I want to share today that the Association is implementing a new financial plan to address lower than anticipated revenues in 2015. To align our spending more closely with our revenue, we are implementing expense cuts that I’m very sorry to say include staffing. Regrettably, we are losing three staff people today from operations, engineering and our community teams. This was not a decision we came to lightly, and we’re committed to helping those staff through their transition as best we can. In this post I want to share some information about how we got here, and our revised plan.

A Brief history

This is a really hard post to write because we delivered a plan to the community at the beginning of 2015, and it’s clear that we are not going to be able to fully execute to that plan. I take responsibility for that.

I started at the Association two and half years ago, at a very different time for the organization. At that point in early 2013, the Association was a handful of staff, mostly focused on the DrupalCons. The D7 upgrade of Drupal.org had been halted. Not without some good reason, community trust in the Association was low, and that’s among the people who even knew the Association existed.

When I joined, the message I heard from the board and from the many community members I talked to was that the Association had to learn to implement consistently and communicate more. In other words, we needed to build our credibility in the community by executing our work well and making sure the community knew what we were up to and how to get involved.

One thing that was clear from the outset was that Drupal.org was key to our success. If we could not begin to make visible improvements to Drupal.org with the community, we would fail. With support from the board, we decided to invest our healthy reserve in ourselves and build a team that could improve Drupal.org. As our CTO Josh Mitchel pointed out in his anniversary blog post, we’ve done a LOT on Drupal.org. We’ve also made great strides in DrupalCons, introducing more first-time attendee support, providing more resources to all the sprints, and adding the third Con in global communities that are so eager to have us there. Our marketing team has helped create some key content for Drupal 8 and we’ve even raised over $210,000 to help fund the completion of D8 release blockers, The revenue we generate to do this work has also increased, and diversified. We've grown the Drupal Jobs, and rolled out Try Drupal. You can see, even with our revised expectations for 2015, that things are still growing. One of our key programs, Supporting Partners, is up 26% over this same time period last year, for example. Growth of this program was only 4% in 2014.

 

So lots of amazing things are happening, but we have to address that we overestimated what was possible for revenue. We have to adjust our plan to meet reality.

Changing the Plan

Addressing our situation is not work we took lightly. We set several goals for the process that guided our thinking throughout:

  • Solve for short-term revenue shortfalls while retaining resources we need to succeed long-term
  • Minimize staff impact
  • Do this once - find the scenario we can truly sustain, and then grow out of
  • Retaining credibility with staff and ensuring we communicate how valuable they are for our future
  • Maintain community confidence

The strategy we used was two-fold. First, we strove to preserve our core services to the community and our ability to fund our own work. Second, we decided to take action as quickly as possible because the sooner we made changes to the plan, the greater the long-term benefit to the organization. We know that this second strategy makes some of this seem like it's out of the blue, but it means that we impact as few people as possible.

Our leadership team looked at three approaches to addressing our cash flow issues:

  • Incremental revenue: Our new forecast extends actuals from the beginning of 2015 out through the end of the year. We believe that it is possible for us to improve upon this forecast slightly because, although our primary mistake was overestimating revenue, we also had some staffing change-ups (a retirement, hiring new reps) on the team at the beginning of the year that adversely affected the numbers. There is some room to modestly improve our revenue from the forecast.
  • Non-labor expense: We looked at travel, consulting fees, hardware and software, among other places in the budget where we had built in buffers or non-essential expenses. Eliminating these now, and not carrying them into 2016 was a key part of our process.
  • Labor expense: This was the last option we looked at because at the end of the day, not only do all our staff give the community everything they’ve got, we really like each other here. I care deeply for the well-being of everyone at the Association. There is also lot of discussion in the business community about the long-term negative impacts of layoffs on organizations. We looked at lots of ways to reduce labor expense, but were not able to find a solution that did not include some layoffs.

Using this process, we were able to identify $450,000 in non-labor expense savings, and increase revenue projections $250,000 from July 1 2015 through December 31 2016. That was enough to solve our 2015 revenue shortfalls, but it did not address the issues long-term. We needed to reach deeper to ensure our long-term success. We had to consider labor reductions.

Prior to looking at any other staff, the leadership team at the Association decided that the first staff cut had to come from us. As a team, Megan, Joe, Josh, and Matt volunteered a 10% reduction, and I volunteered a 15% reduction. But we still weren’t there. Looking at the remaining labor cuts, we wanted to use our values as our guide. We know that our team believes in our teamwork value above all else, and would want to minimize layoffs as much as possible. With that in mind, we experimented with the model and determined that we could limit layoffs to three if we asked remaining staff to take a 5% pay cut across the board.

All told, here’s what measures look like:

 

We believe this approach meets our goals and puts us in the best position possible to continue the great work we’ve been doing.

What Happens Next?

On the financial front, we’ll be managing to our cash flow for the next 18 months, as well as modernizing our budgeting and forecasting tools to reflect an Agile methodology. This will let us see further into the future more often, and give us more opportunities to update our plans based on what’s actually happening. And, if we find we are performing favorably to our plan, our first action will be to restore salaries for our staff.

Most importantly, we’re going to be focused on our team. They all got the news earlier today, and we’re taking this time to talk things through all together, in our teams, and one on one. I am here to answer questions and hear concerns for every one of them. We’ll also implement monthly internal review of our progress to the new plan with staff so that they have transparency on a monthly basis about what’s happening. These people are the best thing we have going for us, and I won’t ever be able to make this up to any of them, but I am committed to helping them find the best path forward they can.

Thank you

Sharing this is not easy. The only thing that makes it better is knowing that the Association, like Drupal itself, has so much potential. I want to thank our Supporters, partners, sponsors, members, and the general community for everything you’ve given us so far. The only way we will realize our potential and move forward is together, and we are so happy that we get to do that with you.

Comments

dalin’s picture

You focused a lot on how the association is reducing expenses in 2015.  But I'd be interested to hear more details about the revenue shortfall.  What sort of revenue categories aren't meeting forecasts, and what can we do to rectify that?

holly.ross.drupal’s picture

There are a couple of areas, and a couple of factors. 

First, many of our revenue lines at the Association are pretty new. Supporting partners, advertising, jobs, etc. are all a few years old or less. Ads and Drupal Jobs are less than a year old, in fact. That means that we have very little data to model what revenue we can anticipate. So, we made some assumptions, built some forecasts and put ourselves to work. These new revenue lines are growing -- a great sign -- but they just did not meet the expectations we had set. As these products mature, we have more data that can help us better model and, more importantly, experiment with the products to see what we can do to increase their revenue potential. We're focused on that right now.

The biggest revenue source for the Association is still DrupalCons. Here we're running into a different sort of problem. We were pretty conservative in our budget about Cons. We specifically planned for a loss at DrupalCon Latin America - we knew that was not going to make money but was important for the community. And, even though it DID lose money, it lost less money than we anticipated. That was actually good for us. However, DrupalCon Los Angeles was soft in both revenue and ticket sales to plan. We did a fair amount of surveying and had lots of conversations last fall to understand what motivates Con attendance. Our understanding at this point is that the state of the D8 release is negatively impacting the Cons. There is not a lot we can do about that, except try and help get D8 out the door, and we're certainly doing more there than we ever have before. 

I want to stress one more time - though revenue was not performing to plan, it is growing. So there is lots of potential there for us. We had hoped to realize that potential faster, and staffed accordingly. Now we have to adjust that plan.

Tafkas’s picture

Thanks for sharing. As a supporting partner we are confident things will get better.

One remark: does the revenue issue explain why DrupalCon Barcelona ticket prices are +/- 25% higher than last year in Amsterdam? That would explain. However, the price raise came as a surprise to the drupalistas I am in contact with here in belgium. It strikes me there was no communication about the raised ticket prices. I wonder how the community will respond to that.

Pascal - www.xio.be/en

holly.ross.drupal’s picture

Hi Pascal - The prioce increase is really a function of the venue and meal costs. As the overall conference business has picked up, the prices have increased significantly, and we're just trying to keep up. In the short term, this is what we have to do. We're also looking at what we can do in the longer term to restructure the conference in a way that will both reduce our venue costs and possibly better meet the European community needs. We are definitely working hard to rethink what the folks in Europe want that is different than the US Con and how we can implement that. You'll absolutely see communications about that.

gbernier’s picture

Hey Holly & Team,

I really appreciate the open and honest sharing of the inner workings, both good and not so good at the DA. You have all been doing a great job on promoting Drupal, the community and the business around it. We wouldn't have the great success that we do if it wasn't for all your efforts.

Just wanted to let you know how much we appreciate it

Cheers,
Gene Bernier

holly.ross.drupal’s picture

Thanks Gene!  This is not an ideal situation, but the team here is committed to our mission and the community, and we all believe in the potential of the Association to grow and acheieve even more. It's the spport of folks like you that keep us going!

seantwalsh’s picture

Appreciate all that you and everyone at the DA is doing. Transparency is a huge part of building trust in the community and growing the association. I actually think it would be great if the DA went even further in this, possibly something akin to what Buffer does https://buffer.com/transparency.

Also, I think everyone who is using Drupal should join the association and I wonder how that revenue stream can be improved, so as to diversify income beyond cons, corporate sponsors, jobs, etc.

grantkruger’s picture

One conference I go to has a payment scale where they essentially have opt in rates that allow freelancers, small businesses, etc to pick a lower ticket price and then they allow those on expense accounts or who want to help them more to pick a higher price. Conversely they also have a very reduced student rate to encourage entry-level people to join the community. Maybe something like this could draw more contributions out of people? You could even grant automatic DA membership to individuals paying the higher price. It would be great if those of us who can could give more and for many, justifying a higher conference expense is easier than justifying the DA membership expense. Just a thought. A healthy DA is good for the entire community.

Condolences to those who lost their jobs.

jpw1116’s picture

Thank you for the post, Holly. Within its our values link, the About the Drupal Association page still shows the 2013 audited financials. It seems that you publish the new ones around this time each year.

holly.ross.drupal’s picture

We do. We are wrapping a review of our 2014 financials with out outside accounting firm now. When those are complete and have been reviewed and approved by the board, we will post them.

ellegonzalez’s picture

I really appreciate the open and honest sharing, holy been doing a great job on promoting Drupal as well as the community and the business around it. I actually think it would be great if you tell something about 2016 financial plan.

Thanks\

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richdadloc’s picture

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