How a Non-Profit Built Some Serious Excitement
(and initially quadrupled its assets)

Tom Loucks

In 1993, a staid, 73-year-old, non-profit society for geoscientists burst from the “re-starting” gate and quadrupled its assets during an eight-year growth spurt (and by 2020 the assets have almost doubled again). What were the circumstances and enabling factors?

The following note documents how an organization (1) focused on providing its members the unique products they seek and (2) sets forth the key success factors that came together fortuitously or by the coordinated efforts of a small cadre of volunteers – dedicated management and committee members – who rolled up their sleeves and shoved the bandwagon into high gear. Success bred success. As Treasurer, I happened to have presided over many of the activities, and the intent of drafting this note is to demonstrate how management skills acquired by a former geologist – retreaded with GSB skills – helped the organization realize its own success.

The Setting

In 1992, the “Society of Exploration Geologists” (“SEG” or the “Group”) was a conglomeration of entities that collectively published a renowned scientific journal and related publications and also organized geologic field trips, workshops, and scientific presentations. Facing its 75th anniversary, combined assets totaled about $3.3 million in securities. It operated out of several professors’ offices at universities in Connecticut, Illinois, and Texas, and would bring on a new Executive Director who would open the first dedicated office in Denver. All the officers were volunteers (and most had full-time jobs), much of the operations were run by numerous additional volunteers, and there was a small, part-time paid clerical staff dedicated to handling publications. The Society essentially lived hand to mouth, but it had managed to do so for close to 75 years.

Background

In 1920, a group of geologists with a collective interest in international mineral exploration would gather in Washington D.C. and decided to form an organization – The Society of Economic Geologists¹. At the time, 501-c corporations did not exist, and thus they formed a Society and eventually incorporated as a New York corporation². SEG members considered publishing their own scientific journal, but one already existed – the Bulletin of Economic Geology – which belonged to a different organization – The Economic Geology Publishing Company (“Pubco,” a Delaware corporation). Members of the two organizations had similar interests, and thus SEG adopted Pubco’s bulletin as its official publication.

Geologists are notoriously innovative and, at the very least, are known for reconstructing elaborate 3-dimensional geologic stories about the past after examining present day geologic features. SEG members took it one step further: they staged a hostile takeover and tried to acquire Pubco, even though neither was publicly traded. That effort failed (and led to some longstanding animosity, rancor, and suspicion), but somehow out of the ashes SEG members determined to create yet another entity, one to “distribute income in support of SEG programs” and to help students with grants for research expenses. Thus, SEG members founded the Society of Economic Geologists Foundation (“SEGF”) in 1966.​

Members of SEG and Pubco historically have come from three scientific backgrounds: academia (professors and students), government (e.g., U.S. geological survey, Canadian geological survey, and other state-sponsored surveys), and industry (predominantly mining company exploration geologists). To best serve the needs of these three disparate factions, the Society and its members typically participated in two major conferences per year: one in the fall that was organized by the Geological Society of America (“GSA”), where presentations and field trips served the more theoretical interests of academic and government geologists, and a second meeting in the spring, hosted by the Society of Mining Engineers (“SME”), which addressed the commercial and practical interests of the mineral exploration/mining crowd. In return for their organizing such conferences, SEG paid large fees to GSA and SME but made no surplus from its own contributions to the success of these conferences (excepting what it could earn from selling its publications at a convention booth). Yet, in addition to organizing entire sessions of SEG speakers with presentations on economic geology at either conference, SEG also organized some of the field trips and often provided keynote speakers for additional separate sessions which were always well attended. That SEG earned nothing in return for its high-demand sessions had not gone unnoticed by its members.

A new idea provided the initial catalyst for growth

Around 1990, one prominent SEG member and officer – Dick Nielsen³ – in fact proposed that SEG begin holding its own stand-alone conference so as to retain any conference surplus for itself. Little did the members realize what a successful driver this would become! Though initially Dick met with resistance and spent many months arguing the case with the SEG Council (its board of directors), Dick finally prevailed. SEG geared up to host its first stand-alone conference in Denver in 1993. This would take a lot of work and administrative oversight, and, in 1991, Dick asked me to serve both as SEG Conference Treasurer (thus alleviating the SEG’s volunteer Group treasurer from this additional burden) and as a member of the conference organizing committee.

The conference was a brilliant success and generated a surplus of over $125,000. Conference registration fees had more than offset expenses, and thus the surplus was largely comprised of corporate donations coming from conference fund raising efforts. The fund-raising efforts had been led by the then-President of the SEGF and myself, both of us having good industry connections. The two of us were both excited and pleased to see the interest from mining corporations in supporting this newest of SEG activities, an indication of support that has only grown further in the almost three decades since then.

A stand-alone office in Littleton, Colorado, sets the stage for growth

Following on the exceptional results of the ’93 conference, stars seriously aligned, providing a pivotal point and an opportune moment in the Society’s history to consolidate all of the administrative functions of the Society and the Foundation, as well as the accounting and treasurer’s functions of the Publishing Company, at the SEG office in Littleton. Several things came together rapidly to set the stage for growth:

• A year before the 1993 Conference, John Thoms had come on as the new Executive Director and, not wanting to direct SEG operations from his house, John opened SEG’s first dedicated office in Littleton, Colorado (a suburb of Denver). John had come out of the Anaconda Company but, following Anaconda’s acquisition by ARCO, had been plugged into a long-term corporate planning/management program at HQ in LA. John would bring this Fortune 500 corporate planning expertise to bear on day-to-day SEG operations.
• SEG Group’s volunteer Treasurer stepped down to focus on a new full-time job, creating a vacancy, and I was asked to become Treasurer of all SEG Group entities commencing in 1994. I also happened to reside in Denver. I was bringing GSB skills plus my own corporate planning experience from Newmont⁴ at HQ in NYC plus the Royal Gold⁵ (RGLD) turn-around experience (during the 1988-1992 period).
• Careful coordination would be required, as I would establish budgetary and financial plans and related control procedures for the “Littleton office,” understanding that the Society, the Foundation, and the Publishing Company were then separate corporations requiring separate books and reporting procedures, with a single staff providing administrative services for all.

Elements feeding the growth story

• Denver was home for many geologists, in particular through industry or the U.S. Geological Survey, so, by opening HQ in Denver, many committees could now meet in person;
• As Treasurer, I served as a member of the SEG Council, the SEG Foundation Board of Trustees, and the Publishing Company Board of Directors and served on their respective Executive Committees. As a key member of the Investment Committee, I could integrate budgeting needs and timing into the investment decisions. I also created the Group’s first Audit Committee
• In terms of hands-on management and immediate decisions, John and I divided the business – he would handle operations and tasks associated with the publications and membership, and I would handle outside commercial matters and anything affecting the treasury function. We also agreed to steer “operations” away from selling coffee cups and T-shirts and to focus on core operations⁶ such as publications, guided field trips, workshops.
• A token change drew incredible praise. In the two years prior to my becoming Treasurer, membership dues had been raised twice – a steep total of 19% – and the two increases had caused a fair amount of grumbling. At my first meeting and for every meeting for seven years thereafter, I announced that there would be no increase in dues – each time garnering a loud round of applause. At a meeting with a prominent geologist 19 years later, he reminded me of how much this gesture had meant to the membership.

Other elements of SEG’s evolution

During my term as Treasurer, other events occurred which would impact the future of SEG and bring in more capital or defray costs:

• In 1996, a member approached SEG with a gift of 5 shares of Berkshire Hathaway common stock with which he proposed to seed the acquisition of land for construction of an SEG headquarters building that ultimately could host SEG, Pubco, and the Foundation. Before accepting the gift, SEG first formed an ad hoc committee to determine if Denver should be the long-term headquarters for the Society and then, having determined that it should, SEG formed a Headquarters Building Committee that was responsible for design and construction of the building. I served on both of these committees, but perhaps my biggest contribution to the building was to suggest to the donor that we also needed to fund an endowment which would cover the future costs of operating and maintaining the building, such that the members would never see such costs coming out of their dues or being paid for from operations. The other obvious savings from this gift was that SEG would never again pay to lease office space. Then, additional gifts of BRK stock brought the total gift to $2,025,250 which would cover the cost of construction as well as funding the fund. Including the land purchase, this became a +$3 million, 4-year project.
• The second was the SEG Headquarters Staffing Committee, which was appointed in March of 1999 and charged with examining personnel, organizational and financial issues related to staffing of the new building and focusing on the search for a compensated Executive Director. Within 10 months the Committee completed its assigned tasks. Arising from the recommendations of the Committee was the 2000 appointment of the Society’s current Executive Director, Brian Hoal, yet another element to the story (see Footnote 7), and he is still there 20 years later.
• McKinstry: Meanwhile, before my term, Hugh and Elizabeth McKinstry announced the creation of the McKinstry fund in February 1992. A Harvard professor and longtime friend of SEG, Hugh and his wife, Elizabeth did the following. Following the death of Elizabeth in 1997, I worked with representatives of the Harris Trust Bank in Tucson, Arizona for a period of more than a year-and-a-half to bring in the funds to which SEGF was entitled as the principal beneficiary under the terms of the Hugh Exton and Elizabeth McKinstry Trust. Altogether, the Foundation received a total of $1.39 million from the Trust. Today, the McKinstry Fund has a market value in excess of $1.8 million and provides annual research grants ($90,000 in 2005 alone) to economic geology students worldwide.
• SEGCF: During my tenure, I was approached by well-known Canadian member who pointed out that Canadians comprised the largest faction of non-U.S. members but could not enjoy a tax deduction for donations made to the Society; he suggested that I look into creating a Canadian foundation, which I did. Working with Canadian SEG members, attorneys, and government officials, as well as with both SEG’s U.S. auditor and its attorney – in a drawn-out process lasting more than three years – we were able to establish the SEG Canada Foundation (“SEGCF”). The SEG Canada Foundation qualifies as a tax-exempt, non-profit organization under Canadian law and Revenue Canada regulations. While the SEGCF’s financial assets are necessarily separate from SEG Group assets, the ability of SEGCF to make research grants to Canadian geoscientists offsets the need for SEGF (USA) to do so, thereby effectively stretching the capabilities of SEG’s stateside endowments to support researchers worldwide (for instance, in 2019 the SEGCF provided $US54,000 in grants to Canadian researchers).
• Once we realized what a financial driver the stand-alone conferences could be, not to mention how informative and exciting for the participants, SEG held one every other year, with every other conference being held overseas.
• For seven of the eight years of this story, the stock market had been on an upward roll (and had started its climb even 4 years earlier). With our efforts on controlling costs of operations, any donations from members or industry went directly into investment portfolios, feeding the growth.
• We wanted to make full use of the Group’s new physical location in Denver by moving the legal domicile for each of the three organizations from New York (for the Society) and Delaware (for the Foundation and the Publishing Company) to Colorado, and I was appointed to oversee the process. The move from New York to Colorado was especially challenging because of arcane New York regulations governing non-profit organizations. It was critical that all this legal maneuvering be done carefully to fully preserve the tax-exempt status of the three entities when re-domiciled in Colorado.
• Once the entities were registered in Colorado, we were finally able to effect the consolidation of Pubco into SEG: Pubco would become the publishing arm of SEG and much of its previous corporate overhead expenses were permanently eliminated. I relied heavily on SEG staff for documenting the financial considerations in the documents necessary for the merger of the Publishing Company and SEG. The merger was successfully completed at year-end 2001.

Documenting the Growth

The Group’s financial status shifted tectonically following the1993 stand-alone conference, as all three entities experienced unprecedented growth over the coming eight years. The Group’s international reach expanded dramatically as membership increased 22% from 2,960 at year-end 1994 to over 3,600 at year-end 2001. During the same period, total financial assets for all three entities increased 140% from $4.1 to $9.8 million. Including the new headquarters building valued at over $3.0 million, assets quadrupled.

Table 1 (below) illustrates some key parameters for measuring SEG Group’s growth from 1992 (pre-1993 conference) to 2001.

Data for 2019 are included to demonstrate the Group’s continued success, demonstrating that the plan was indeed sustainable and to the point where none of the personnel who made it happen are there today⁷, yet the entity keeps right on growing, from $3.3 million in assets in 1992, to $13.8 million during the time span of this anecdote, and on to $25 million today.

Lessons

From where does such growth emanate? The products that generate the sales sell themselves – from books to workshops and conferences, and to achieve such quality takes pride and dedication. Those drivers are the engine, but behind it all, it takes management and direction. For my own role in this success story, and setting aside my own prior technical background as a geologist, so very much of what I absorbed at GSB came to bear, from the basic tools of accounting (Katharine McGahran – “but now there’s additional information”), and how many times have I invoked Stephen Brandt’s “What would you do if you owned it?” Certainly, the Case Method of teaching served as a wake-up call in itself, training me for one dilemma after another. How to think about problems, from Robert Burgelman’s courses in strategic planning to David Jemison’s course on actually managing the implementation of strategies. A favorite course for many of us – Jack McDonald’s course in investment management – played a role in that early on our investment committee handled the portfolio in-house, and our relative non-diversification scored us many bonuses before we turned it over to professional money managers.

Beneath it all is yet another story – that of human resources. We started with no staff in Denver, hired at first two and now 10. There is virtually NO staff turnover – the staff is appropriately paid, and we eventually could offer health benefits and a retirement plan. The staff is dedicated, devoted, and happy.

In the end, it was a combination of focus and execution: What are the issues, What is the plan, and who will put both oars in the water to get it done?

Acknowledgements

Beyond the hard work of volunteers who helped this story happen, years of pro bono commercial advice came from SEG’s longstanding auditor (Chuck Ziegler) and Denver attorney Don O’Connor (with acknowledgements to his firm of Davis, Graham, & Stubbs). Any errors with the data herein are mine.

References

SEG History volume, 75 Years of Progress, 1920-1995, published by SEG, 1997, 128p.
SEG Treasurer’s reports, 1994-2001, and SEG Newsletters (1993, 2002, 2019 and 2020)
SEG Council minutes as reported in SEG Newsletter, January 2020.