Saturday, August 31, 2013

One more article

I wrote one last article on church finances and it was highlighted on Real clear religion.  You can read it here. I high ranking church official dealing with temporal affairs confirmed to me that tithing revenue had flat lined while the demand on tithing continues to increase.  This is certainly no surprise given the shape of the global economy.  Needles to say it was obvious that the church could save hundreds of millions of dollars annually in low hanging fruit (see previous post on church education reform).  I was wondering why the church hadn't taken advantage of these easy savings when it hit me, God is a Keynesian!  I hope you enjoy the article!

Wednesday, August 28, 2013

A great summer

Today at work there is an opening reception which officially signals the end of summer and it has been a great one. Here are some highlights of the summer with some fun summer pictures:
  • Trip to Norway for a conference
  • Visit from Lynne, Mom, and Dad.  We especially loved the visit to Padise and Keila
  • Youth conference in Latvia
  • A nice trip to the Helsinki temple
  • Trip to T├Árva to visit Maris' family
  • Great weather. This was one of the few summers where there was enough sun and warm weather! A good year to stay in Estonia
  • The new trains finally began taking passengers after a 6 month testing period
  • Watching all the Harry Potter movies for the first time
  • Watching season 1 of Star Trek the Next Generation
  • Getting excited for a new baby girl! So far so good.  Maris has done a great job, she'll be a wonderful mom.
  • New grocery store opened right across the street from us
  • Lot's of reading
  • Lot's of getting ready for the new semester.  I'm excited for my courses and for my students.
  • A nice walk through Keila's walking paths in the forest.
  • Visits from friends.
  • Working out at the fitness center.
  • Going out to the movies

 A really interesting thing happens in Keila, towards the end of the summer and in the Fall hundreds of Seagulls come and take over.  This is the building across the street, dozens of them just hang out every single day.  Sometimes they are super noisy.

 What is normally a beautiful blue roof is now somewhat white.

 There are also giant slugs in Keila!!  When it rains by the bushes you can see them.  This one is almost 6 inches (10-11 cm) long.  We have seen even bigger ones!

 We went for a hike in the forest, it was beautiful!


 Keila's walking paths which double as cross country skiing paths in the winter time.

 The new store that opened up right across the street, we like it!

Our friend Katre came to visit us in Keila!  It had been a few years since we had seen her, thanks for coming!  As you can tell from the picture sun tanning was not one of my summer activities!

Now it is off to work!

Saturday, August 24, 2013

The real deal

This will be the last post on LDS church finances.  I am very tempted to start up a new blog that would deal exclusively with LDS church finances.  I feel that this is a subject that interests many and is a subject that needs the discussion and attention.  The last few posts were much more successful than I ever could have imagined.  This month set a record for most views and the blog post on mega-projects was even highlighted on realclearreligion.com.  You can see it here. I enjoyed the comments that were written both there and on this blog.  There is much more to discuss and blog about regarding church finances.  Some topics that need discussion are the role church investments and businesses (not the expenditures of tithing) play in fulfilling the mission of the church.  (Why does the church own a billion dollar ranch in Florida?).  The impact of Deseret Industries and LDS employment services.  The impact of the Perpetual Education Fund on Tithing revenue, capitalism and Mormonism, and so much more.  A full time blog would take a lot of time and I have many activities in the upcoming year.  For now the previous posts will have to do.

To conclude this series of blog entries I wanted to share two thoughts I had the other day.  I am writing this blog on my way back home from the Helsinki temple.  There I felt the confirmation of two principles that I have felt before numerous times.  First, that temple covenants are very real.  God is a God of love and he is waiting for us to come back to him in heaven.  Temple covenants help us become better people and help us stay on the path that leads us back to him.  Second, the leaders of the LDS church are true messengers from God. I have seen this in regards to church finances as well.  The Perpetual Education Fund and the decision to build many smaller temples are just some examples.  This doesn't mean that everything is perfect all the time, as previous blog posts have highlighted this is an organization that has issues just like very other.  I now better understand certain phrases such as "the church is true, not its people" and "the gospel is true, not the church".  In short I wanted to state that my experiences have shown that the LDS church really is the Church of Jesus Christ, it's the real deal.

Tuesday, August 20, 2013

LDS church bureaucracy- starve the beast



As an active member of the Church of Jesus Christ of Latter Day Saints, I believe that this church is led by revelation and that the president of this church is also a prophet of God.  This has significant consequences for not only members of the church, but for the entire world.  As a result of this I have come to know that the church can do miracles in helping people come to Christ.  For a good read on the relationship between the church and spiritual progression check out this conference talk by Elder Hallstrom.  Regarding temporal affairs, I have come to know that an enormous bureaucracy exists within the church that is responsible for inefficient use of tithing funds. 

The LDS church employs armies of people who work in all the different sectors that are necessary, church education, translation, printing, IT, accounting, management, facility management and construction. Having a bureaucracy is certainly not bad, it is necessary.  These good people who work in these capacities enable the church to function.  With all bureaucracies there can be a tendency for waste and inefficiency, unfortunately this is the case with the church bureaucracy as well.   Problems have occurred because of several reasons.  First, there is no competition for services, the church is a monopoly.  Second, there is limited accountability which is a result of a monopoly and a lack of transparency.

For example, let’s take a look at how the church prints and distributes church materials for Europe and parts of the East-Europe areas.  There is a regional printing center that prints and then distributes material to units throughout Europe.  This represents an enormous cost in terms of printing, but especially shipping.  One would think that there might be an element of economies of scale here, if you are going to print Liahonas print them all at the same place just change the language a few times in the computer and ship them out.  Unfortunately this is not the case.  The center has been plagued for years with mismanagement and mistakes.  Often units in the Baltic Mission (and throughout Europe) have had multiple problems with getting the correct orders.  A box of 20 French seminary manuals sent to Estonia, boxes of Lithuanian copies of the Book of Mormon sent to Estonia and so on.  This presents a problem on two fronts.  First, it is a large waste of resources.  We took the box of seminary manuals and threw them away because it was cheaper than shipping them back to Germany.  Second, it presents difficulties to the units who do not get the proper materials. 

Along with the problems of centralized production is centralized planning.  In Estonia we recently received Doctrine and Covenants in Estonian.  This has been a great blessing for the members here.  We were very excited to study the D&C and church history this year in Sunday school.  I was aware that the teacher’s manual had already been translated.  When the yearly shipments arrived there were no manuals.  I inquired what the problem was and the answer was “what manuals?”  According to their records no such manuals existed.  After further inquiry (this time from the translation department) it was confirmed that after the church had paid for the manual to be translated and edited they decided to cancel the printing.  Apparently there had been some restructuring and some projects were put on hold.  If the church in Estonia was a business we would have stopped buying from the German printing press years ago.  If the German printing center was a business they would have gone bankrupt years ago. 

Another example is landscaping at the Twin Falls temple and adjoining stake center, a church land scape architect was brought in and the result was a sprinkler system that wastes a significant amount of water (no regard for a local need to conserve water), and non-local plants that had a harder time getting going in a foreign environment. 

Similar examples could be given in terms of translation, construction, and facility management.  As members in Estonia we constantly wonder why audit and financial texts are being translated at the expense of handbooks, manuals, and other needed spiritual materials (only one clerk does not speak English at a high level).  When there are issues of extreme incompetence and negligence people can be fired, but in practice employees have solid job security.  Competition for jobs is also low as most posts require that members be temple worthy, which narrows the field of qualified candidates (think of the thousands of non-member professionals who could be working for the church). 

Recently I brought up the printing issue with a high ranking church official for temporal affairs and his response was that the church was getting away from printing all together, the Come Follow Me youth curriculum being a prime example.  We can bring out two positives from this example.  First, it is commendable that the church is involved in restructuring, budget slashing, and canceling projects (starving the beast).  This keeps costs in check.  Second, it is good to see that the church is innovative and using technology to cut costs.  However, these positives also highlight a larger problem that remains unsolved.  The church is only willing to look for improvements within their bureaucratic system.  This does not increase accountability, transparency, or competition.  While the balance sheet might be positive the product or service will always be lacking.

What should the church do to?  First, the church needs to stop doing everything itself.  In spiritual affairs the centralized monopoly style works well.  There is one faith and one baptism.  In temporal affairs this does not work as well, as the printing case demonstrated.  The church should apply principles of New Public Management to increase efficiency.  This means establishing partnerships with the private sector and outsourcing services to for profit entities.  The church has done a terrible job at printing and distributing supplies, but there are many private printing businesses that do a fine job.  The church could find a printing press in Latvia, email them some PDF documents and have them print them out and cargo bus them to the units in the Baltic Mission. This would save on delivery and printing costs, and decrease the mistakes and waste.  A private printing company can’t afford to mess up orders time after time. This would increase accountability.  It is possible that the paper type might be slightly different than the paper type used in Utah, but the words would be the same.  This same process would be beneficial in many sectors, not just printing.

Second, the church needs to localize the decision making process regarding temporal affairs.  Local leaders have a better idea of the needs, laws, and customs.  When local leaders have more control over decision making (such as what to translate, what to print, how to construct facilities) accountability is greater and the product is better. 

In the early days of the church a centralized system may have worked very well.  Today with more members outside of the US than in the US it is time to make some changes.  I suggest reorganizing the presiding bishopric into a council of the twelve presiding bishops.  The president of the council of the twelve presiding bishops would be responsible for the US and Canada, and Church investments.  The remaining 11 presiding bishops would then be responsible for each non North America area (currently 15 which could easily be reduced to 11). They would have full jurisdiction, with no Salt Lake city approval needed for temporal affairs in their area.  They would report only to the Area presidency (or in the case of North America the First Presidency).  Standard operating procedures would also be rewritten (area based standard operating procedures) to include local members, as areas can still be rather large, in decision making processes. The church should also open up competition for many positions to people who are not members of the church.  As previously stated, the use of private companies for products and services should be encouraged. 

Bureaucracies are a way of life and should not be seen as something negative or bad.  However, as this post has highlighted it is easy for certain problems to arise in bureaucracies.  Currently there are significant problems in the church that have resulted in waste, poor decisions, and bad products.  This unfortunate situation could be improved if accountability, competition, and a localization of the decision making process were introduced into church bureaucracy. Maybe we don't need to starve the beast, maybe the beast just needs a better diet.


Saturday, August 17, 2013

The future of LDS mega-projects




One of the Europe East area goals is to bring the LDS church out of obscurity.  This is a goal that I feel the LDS church as a whole has as well.  Mega-projects can play a vital role in bringing the church out of obscurity in addition to the practical benefit of the project itself.  Mitt Romney gave some practical marketing advice in his book Turnaround.  He said that if you have 12 roses you don’t split them up and put them in different rooms, you put them all together in a single large bouquet to gain attention and create a wow factor.  This can be true of mega-projects as well. 

Mega-projects have been important to the church for ages.  Some may tend to think that they were only a result of President Hinckley’s visionary presidency (BYU-Idaho expansion, Conference Center, City Creek, mass construction of temples), this is not the case.  Mega-projects were done before and after President Hinckley's presidency (For example the BYU Jerusalem center and the I’m a Mormon campaign).  From this list we can note several interesting aspects about mega-projects.  First, they come at an extremely high cost, second, they greatly vary in type but all produce a wow effect that either better the church’s brand image or increases excitement and visibility towards the church.  The geographical and demographical stresses on the church budget will make it harder for the church to fund mega-projects.  The church will still need to produce mega-projects in the future as they cannot only rely on members alone to bring the church out of obscurity.  The recent success of members such as Mitt Romney, Jon Huntsman, JimmerFredette, Stephenie Myers, Jabari Parker,  David Archuleta, and Bryce Harper should not be seen as the norm but a nice surprise that hopefully will repeat itself in the future. True, gospel principles coupled with blessings from the Lord tend to make members successful, but this certainly does not guarantee a high number of global elite's like there are right now.  

What does this mean for LDS mega-projects? It means that mega-projects are going to have to be cost-effective either in the short term (low level of investment) or in the long term (high investment, but high level of return).  It will be tricky to match church priorities with these levels of constraints.  So here is a prediction of what we can expect to see in the future:

1. Less spiritually based mega-projects.  Most likely the church will decide not to build a mega building that is used solely for spiritual reasons (like the 240 million USD conference center).  These buildings require a high level of investment, significant costs to maintain and do not produce any revenue.  Currently the church has built several wonderful buildings and should be able to get by without building any more (Conference center in 2000, Church history library in 2009 for example).  This also means a steady but slow building of temples and chapels throughout the world.  For the upcoming year the presiding bishopric will approve no exceptions in construction.  This means that branches and wards will get what they qualify for but nothing else, no matter the circumstances.  The same frugality will most likely be applied when it comes to mega-projects.

2. More (but smaller) revenue based mega-projects.  The City-Creek mall is a good example of this.  While the church is not likely to invest on this scale (2 billion USD) again, similar projects could appear.  Many have asked why the LDS church would spend 2 billion USD building a luxury mall.  This is a good question but there is an answer.  First it is an investment, meaning that most of the money will be recouped at some point, it is not as if the LDS church just wrote off 2 billion USD.  Second, it is an investment to preserve down town Salt Lake.  This is a classic "invest in your core" strategy.  Temple Square will be and will always be the headquarters of the church (insert Zion in Missouri joke here).  The church could not stand by and let Salt Lake turn into Detroit with people fleeing to the suburbs with empty businesses and rising crime rates replacing them.  Since the completion of city creek, investment in down town has increased by other private entities (directly because of city creek).  Taking this into consideration, the church got a pretty good deal for its 2 billion USD.  The mall also provided the wow effect that mega-projects need to be successful.  For example see these positive (but honest) news articles in the New York Times about the project here, here, here, and here.  The project certainly cost more than church developers wanted, but in the long run it will certainly be worth the investment. 

What principles does the LDS church need to promote with moderate sized revenue producing mega-projects?  I will recommend three with three concurring mega-project proposals: family togetherness, bringing the church out of obscurity, and a continued investment in Salt Lake City. The church is a church for families.  Despite efforts of making everybody feel welcome the church (and corresponding gospel principles) is built around the principle of families being together forever.  In the busy digital age families spend less time than ever together, which will have negative consequences for church membership down the road in terms of divorce, activity rates and so on.  Despite the "Mormon moment" most people do not know much about the church.  This will remain true for decades to come.  The "I am a Mormon campaign" is a good start, but it is expensive ad campaign that cannot be sustained forever.  Investing in Salt Lake is a good idea. As Salt Lake slowly transforms into a world class city it will bring even more attention to the church.  The City Creek Center should be seen as a beginning, not the end of this project.  For example Salt Lake City is considering bidding for the Olympics again in 2026.  This would not have happened if down town Salt Lake had continued to deteriorate

Three medium sized mega-projects (in terms of investment) that would bring in revenue and promote the above mentioned principels:
1. BYU-England. I have written a detailed proposal about this project in the past, here will be a brief overview.  Needless to say this type of project would be best suited for England due to language and cultural reasons.  The future of the church in Europe will be based on the YSA. See Elder Perry's remarks for details. BYU-England would provide LDS youth in Europe with an affordable education (currently there are problems with high tuition rates in the UK) and enable them to socialize with other YSA which despite the creation of YSA centers is limited in many places in Europe.  A BYU experience for the YSA in Europe would reduce the demands on BYU in the US, and strengthen the testimonies of thousands in Europe.  It would most likely increase the percentage of YSA serving missions and marrying in the temple.  This is something that BYU-Idaho's Pathway program simply cannot duplicate (both in terms of quality of education and a social experience).  You are probably thinking that this sounds like a huge investment not a medium investment and one that will generate no revenue, this isn't the case.

A BYU-England would not be the typical BYU style large campus university.  It would be a European style metropolitan university where university buildings are integrated into the city.  This greatly reduces the cost of starting up a university as the majority of infrastructure is already there and is maintained by the city, not the university.  The church's philosophy of isolating college kids from the world to provide them with a spiritually safe environment (the only possible reason to choose Rexburg Idaho as a location of one of the church universities) is outdated in a digital world .  Spiritual safety is a individual choice to stand in holy places, this choice is needed in Rexburg and Liverpool just the same.  A church university, then is about creating real and lasting social networks that are difficult (though possible) to do via Facebook.  The university would also be able to offer a quality education that is recognized in Europe (something that Pathway will never be able to do, try to get a job in Russia by telling your employer that you have an online degree from BYU-Idaho).  The startup would be made easier by piggy backing off BYU for course content, text books, and even integrating independent study courses as part of the curriculum.  This would reduce costs enormously and make the start up manageable.  

Tuition payments would be modest and would not cover the operational costs (as is the case with BYU, BYU-Idaho, and BYU-Hawaii).  The real revenue would be from the increase in activation rates among YSA and the increase in temple marriages (more children and more real growth for the church).  This would represent a significant increase in the number of tithing payers and in total tithing revenue, especially considering the high salaries people have in Europe compared to other places in the world.  Despite the enormous amount of resources the church pours into Europe, church growth remains stagnant (for example, 14 temples built or announced, in Europe for only 500,000 members, compared to 8 temples built or announced in Brazil with 1.2 million members). The I'm a Mormon campaign in London is a good step in the right direction, but this will provide only short term results.  Europe would benefit from a mega-project and BYU-England should be the choice.

2. Waters of Mormon.  An indoor Book of Mormon themed water park (think Lazy Laban River, Bountiful tide pool, Baptism splash, and so on).  If successful it could be duplicated into a chain of several water parks in the Western US.  This would promote family togetherness (special family night discounts, and family ticket pricing).  This would be a project doable in terms of investment and revenue as ticket sales would cover the operational costs.  A world class water park would attract many which would then introduce them to the Book of Mormon.  This would also create a splash in the media as people would wonder "why is the LDS church building a water park?" Just as they wondered "Why is the LDS church spending 2 billion on a luxury mall".  Locations should be in a large city locations with a high percentage of LDS members but also many who are not.  Possibilities: Salt Lake, Pheonix/Mesa area, Las Vegas, Boise, Denver, Portland, Calgary. 

3a. The Grand Nephite.  A semi-luxury hotel for Salt Lake City.  With the increase in investment and growth in Salt Lake City, it can accommodate another hotel.  The hotel would be another Book of Mormon/Aztek themed hotel that would be cheap enough for families to come but also nice enough for business travelers.  This project could be problematic as it would be a direct competition for Bill Marriott's hotels, but it would also enable the church to diversify its investment portfolio which currently is over reliant on farm land.  

3.b If the church really wanted to think big, it could combine the Grand Nephite and the Waters of Mormon into a single large LDS family resort center pattered after the Great Wolf Lodge. Locations in hotter places would obviously have an outdoor water park connected to the hotel.  This might seem a little unreal, but this would not be the first amusement park owned by the church.  The Polynesian Cultural Center surely sounded just as silly before its construction.  It has gone on to be a resounding success. 

Church mega-projects have played a significant role in bringing the church out of obscurity (necessary to take the gospel to the whole world).  Financial restraints will impact the future of mega-projects, but as this blog post  has demonstrated, it certainly will not be the end.  I fully expect to see more medium sized mega-projects that will generate revenue.  I can't wait to be wowed with what the church thinks up next. 

Friday, August 16, 2013

Online education reform and LDS church education



Recent technological advances are finally making an impact in higher education.  Distance learning and massive online open courses (MOOC) are only a few of many examples.   BYU’s online courses and BYU-Idaho’s semi-online pathway program demonstrate that the LDS church’s universities are well positioned to adapt to the coming changes.  In contrast, no such changes can be seen in the LDS Church Education System, namely seminary and institute.  Seminary is a daily religious educational program for kids aged 14-18 and institute is a religious educational program for those 18-30 usually affiliated with a university.  The LDS church should use the changes in technology to reform the church education program by augmenting contact in the classroom with online material and learning centers. This would increase the quality of church education and save the church millions of dollars which could then be reinvested into various church education programs. But, how would a revised program play out?
Seminary and Institute would meet once a week in the classroom while continuing to study daily via online learning centers. HD video content and the spread of portable tablets makes access to online learning tools more effective than ever.  Students would be able to view recorded lectures and testimonials from super star speakers such as Randy Bott and John Bytheway on a daily basis.  Online learning centers would maintain active participation in gospel learning via online reading quizzes, online forums and chats, and perhaps even videoconferencing.  Gospel learning has always been based on gaining and strengthening a testimony.  This will always be a personal endeavor that will not be harmed due to a reduction of classroom time.  Meeting once a week will still give students the social benefits of seminary and institute while enabling students to spend more time at home with their families.
Currently the LDS church has both paid and unpaid teachers.  Full time teachers are paid and part time (usually early morning teachers) are volunteers (its their church calling).  In most places in the world teachers are not paid, but in the Mormon corridor (Idaho, Utah, Arizona) there are number of paid teachers.  By shifting the bulk of the workload to online materials, the church would be able to replace paid seminary and institute teachers with part time called (free) members.  While the church would need to invest heavily to get this system off the ground the overall result would be millions in saved dollars annually mostly from personnel costs. For example, 1,000 paid teachers at 35,000-40,000 USD a year would equal 35-40 million USD in annual savings. With additional savings from benefits (health care, 401K plans), and from construction costs (smaller and fewer seminary buildings) the church would save over 50 million USD annually.  

This reform would be in line with LDS principles of having non-paid clergy. Technically, seminary and institute teachers are not clergy, but they are paid to teach the gospel. Their role is similar to what missionaries and Sunday school teachers do for free. Many seminary and institute teachers are already doing this for free as well.  Their replacement would be made easier by a phased in approach to the online reform.  Some could be retrained and rehired as administrators, coordinators, and developers for the newly revamped system. Technology is changing education (for the better) the church needs to take advantage of this both to improve the quality of church education and to be more efficient with church funds.  

Wednesday, August 14, 2013

LDS church finances

The financial situation of the church has always been interesting for me.  Maybe it is a spillover from my interest in football.  Since the NFL has the salary cap my interest in the 49ers also has me interested in their finances.  Poor cap management means a bad team.  The LDS church doesn't have a hard salary cap, but it does have a soft cap, tithing revenue.  They can certainly spend more than they get for a little while but to be sustainable the church needs to spend what the receive.  The church also has other business branches, you can read an interesting article here by Businessweek. Many have criticized the article (read this piece by the Deseret News).  I thought the article was excellent, it certainly did not do a good job grasping the goal of the church but I don't think that was the article's point. I also agree with the implied criticism that the church could have given more towards humanitarian projects. While the cover page and images were a bit tasteless I understand that the media needs to sell. To be honest when a church builds a 2 billion dollar luxury shopping mall, it is only inviting these types of media stories.  Given the church's reluctance to open up about finances the story was enlightening and welcome.  But the interesting investments that the church has (cattle ranch for example) are insignificant in terms of church financing.  They generate huge amounts of revenue, but most of that goes to maintaining the businesses. The profits are usually reinvested in the businesses or used in other business ventures such as the city creek project.  While there is a legal distinction between business revenue and profit revenue to me it is still the church's money.  The biggest reason why these interesting investments aren't that important is because of the difference in revenue.  The church is still heavily reliant on tithing as its main source of revenue, this model will continue for the foreseeable future.  The vast majority of yearly revenue for the church is tithing, not investment income.

Currently tithing revenue has flat-lined due to demographic and geographical factors both inside and outside of the US.  As baby boomers retire their income decreases significantly.  Families are having fewer kids and younger people are taking longer to get going in their careers.  This coupled with high unemployment for the last five years or so (and likely the next five years or so) all have a negative impact on tithing revenue.   Geographically more and more members are joining from poorer places in the world (Africa for example) and even in the rich parts of the world, like Western Europe, it is immigrants who are more likely to join who tend to be relatively poor.  This also has negative consequences for tithing revenue. The weak global economy shows no signs of roaring back to life anytime soon.  While the perpetual education fund has done some to increase the earning potential of some members, its impact is not enough to offset major demographic and geographic factors.

Meanwhile demands on tithing revenue continue to increase.  New missions need new mission homes, rapid church expansion in many remote areas means more chapels and temples that need to be built.  Run away costs in higher education make subsidies at BYU, BYU-Idaho, and BYU-Hawaii go up as well.  The spreading of the gospel to every nation and tongue also means an increase in spending on translation and publishing.  It is not a surprise to read about a reduction in church employment.

Over the next week I will be writing several blog posts relating to church finances with specific ideas and thoughts about several sectors.  Hopefully they will be interesting to read and maybe even helpful to someone as the LDS church continues to adapt and adjust to the changing world.