AMC Fee Averages – The World is Flat Argument

Michael LoBue writes: The most preposterous debate within the AMC community in 2008, in my opinion, centers around the average fee AMC-managed organizations pay for the collection of services they receive from their AMCs.

Of course, this issue of the AMC economies of scale value is perhaps the least interesting and least valuable of the benefits enjoyed by using an AMC, but it is the easiest to understand and quite possibly the benefit that will be most sought in 2009 while the economy is in the tank.

As recently as December 23rd a highly respected member of the AMC community wrote the following response to a question asked on the ASAE AMC List Serv:

Question: Could you please give us an idea of what the average percent of an association budget is the typical management company contract fee?

 
Answer: Frankly, I don’t think there is such a thing as average in this business. The range of services, output and work product are so varied in terms of necessary resources , human and otherwise as to make association management aggregated cost data fundamentally flawed when used to establish “average” . Even the ASAE ORR (with a fairly broad sample) falls apart as you slice and dice within scope and organization type. It really is like taking a chain saw to do brain surgery. You can look at subsets of organizational activity such as membership development but the useful analytics are, in the end, more about ROI, dollar based or otherwise. I think seeking average is the lazy way to avoid doing the hard work of establishing value.

First off, the above answer is an excerpt of the entire response, but it captures the respondent’s two major points:

  1. the average doesn’t exist
  2. even if it did, it would be too toxic for mere mortals to even posses, let alone use

Of Course An Average Exists!
The first point about the average not existing has to be an emotionally charged over-statement by an otherwise intelligent and highly responsible professional simply very concerned that an important piece of information will be misused, resulting in harm, much like his metaphor of using a chain saw to do brain surgery. Of course the average exists, even if proper sampling was not conducted to know the value, it doesn’t mean that it doesn’t exist.

This is where The Flat Earth Society comparison enters. According to recorded history, Aristotle was the first to present evidence that earth was a sphere (around 330 BC). Around a 100 years later Eratosthenes provided the first calculation of the earth’s circumference (Wikipedia).

Here’s my point, to deny the existence of something that so obviously exists is to look no less silly than about 3,000 people who align themselves TODAY with an organization that continues to deny a fact that was essentially settled science more than TWENTY FIVE CENTURIES AGO!

Wouldn’t it be more productive to collect useful information, disseminate it and educate practitioners about the accurate use of such data? Then, based on what’s learned, ask a new round of questions, go back to real organizations to collect more data to answer those questions, and so on? Last month I posted on what is lacking from ASAE’s Operating Ration Report (click here…).

We can do better than having debates about the shape of our industry; we should collect data to help define its boundaries and contours and learn to improve it.

This is cross posted at: www.AssociationVoices.org

AMC Accreditation – Essential for Institute Membership?

Michael LoBue writes: Last week Dave Bauman of Executive Director, Inc. (an AMC Institute member) sent a message to the Institute membership posing a number of questions about the Institute’s AMC accreditation program, why more members were not accredited and basically proposing that it’s time to deal with the question of replacing the Institute’s current membership eligibility requirement (17-point list of good practices) with full accreditation.

Requiring accreditation for Institute membership is not a new question. It was deliberated when the accreditation program was being developed. A formal question was put to the board of directors in 2004. Each time the board was mixed on the question, but the majority did not believe it was in the best interest of the organization to require accreditation for membership at that time.

In 2004 I not only voted against requiring accreditation for membership, I spoke rather emphatically about the issue. It’s worth noting that my firm is one of the 19 charter accredited firms. We believe in the value of accreditation and have invested in it. We were re-accredited last year through 2011. (My partner, Michael Majdalany, has spend a good bit of his time involved with the Institute as an accreditation mentor — so, as a firm we certainly support the Institute’s accreditation program.)

I believe the right question here is not if, but when will requiring accreditation be right for both the Institute and the industry in general. Is now the time? I don’t know. This question needs to be deliberated. Among the issues to address in the current program is its very US-centric nature.

Decisions Should Be Data-driven and Not Decibel-driven

The question of requiring accreditation for membership can easily dissolve into forcefully asserting beliefs on both sides of the issue that may or may not be supported by data. Data-driven decisions are not ones that allow the data to completely dominate the final choices, but ones that take into account the facts and the rational analysis and interpretation of the facts around larger organizational goals.

Market Share

At the risk of over simplifying the question, I would assert that the question of requiring accreditation for Institute membership be driving by the market share of associations managed by Institute members. I believe this is important because nothing will drive the credibility of the Institute as a deterministic voice for AMCs and the market segment we represent more than market-share. No, this is not a question of having the majority of the market; but it is a question of having a significant minority portion of the market.

While I don’t have an answer for “what constitutes the threshold for a significant minority portion of our market”, I do believe that this question provides a rational framework to address the larger question of “accreditation membership requirement”. Below is an estimate of the AMC market share for 2008 of US 501(c)(6) organizations managed by AMCs, and that portion managed by Institute members. Clearly, this number (share) could go higher if 501(c)(3) organizations were also factored in, but there’s no obvious and reliable way to do that (as far as I can tell).

Further, this view only accounts for the US share. Before anyone concludes that I’m trying to drive a US-centric model, let me add that I’d love to include non-US markets. So, if any of our non-US members can provide data to supplement this picture, please send it to me.

Based on 2008 Institute member profiles the number of associations managed by accredited members is roughly 50% of all associations managed by Institute members. Therefore, if we were to require accreditation for Institute membership, what is the minimally acceptable market-share we’d be willing to accept to claim that the Institute represents a significant voice for the industry?

Now, let’s not get irrational and assume that if accreditation became the requirement that it would immediately eject all non-accredited members. How such a change is implemented is both significant and to be separately determined. But again, this question of market-share helps us with that question as well. For example, if we determined that the current 3% market-share estimate is the minimum threshold, then one goal could be assisting all current non-accredited members to become accredited (assuming they wish to…).

This post is already quite long — so, I’ll leave the topic for now and follow up with a subsequent post on “accreditation vs quality”. Hint: accreditation doesn’t equal quality, but it does equal commitment!

This is also cross-posted at AssociationVoices.