United States Naval Institute: An Open Letter by Raymond Pritchett

The Board’s intent in proposing that we revise the Mission Statement is to take the first important step in a strategic plan that will move the Institute to a stronger, more relevant future with increased financial stability.

- Steve Waters, Chairman, United States Naval Institute Board of Directors

On February 25, 2024 Major General Thomas L. Wilkerson, USMC (Ret.) announced on the United States Naval Institute blog that "the Board of Directors has recommended an historic change to the Mission of the Naval Institute to 'advocating the necessity of global seapower.'" Nearly three weeks later a letter from Steve Waters, Chairman of the United States Naval Institute Board of Directors, was posted to the Naval Institute blog with the intent to address the criticism and concerns being expressed by USNI membership. In his letter explaining the mission statement change, Chairman Steve Waters highlighted three specific challenges facing USNI that included financial instability, decline in membership, and a trending loss of relevance. The emphasis by Steve Waters in all conversations has been on the first issue, financial instability, but I personally believe the second and third issues are far more serious problems. Let us examine all three.

Financial Instability

The Board’s work regarding this Statement began in late 2009 and culminated in unanimous Board approvals at our meetings in July and October 2010 and again, with one dissent, in February 2011. The Board voted so because it believes that the Institute needs to gain financial stability and to be as relevant as possible to the Sea Services, to our members, to our donors, to our employees, and to the Nation itself, especially in these difficult times. We think it is possible both to be an independent forum which speaks “truth to power” and to advocate the importance of seapower.

You will recall that economic events of 2008-2009 were difficult for the Institute. Advertising revenues declined, donations shrank, and our endowment lost almost a third of its value. The Institute, led by our senior management team, became cash break-even in 2009 due to dramatic cost controls that remain in effect today. However, the reality is that print media business lines are not growing. The Naval Institute Foundation has enjoyed increases in major donor support and both corporate and foundation sponsorships in the last two years. But, there is no guarantee that these increases will continue, nor that past operational deficits will not reappear.

- Steve Waters, Chairman, United States Naval Institute Board of Directors

I respect and understand that as a man of finance and as Chairman of the Board of Directors, Steve Waters is focused on money. Money is important, but the pursuit of money is the wrong motivation for a membership organization like the United States Naval Institute. When I recall 2008-2009, I recall difficult economic times for virtually every non-profit organization in Washington, DC, so I am not completely sure why hardships that were equally shared by almost every non-profit organization would form a foundation for "historic change" for an organization like USNI that has 137 years of history, legacy, and hopefully long term longevity built into the business model. Furthermore, I am very skeptical anytime I see proposals for major changes to any business plan that is grounded on the argument that "there are no guarantees."

But my biggest concern is the obvious disconnect between the words of the Chairman and the information reflected on the audited 2010 financial statement. Many of you may not be aware, but the USNI Financial Statement for 2010 was published on the USNI website, in fact, CDR Salamander discussed the subject on this blog.

In the State of the Institute statement published in the April 2011 issue of Proceedings, the financial situation of USNI is discussed in a context very different from that of Steve Waters:

Fortunately for the Institute, with thanks to the USNI team and you, our members, the Naval Institute had its strongest financial performance in more than 20 years. In 2010 we continued and expanded the significant financial and operational successes of 2009.

The Institute met or exceeded every financial goal for 2010 and reported a positive net operating margin of $613K. Our traditional business lines—membership, periodicals, books, and conferences—showed positive operating margins. The Foundation raised $2.3M, due in no small measure to almost 5,000 member gifts and pledges, including some that were quite large.

The Naval Institute Foundation portfolio gained an additional 15 percent over the 29 percent growth of 2009. The combined impact for USNI was a positive consolidated margin of $1.8M with a net positive cash flow of $522K.

Stephen M. Waters, Chairman of the Board
Thomas L. Wilkerson, Major General, USMC (Ret), Chief Executive Officer

So in the same year "the Naval Institute had its strongest financial performance in more than 20 years," the Board voted for the Mission Statement change "because it believes that the Institute needs to gain financial stability and to be as relevant as possible to the Sea Services, to our members, to our donors, to our employees, and to the Nation itself, especially in these difficult times."

How can Steve Waters claim USNI had its strongest financial performance in more than 2 decades in the annual State of the Institute while Steve Waters claims in his personal statement that these are difficult financial times for the institute? The financial facts do not support the statements, arguments, and activities of at least one Steve Waters.

Decline in Membership

The decline in membership for the Naval Institute is a serious problem, and I applaud the Board of Directors being committed to dealing with this problem. During the members meeting April 29th, I look forward to hearing what the Board of Directors has done to address this issue. I have observed that over the last decade a generational gap has developed within the membership of the Naval Institute, and only within the last few years has USNI been addressing this issue.

A lot more can be done. Steve Waters wrote in his letter that the Board of Directors has a "strategic plan that will move the Institute to a stronger, more relevant future." Because he later mentions decline in membership specifically in his article, I presume he will be presenting how the Naval Institute intends to address that problem, and how USNI members can help.

No worries, if the Board of Directors does not actually have a plan, I have three simple suggestions that are so easy and obvious it will be impossible to find a single person in the room who disagrees. The generation gap at USNI is real, and it exists in part because the Board of Directors has spent the past year discussing 20th century solutions to 21st century problems.

Loss of Relevance

Of equal (if not greater) concern is that our membership, like many other nonprofit military associations, has declined significantly in the last two decades. These demographics speak directly to the relevance challenge that the Institute is facing and must be reversed if we are to survive. Our membership decline has provided another imperative for the Board to revitalize our mission statement. We must be relevant both to our traditional supporters and to prospective new ones.

The Board’s Mission Committee, led by VADM John Morgan, and including VADM Nancy Brown, VADM Norman Ray, and Mr. Donald Brennan, undertook to ask how the Institute can be most effective at a time when our military budgets will decline due to the United States’ federal deficits, just as external threats are increasing around the world. The Board agreed with the Mission Committee that the Sea Services are critical to our national defense, to American foreign policy and to protect maritime commerce and hence our economy.

- Steve Waters, Chairman, United States Naval Institute Board of Directors

That last paragraph isn't just poorly written; it is offensive in its patronization. Does any member of the US Naval Institute find confidence in the fact that Board of Directors of the United States Naval Institute formed a "mission committee" to determine whether "the Sea Services are critical to our national defense?" That is stupid beyond words. It would be like the American Medical Association (AMA) forming a "mission committee" to determine whether a physician is relevant to human health.

Relevance is a very complicated concept requiring context for a serious conversation, so lets approach this discussion in stages. Is USNI relevant to the maritime services? Yes and no. Congress reads Proceedings, so the organization is still relevant to the leaders of the maritime services. Leaders in the maritime services still write in Proceedings, so that too is part of how the organization finds relevance. If the question is whether the Naval Institute is relevant to the maritime services as a whole, I believe the answer is no. The demography issue discussed by Steve Waters is real, and USNI has lost touch with the mid-grade and junior officer communities, and virtually the entire enlisted community. What has the Board of Directors done to address this challenge? Lack of relevance among the vast majority of people in the maritime services must be a problem addressed immediately, and I believe there are a lot of very good ideas floating around for how USNI can address this challenge.

Relevance in the context of national defense and foreign policy appears to be the context being discussed by Steve Waters. I look forward to seeing what ideas are presented to the membership, if any. What has the Board of Directors done to date to address this challenge? What are the metrics that will be used to evaluate and demonstrate for fund-raising purposes the relevance of USNI? Who is USNI trying to be relevant too, and by what metric does USNI use to determine relevancy in national defense and foreign policy?

At present, USNI is an organization that publishes content, but not an organization that pays staff to produce content. In the modern communication environment, as modern content publishing non-profit organization USNI is essentially the network and not the data on a network. Do the Board of Directors recognize that distinction, understand what that means in the communication age where information is often free, and do they have a vision for how to best position the Naval Institute in the modern information environment for purposes of relevance?

What is the definition of relevance to the Board of Directors, and is that definition the same definition for relevance the membership believes best applies to the organization? I believe the answer is yes, but because many see the current struggle at USNI as a zero sum game, I might be in the minority.

Looking Ahead

There is going to be content published over the next few days leading up to the members meeting next week. Some points made in these articles I agree with, some I do not.

It is still unclear who will be presenting for USNI at the annual members meeting. I have heard that John Morgan is unable to make the meeting due to medical reasons. Let us all hope his medical condition isn't serious enough that it prevents him from attending online. This is a historic time for the Naval Institute, and to be very honest I have serious concerns regarding the quality of leadership on the Board of Directors when so many members of the Board of Directors are hiding from membership following what I see as one of the most embarrassing episodes in the 137 year history of the organization.

I get it that Board of Director members are busy people and may be out of town on business, but is it really too difficult for any Board of Director member who can't be present to get the phone or participate through the webcast? All I hear about from the Board of Directors are 20th century solutions to 21st century problems, and now they want to use 20th century excuses in the 21st century too?

Let me get this straight. I'm on a conference call yesterday discussing ideas with Fred Schultz, Paul Merzlak, Scott Gureck, Bill Miller, and Mary Ripley over at USNI on how we can reach more junior officers to produce more content for USNI and within a current context. One of the guys on the phone with us is Capt. Alexander Martin, who led the US Marines who took back The Magellan Star from pirates, and then wrote an article about his experience on the Naval Institute blog 24 hours later. I spent time with Alex earlier this year when I was in San Diego, and I asked him why he wrote the article, he said "Because I wanted my guys to be recognized, and I really do care about this stuff."

So on one hand, folks inside USNI are working hard and beating the bushes looking for ways to encourage Junior Officers to share their experiences at a pace greater than the rhythm of the monthly issue of Proceedings, but on the other hand the leaders of USNI on the Board of Directors can't find a way to make a members meeting planned months in advance following one of the challenging debates in the organizations 137 year history? The disconnect that exists between the leadership on the Board of Directors of USNI and the people who actually work inside USNI is depressing.

If you are a member of the US Naval Institute and live in the Washington, DC area, you need to attend next Friday. I'll be there. I look forward to listening to the concerns of other members, and learning the answers to a great number of questions that must have legitimate, honest answers. Some folks are attending because they want accountability, but my motivation for attending is that I want to see what the future looks like.

For those who do not understand what is at stake next week, listen carefully to this warning because it is very much legitimate based on my extensive homework on the issues recognized by the Board of Directors at USNI. If Friday becomes a bullshit show by the Board of Directors, the Naval Institute will lose the future with the younger generations of officers in the maritime services. The organization does not have time to wait even one more year for action to be taken on these issues; the window of opportunity for certain opportunities that have everything to do with the future is closing.

If you do not realize that fact, you are wildly out of touch with the people in the maritime services today and need to do your homework. If you require more information, you need to start asking serious questions. We live in an era of abundant choices, and right now according to data I have collected in relative comparisons of various alternatives and Proceedings - the folks in maritime services are choosing somewhere besides the Naval Institute to contribute their ideas.

Next Friday we fix that.