Section A – This ONE question is compulsory and MUST be attempted
The following information should be used when answering question 1.
Introduction
Arcadia is a country with great mineral wealth and a hard-working, well-educated population. It has recently enjoyed sustained economic growth generated by the expansion of its manufacturing industry. The population has grown as well and, as a result, agricultural output has increased to satisfy this population, with much previously marginal land converted to arable and pasture land. However, after 10 years of sustained economic growth the country, in 2009, began to experience economic problems. Gross Domestic Product (GDP) has declined for three successive quarters and there is increasing unemployment. Surveys have shown that wages are stagnant and retail sales are falling. There are also increasing problems with servicing both personal and business debt leading to business bankruptcy and homelessness.
The formation of WET
In 2002, the environmental campaigner Zohail Abbas published a book on the Wetlands of Arcadia. The Wetlands of Arcadia are areas of natural habitat made up of land that is saturated with moisture, such as a swamp, marsh or bog. Dr Abbas’ book chronicled the systematic destruction of the wetlands due to population growth, increased economic development and climate change. Water had been progressively drained from the wetlands to provide land for farming and to provide water for the increasing population and industry of the country. Wetlands also provide an important habitat for wildlife. Dr Abbas showed that in the period from 1970 to 2000, there had been a dramatic decline in birds, mammals and fi sh dependent upon the wetland habitat. Some species had become extinct.
In 2003, Dr Abbas formed the WEtland Trust (WET), with the aim of preserving, restoring and managing wetlands in Arcadia. Since its formation, the Trust has acquired the four remaining wetland sites left in the country. The Trust’s work is funded through donations and membership fees. Donations are one-off contributions. Membership is through an annual subscription which gives members the right to visit the wetlands. Each wetland site is managed by volunteers who provide access and guidance to members. The wetlands are not currently open to the general public. Dr Abbas’ work on the wetlands has brought him to the attention of the Arcadian public and he is now a popular television presenter. WET is also a strong brand, recognised by 85% of Arcadians in a recent green consumer survey.
GiftHelp
WET is a registered charity. Charities within Arcadia have to be registered with the Commission of Charities which regulates charities within the country. The number of charities has increased signifi cantly in the last few years leading to widespread criticism from established charities, politicians and the public, who believe that many of these charities have been formed to exploit taxation advantages. Dr Abbas is a vociferous critic, particularly after the Commission of Charities gave permission for the establishment of a rival wetland charity (WWTFT) despite the fact that all wetlands in Arcadia are under WET’s control. WWTFT promised to create new wetlands artifi cially in Arcadia. They have so far only raised $90,000 of the $151,000,000 required for a pilot site. Dr Abbas was part of a group that lobbied the government for the reform. of the Commission of Charities, but the government has rejected their advice.
The government of Arcadia has recently changed the rules on charity taxation. Previously, once the charity’s accounts had been audited, the government paid the charity a sum of 20% of the total value of donations and membership fees. This refl ected the income tax the donor would have paid on the amount they had given to the charity. However, the government has now declared that this is unfair as not all donations or membership fees are from Arcadian taxpayers or from people in Arcadia who actually pay tax. Consequently, in the future, charities will have to prove that a donation or membership fee was from an Arcadian tax payer. Only donations or fees supported by this proof will receive the 20%, so called GiftHelp, refund. Research and evidence from other countries suggests that 30% of donors will not give the GiftHelp details required and so the charity will not be able to reclaim tax from these donors. An analysis of WET’s income for 2008 is given in Figure 1 and an analysis of income for all charities is given in Figure 2. Research has also shown that 55% of members and 85% of donors also give money to other charities.
WET 2003–2009
WET was originally a vehicle for promoting the vision and ideology of Dr Abbas. Volunteers were recruited to manage and administer the wetland sites and the number of members gradually increased (see Figure 3). Many of these volunteers have become acknowledged experts in wetlands and their knowledge and experience is valued by members. However, as the charity expanded a number of issues emerged.
1. Administrative costs rose at a faster rate than subscriptions and donations. Administrative staff are all full-time paid employees of the charity. However, despite an increase in staff numbers, there is a substantial backlog of cleared applications in the Membership Department which have not yet been entered into the membership computer system. The membership computer system is one of the systems used to support administration. However, the functionality of this software is relatively restricted and cumbersome and there have been complaints about its accuracy. For example, members claim that renewal reminders are often sent out to people who have already paid and that members who should have received renewal invoices have never received them. As a result ‘we seem to be wasting money and losing members’.
2. Members have become increasingly frustrated by their limited access to the wetlands and many wish to participate more in determining the policies of the organisation. They feel that the wetland sites should also have better facilities, such as toilets and concealed positions for bird watching. There were increasing criticisms of Dr Abbas’ domineering style. and cavalier disregard for the members. Membership is currently falling and very little money is spent on sales and marketing to arrest this fall.
3. Volunteers have also become disgruntled with Dr Abbas’ management style. They feel patronised and undervalued. The number of volunteers is declining (see Figure 3) which in itself is reducing the access of members to the wetlands. A recent decision not to pay travelling expenses to volunteers led to further resignations.
At the 2009 Annual General Meeting (AGM) Dr Abbas stood down and announced the appointment of a new Chief Executive Offi cer (CEO). Dr Abbas admitted in an emotional resignation speech that he had not suffi ciently taken into account the views of members, donors or volunteers. ‘It is a matter of deep regret that I spent more time focusing on wetlands rather than people’. He was made honorary president of WET in recognition of his work in establishing and expanding the charity.
The new CEO, Sheila Jenkins, wishes to pursue a more inclusive strategy, and immediately set about consulting the membership and voluntary staff about what they expected from WET. The two clearest messages that came from this consultation exercise were that:
– Members wanted much better access to wetlands and they were more interested in the wildlife that used the wetlands (particularly the birds) than the wetlands sites themselves. This was not a view shared by Dr Abbas who wanted the wetlands preserved for their own sake.
– Volunteers wished to be much more involved in the running of the organisation and wanted to be treated by management in a way that recognised their voluntary commitment.
System review
Sheila Jenkins is particularly keen to improve the technology that supports WET. She has stated that the better acquisition and management of members, volunteers and donors is an important objective of WET. WET’s current website is very rudimentary, but she sees ‘e-mail and website technology as facilitating the acquisition, retention and satisfaction of our customers’ needs. And by customers, I mean both prospective and existing members, volunteers and donors of WET.’ She also wishes to gain increased revenue from each member and donor.
The current membership renewal process has come under instant review and it is shown in the swim lane diagram (fl owchart) of Figure 4. A narrative to support this diagram is given below.
Membership renewal process
One month before the date of membership renewal, the computer system (Membership System) sends a renewal invoice to a current (not lapsed) member giving subscription details and asking for payment. A copy of this invoice is sent to the Membership Department who fi le it away. Approximately 80% of members decide to renew and send their payment (either by providing credit card details (60%) or as a cheque (40%)) to WET. The Membership Department matches the payment with the renewal invoice copy. The invoice copy (stamped paid) is sent to Sales and Marketing who use it to produce a membership card and send this card together with a Guide to Sites booklet, to the member. The Membership Department passes the payment to the Finance Department.
Finance now submits payments to the bank. It currently takes the Finance Department an average of fi ve days from the receipt of renewal to notifying the Membership Department of the cleared payment. Once cleared, Finance notifi es the Membership Department by e-mail and they update the Membership System to record that the payment has been made. As mentioned before, there is a backlog in entering these details into the computer system.
Some cheques do not clear, often because they are fi lled in incorrectly (for example, they are unsigned or wrongly dated). In these circumstances, Finance raises a payment request and sends it to the member. Once the member re-submits a replacement cheque, it again goes through the clearing process.
Credit card payments are cleared instantly, but again there may be problems with the details. For example, incorrect numbers and incorrect expiry dates will lead to the transaction not being authorised and so, in these circumstances, Finance again raises a payment request.
The members’ response to payment requests is very low (about 5%). The fi nance manager has described this as scandalous and ‘an unethical response from supposedly ethical people’.
Also, not shown on the diagram: One week before renewal, the Membership System produces a renewal reminder and sends it to the member. Some members pay as a result of this reminder. If payment is not received then the member details are recorded as ‘lapsed’.
Required:
(a) The new CEO, Sheila Jenkins, recognises that she should understand the strategic position of WET before considering strategic options and changes. She wants a concise assessment of the strategic position; covering environment, strategic capability, stakeholder expectations and organisational mission.
Undertake the assessment, required by Sheila Jenkins, of the strategic position of WET. (21 marks)
Professional marks will be awarded in part (a) for the scope, structure and tone of the answer. (4 marks)
(b) Problems with the current membership renewal process include:
– the low response to payment requests
– the despatch of renewal reminders for people who have already paid
– the failure to send renewal invoices to some members.
Analyse faults in the current membership renewal process that cause the problems identifi ed above. Suggest solutions that would remedy these faults. (15 marks)
(c) Sheila Jenkins sees customers as ‘both prospective and existing members, volunteers and donors of WET’. She also wishes to gain increased revenue from each member and donor.
Evaluate how email and website technology might facilitate the acquisition and retention of WET’s customers and support WET’s aim to gain increased revenues from members and donors. (10 marks)