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Uncomfortable Truths About Association Management

Michael LoBue writes: In the two recent comparing organizations based on their management models — AMC-managed vs. standalone — a number of uncomfortable truths emerged. The discomfort appears to be with some standalone organizations.

The second of these two studies completed last month, compared deficit operations over 2006, 2007 and 2008 was mentioned in the April 2010 issue of Association Trends magazine. The reference to the study was based on complaints from an unspecified number of standalone organizations because I sent letters to selected officers of those organizations sharing the results and suggesting that they might want to consider the AMC model.

Contrary to how the study was characterized in Association Trends, the study was conducted solely to learn more about the differences between these two management models and whether or not measurable results can be attributed to the management models. The study was not conducted nor commissioned by the AMC Institute. It was conceived and undertaken solely by my firm. The decision to use the results to reach out to standalone organizations came after discovering some important findings.

To clarify:

• I did send letters directly to board leaders from a majority of the standalone organizations in the study that experienced deficits in 2008; and
• I did not send letters to the executive directors of these organizations, but some did receive the letters, apparently from disgruntled board members.

Here are the comments printed in Association Trends:

• "Several executives claimed their board members we ‘steamed’ that elected leaders’ names were so readily available on the 990s and that someone would have the ‘audacity to contact me directly’ rather than going through the association."
• "One CEO said, ‘If an AMC owner contacted me to offer help, knowing I was struggling, we might have worked something out that was mutually beneficial. But going around me to my board, $*&^%@)#!'"
• "Another targeted executive agreed that he might use an AMC for project work and consider recommending the AMC form of management as an option but, ‘the guy who sent these letters is off my list forever!'"

This direct mail campaign will probably not go down as one of the better marketing programs we’re tried as a firm. It was not our intent to annoy or stress these organizational leaders any more than the economy may have already done. On the other hand, these reactions may validate something worth noting — that the findings in the studies, which sadly were not mentioned in the Association Trends’ article, are revealing some uncomfortable truths about how AMC-managed organizations enjoy benefits over standalone organizations. These benefits include:

• Higher net profitability ratios;
• Higher operating efficiency ratios;
• Lower operating risk ratios;
• More diverse revenue profiles;
• Higher percentages of revenue spent on meetings, trade shows and educational activities for their members;
• A third less paid, on average, for staffing, occupancy and capital resources; and
• Less likely, by a wide margin, to have experienced deficit operations during the recession.

Contrary to the very personal reaction that our letter campaign may have generated in some recipients, it was not a personal or professional attack on anyone. The data from these two studies speaks to the management models, not the executives involved. The results suggest that even under the stewardship of extremely competent management, the standalone model has limitations overcome by the AMC-model.

It might surprise some of those board members and executives to learn that I not only sit on two nonprofit governing boards today, but I have been serving on at least one board for most of the past 25 years. Indeed, it is out of this deep experience as a fiduciary that I spent hundreds of hours on these two studies. We all need to improve our decision-making; we need to make more decisions based on evidence. Our organizations are too important to ignore any edge we can gain.

It would be a shame if leaders of standalone organizations dismissed the findings in these studies merely because it might contain some uncomfortable truths. Yes, AMCs stand to gain if these studies contain truths, but that’s an irrelevant fact. All that should matter to the leaders of standalone organizations is whether or not these studies contain useful findings. Findings that help them make better decisions for their members — regardless the management model.

Summary of Operating Ratio Study of AMC-Managed & Standalone Organizations (Aug 2009) click here…
Summary of April 2010 Study of Deficits and Surpluses click here…

Are AMC-Managed Organizations Recession Resistant?

Michael LoBue writes: I just completed writing a report on a research project examining how the current economic climate affected AMC-managed and standalone organizations. Based on analyzing two comparable groups of membership-based associations, AMC-managed organizations appeared to be avoid the harsh aspects of the economy, whereas standalone organizations were hit very hard.

Standalone organizations employ their own personnel, shoulder the full costs of occupancy (own or rent office space) and spend their scarce revenue on capital goods.

The study examined whether organizations ended their fiscal years in surpluses or deficits. The fiscal years examined were 2006, 2007 and 2008 — fiscal year ending December 31.

The results were quite compelling — standalone organizations were nearly twice as likely as AMC-managed organizations to have ended 2008 with deficits. The chart below displays the three-year comparison of the two groups of organizations based on these two management models:

For an overview of the article and a link to the full report click here….

Why I'm Deleting My Twitter Account

Michael LoBue writes: I can’t remember when I signed up for my Twitter account — probably 6 months ago when a colleague in the association management space assured me that it was “where it’s all happening”. It is where it’s all happening; the train wreck of thought!

Intuitively I couldn’t quite accept that much of anything could be communicated in 140 characters unless a deep context already existed between the communicating parties. If other means of online communications didn’t exist (e.g., email, group lists, blogs, SNSs, etc.), then there might be some value to it; but I couldn’t see the there, there.

This morning I read Why Email No Longer Rules in the WSJ. Jessica Vascellaro contends that “services like Twitter, Facebook and Google Wave, with their constant stream of interaction among users — for better or for worse” has knocked email off its top perch. I think for worse – much worse!.

I reviewed a wonderful little experiment commissioned about one of our firm’s clients, the Institute for Innovation & Information Productivity (IIIP).

This study sought to understand whether attention deficits and associated performance drop-offs were statistically significant and if they varied with age or gender when an office worker was interrupted with email and text messages. Subjects were given a cognitively challenging task to perform, and then were interrupted with email and text messages to test their abilities to recover focus and complete the original task. Here’s what the researcher, Dr. Martin Westwell of Oxford University’s Institute for the Future of the Mind discovered:

• There was a significant difference between age groups on performance with cognitively demanding tasks under conditions of high interrupts.
• Younger people (18 – 21), lost their cognitive advantage over older counterparts when interrupted continuously during cognitively demanding work;
• The older group (35 – 39), saw no significant performance degradation under conditions of high interrupts and cognitively demanding tasks.

When I spoke with Dr. Westwell about this research, he went on to say: “The drop off in performance was akin to suffering from a concussion resulting from an injury in a contact sport such as football!” Find full report here...

The point is, email is bad enough in the hands of someone with little discipline — Twitter is like crack-cocaine to an addict. If you’ve read this far — well beyond 140 characters — and you think there’s some merit to this position, then you should read Mark Baurerlein’s The Dumbest Generation.

This post also appears on AssociationVoices.

Operating Ratios - We Can Do Better

Michael LoBue writes: Earlier this year the 13^th Edition of the Operating Ratio Report (ORR) was released by ASAE. This edition is a solid improvement over earlier editions. The ORR is an important, no make that an essential, benchmark report for AMCs of any size.

Included in the improvements in the 13^th Edition is the reporting of medians, in addition to the usual averages. For those who took "Stat 101" too long ago to remember, median is that value in a range of numbers that is exactly in the middle of the distribution — half of the values are above that median and half are below. So, if the median is greater than the average (aka: mean) it means that the range of numbers contains "values below the median that are pulling down the average". The opposite is true if the median value is less than the average. Thus, including medians gives us more information about the total distribution of values than the average alone provides. It also includes key performance ratios by organization types — these ratios are:

• Profitability
• Productivity & Efficiency
• Leverage
• Liquidity
• Revenue & Expense Management

All this is good! But, we’re still lacking important data in the ORR that will give association managers a much better sense of how our organizations compare to like organizations. For example, it is misleading to compare a single organization to the ORR by revenue class and draw any useful conclusions, or even inferences, about how well our organization may be performing relative to the industry.

Chances are, any organization we compare the ORR metrics will be above or below the average and median. If our subject organization is below, does this mean it is leaving revenue on the table, or under-investing on the expense side? Presumably, deeper comparisons to the Key Performance Ratio will give us a better handle in comparing our organization. But, there is a missing metric that must exist in the data sets that would answer a key question. That question is: “How does my organization compare to the surveyed organizations that occupy the same point on the distribution?” To answer this question we need the “missing metric” and associated data from the organizations corresponding to the metric:

1. incremental data points – either standard deviation values or quartile values; and
2. demographic characteristics of the organizations at each incremental marker.

For example, if your subject organization is “some-number” in percentage points above the mean (and median), wouldn’t it be more valid to compare your subject organization to the organizations in the ORR that are at or near 8 percentage points above the mean?

Take the following model distribution curve… all the response form the “bell curve” distribution, where 68% of the responses (value) are 1 standard deviation above and below the mean value and 95% of all values in the distribution are between 2 standard deviations above and below the mean value. Assume your subject organization is somewhere between +1 and +2 standard deviations (see red X inside red oval below — wouldn’t it be more useful to compare your subject organizations to organizations in the distribution that were near the position of your subject organization (within red oval) than the general mean for the entire distribution? After all, isn’t the mean the best of the worst and worst of the best — that’s no target to shoot for!

The following list of comparisons should be available from the existing ORR dataset:

• number of members
• age of organization
• scope (e.g., local, state, national or international)
• line of business or profession
• revenue source ratios

In conclusion, this should not be a difficult threshold to reach for the professional management of associations. After all, it’s being taught these days in high school!

This has been cross-posted at: Association Voices.