? How do we define and measure risk tolerance? How do we convert risk tolerance to asset allocation? What strategic elements of our policies offer guidance for transitioning to different asset mixes or risk tolerances? Accordingly, a TAB Adhoc Investment Advisory Committee has been formed to provide a direct path of communication between the IEEE Investment Committee and TAB.
The consultants agree that balanced budgets are great, and support a complete and clear investment strategy and policy.

2003 Society Budget Highlights
While the bottom line for the Societies was marginally positive at the 2002 November view, nine Societies have negative nets for 2003, and six of those nine have had negative budgets for the past two years. These nine Societies appeared at the TAB FinCom meeting in Chicago to present their plans for recovery. Four of the nine participants will return in February for an update.

Corporate Infrastructure Study
Finally, the CI section! Since the June BoD Series, an independent accounting consultant has been studying the corporate infrastructure of the Institute. Their findings, presented at the November BoD series, are in four main categories: Governance, Simplification, Strategy, and Trust. Here's my take on their report:

That, in a nutshell, is the word from our infrastructure consultants… strong medicine. Does this have a familiar ring to it? Resuming an effort begun in 1992 (!), a Presidential Blue Ribbon Committee, reestablished in 2000, presented governance proposals in July and November 2001(https://ewh.ieee.org/reg/6/Docs/pbrc_nov01_final.htm) with striking similarities to the consultants suggestions. At that time, the medicine was too strong. Principles were approved, but change agents were not empowered to implement the tough issues, such as dissolution of committees, and creating a smaller BoD with longer term limits. Now we have essentially the same message from outsiders.

Discussion
By the time you read this, my term as your Division IV Director will be history. It has been a pleasure, I assure you, to meet so many energized volunteers. I'm not going away just yet, but will stick around as TAB Treasurer, and look forward to further discussions on finance as well as the other issues on the CI agenda. Hal Flescher (h.Flescher@ieee.org) is your new Division IV Director. Ask him what his views are on the consultant's report. Let's get going!