CONCLUSION: Based on a comparative analysis of two parallel operating ratio studies of AMC-managed and standalone organizations, AMC-managed organizations reap considerable qualitative and quantitative advantages for membership-based organizations up to $5M in annual revenue. These results are likely valid for organizations above $5M in annual revenue, however, there was not a sufficient number of organizations above $5M in the study of AMC-managed organizations to draw any conclusions about those organizations.
IMPLICATION: Standalone organizations up to $5M in annual operating revenue should answer one question: “Are we receiving the return on our management model investment, given that on average, we may be spending 50% more for the resources to manage our organization than if we were managed by an AMC?”
Based on results of recent study, it appears they are!
OVERVIEW: The current economic climate is having an impact on associations, just as it is on virtually all business sectors. This paper reports on a recent study showing that until 2007, about 30% of all organizations up to $5M in annual revenue operated at a loss. But, organizations that employ their own staff, lease their own office space and incur their own capital expenses (aka: standalone) were nearly twice as likely to have ended 2008 with deficits than AMC-managed organizations. More than 50% of standalone organizations with up to $5M in annual operating revenue operated at a loss that year! The reduction for AMC-managed organizations between 2007 and 2008 was a nominal 7% — two-thirds of AMC-managed organizations reported a surplus in 2008! Therefore, the answer to the question posed in the title would seem to be a resounding “yes.”
IMPLICATION: Standalone organizations up to $5M in annual operating revenue should answer one question: “Are we receiving a return on investment in our management model, given that on average we may be spending 50% more for that management approach than if we were managed by an AMC — especially given the performance benefits produced by AMCs?”
Michael LoBue writes: As the study results comparing the impact of the start of the recession on standalone and AMC-managed organizations gains attention, there seems to be a general criticism of the study by executives of standalone organizations. The criticism is that the results are not valid because the study samples were not randomly selected. This post responds to that criticism, pointing out how the criticism itself is both short-sighted and (intentionally?) misleading.
Here’s the punch line —true the samples were not randomly drawn, but it’s just as likely the stellar results produced by the AMC-model vs. the standalone model would be even greater (as opposed to less — as implied by the critics) if the study is repeated on randomly drawn groups.
Select the following link to read the entire response to that criticism.
Michael LoBue writes: I returned today from the 2010 ASAE Annual Meeting in Los Angeles. Another good meeting and conference. It appears that there’s a growing interest among small staff organizations to abandon the main office (or any leased office space) and have employees work from their homes. This trends seems like an exercise in tossing a few chairs off the deck and rearranging a few other chairs on the deck. It also seems driven by the desire for cost savings and not a desire for improvements, although direct cost savings can be achieved and some productivity gains can be realized under the right circumstances.
- What happens when you bring the first new staff person into the virtual office arrangement? It’s one thing to ask a group of staff members who comfortable with their jobs and who know one another after sharing an office, to work from home than it is to recruitment and orient new staff into a virtual office arrangement.
- While the organization is no longer writing rent and utility checks, the list of employer concerns (see Figure 1) remain. How do these concerns change and might there be new employer concerns resulting from the arrangement?
- How does working from home enhance the staff’s professional development in this isolated arrangement?
- Where is the organization or their membership in these issues raised in the presentation? (Not a single slide in this excellent presentation contained the word “member”, or discussed how this arrangement adds value to the members of an organization.
Based on yesterday’s presentation it’s clear that this notion about “going virtual” is aimed at saving costs. Clearly a worthwhile objective, but this new piecemeal approach cannot touch the benefits delivered by the AMC-model:
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.
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.