Ray Morris had been in his new position as chief operating officer of SAE International for barely a month when he was attending one of the organization’s major meetings in Seattle on Sept. 11, 2001.
The future of SAE International, a membership organization for engineers across a variety of transportation industries, looked as bright that morning as the blue skies over New York City, Washington, D.C., and Shanksville, Pa., until terrorists turned aircraft into weapons and destroyed any illusions we may have harbored of being insulated from enemies bent on doing us harm.
“That had a huge impact on us for about a year-and-a-half,” says Morris, a 30-year veteran of nonprofit SAE International.
For an organization that relies on the mobility of its 85,000 members and their willingness to travel to the meetings, conferences and exhibits that it sponsors, and that counts on those events for a large chunk of its revenue, the months following the worst terrorist attacks ever on U.S. soil proved to be lean ones for SAE International.
The attacks had a debilitating effect on the industries close to SAE International. Automobile companies’ plans for development and production stalled in the uncertainty of a teetering economy, and their suppliers put their own plans on hold to see how customers would respond. The aerospace industry, in the face of dwindling air travel, put some of its development plans on hold. The heavy equipment industry braced for cutbacks in construction and infrastructure improvements.
Investment portfolios of nonprofits such as SAE International shrunk in value as the stock market faltered. Revenue dropped and net assets fell into the red. SAE International canceled six major events it had scheduled for the balance of 2001. By the following April, it had completed a painful downsizing that pared the staff of the Warrendale organization from 400 to 250.
SAE International has since bounced back, and with the pain of reorganization behind it, Morris is once again optimistic about its future. Morris, who spends more than half of his time traveling on SAE International business, says the organization is expanding its global presence and shifting its focus to keep up with industry changes.
While there is a shift globally in the industries that it serves with its continuing education and standards writing services, there are new opportunities emerging in North America as well.
An ‘aha’ moment
While the actions taken in response to the terrorist attacks were critical for SAE International’s survival, the organization has initiated several moves in recent years that have bolstered its performance and kept it competitive by offering services and support that give members real benefits they can use on the job.
The need to offer tangible value was driven home to Morris in a meeting with a major aircraft industry executive several years ago.
“He came out of his office and he said, ‘If you can’t tell me how to get planes out the door faster, I don’t have time for you,'”says Morris.
“That was kind of an ‘aha,’ that this is the way it is with every executive,” says Morris. “They don’t want to be bothered with SAE, they don’t want their people taking time off to do SAE work, they don’t want them to go to meetings unless we’re delivering value.”
The encounter emphasized the notion that businesses have grown much too cost-conscious to support organizations simply as an exercise in altruism. Even organizations such as the 100-year-old SAE International, with origins in the early days of the automobile industry and members who have included American transportation pioneers Henry Ford, Orville Wright and Glenn Curtis, serve little purpose if they can’t offer some tangible, practical benefits for their members. Unless they can provide bang for the buck, nonprofits aren’t going to grow, let alone survive.
SAE International hasn’t stood still over the last century; far from it, the organization that was founded in 1905 as the Society of Automobile Engineers has grown and changed to meet the demands of new industries, globalization and competitive challenges from for-profit entities as well as from other professional and technical organizations. Because of its founding name, SAE International is most often associated with auto industry engineers. Morris points out, however, that it serves engineer members in the aerospace and commercial/heavy duty vehicles segments as well by providing continuing education and industry standards for everything from lubricants to fasteners and spark plugs.
Of the 7,500 active standards that SAE International has established, 6,500 apply to the aerospace industry.
Nonprofit, not noncompetitive
The scope of its services and programs and their reach puts SAE International directly in the crosshairs of other organizations, especially for-profit entities that have an interest in supplying some of the same products and services to the mobility industry and its engineering professionals.
“I don’t see myself competing with the American Society of Mechanical Engineers, but I see myself being competitive with Automotive News and Ward’s AutoWorld, people like that,” says Morris.
SAE International publishes three magazines for its principal membership segments. Morris notes that the impact and size of its annual congress, which attracts about 1,200 companies, and a yearly event in Detroit that draws 40,000 people, are not lost on other publishers and businesses.
“I guarantee you every individual magazine that serves the industry and every entrepreneur there sees dollars,” says Morris. “The real competitors, for the most part, are for-profit businesses.”
Whatever model fits
SAE International is organized into more than 100 sections, groups of engineering professionals based in cities around the globe and tied directly to the parent organization. A second form of organization, affiliate groups, is based in Brazil, India and the United Kingdom, the last two established in just the past two years.
Morris likens the relationship with the affiliates in those nations as similar to a franchise arrangement. The affiliates can set dues structures, for instance, to meet the needs of engineers in their respective countries, thereby lowering the barriers to membership. This allows SAE International to establish a presence in those markets and offer its array of educational and consulting programs.
In India, for example, where SAE International has had an affiliate for two years, the potential market is huge. In 2004, automobile production in India exceeded 1 million units for the first time. Moreover, India graduates a large number of engineers each year and has a strong technology research base. And with a large, low-wage work force, its manufacturing activity undoubtedly will grow substantially.
SAE International pours a large portion of its development money into China, the world’s fastest-growing market and one where the domestic auto manufacturing industry is surging. About two-and-a-half years ago, says Morris, SAE International entered China to sell its publications, seminars and exhibit programs to engineers in the country, hoping that membership in SAE International would follow. But it found itself vying with China’s state-sponsored organization for engineers, a battle it couldn’t seem t
o
win.
“We were always bumping heads with them,” says Morris.
As an alternative strategy, Morris opted to partner with China’s engineers organization to jointly offer services and programs. That tack has been much more successful. SAE International’s subscriptions for its three magazines have gone from a few hundred to more than 8,000. And next month, the two organizations will team up to put on an automotive electronics program in Shanghai.
The bottom line is that SAE International uses a method that will work in individual circumstances to reach its constituency with its services rather than to simply gobble up membership.
“Our goal isn’t to go out and take over societies,” says Morris. “It’s to serve individual engineers, so whatever model fits is what we do there.”
A shift away from the Big Three
Morris says SAE International is putting more emphasis on what the industry refers to as the “new North American domestics,” foreign manufacturers that have established large operations in the United States, Canada and Mexico. The Big Three, GM, Ford and DaimlerChrysler, won’t disappear, says Morris, but their market share has been eroded, while that of makers including Toyota, Nissan, Honda, BMW, Hyundai and Honda has increased.
Engineers for off-shore automakers have typically viewed the engineering societies in their native countries as the ones that should serve them. However, as the nature of the auto industry in the United States has changed, so, too, has the view of engineers employed by foreign companies. The foreign companies have invested heavily in plants in the United States — Toyota has eight plants here — and have transformed their operations from essentially assembly plants where major components are imported to build vehicles, to full-fledged manufacturing efforts, where most parts are built or sourced domestically.
Honda, for instance, plans to build a $100 million plant to make automatic transmissions in Georgia, part of its $270 million investment in power train manufacturing in the United States. With this more integrated manufacturing process have come engineering teams based within the domestic operations, opening up opportunities for SAE to offer its programs to engineers with foreign-based automakers. SAE International’s largest contract for in-house seminars is for the 700 engineers at Honda’s plant in Marysville, Ohio.
Morris continues to be optimistic about SAE International’s future, and for good reason. It surpassed its revenue and operating margin goals in 2004 by a substantial amount, and initiatives designed to expand its reach internationally and from a services perspective are strengthening the organization.
With advances in electronics, the need to develop new power plants and improve existing ones, and the demand for cleaner and more efficient vehicles of all kinds, Morris expects that the need for services like the ones SAE International delivers are only going to increase.
Says Morris, “This is an exciting time for all the industries we serve because of all the new technologies that are out there.”
How to reach: SAE International, www.sae.org
