AMC Myths

Over the years many stories have made their way around the market about AMCs, what they're good for, where they're weak and reasons to avoid them. Many of these positions are simply myth. Some of them may have been inspired by actual incidents of poor practices by a particular AMC, or worse yet, by a service firm that wasn't really an experienced association management company. Regardless the reasons, the AMC-model suffers the bad reputation — worse yet, organizations that may be better served by the AMC-model are missing out on its benefits.

Myth #1: AMCs are good incubators for start-up organizations, but when organizations mature they deserve their own staff.
Myth #2: AMCs are only interested in their own profitability and will sacrifice their client's financial viability for their own profit.
Myth #3: Board members of AMC-managed organizations have less control of their organizations than standalone organizations.
Myth #4: Board members of AMC-managed organizations are not as free to exercise fiscal control as a standalone entity is able to do.
Myth #5: Organizations need staff to be part of our profession or industry segment - such staff only comes from a standalone structure.




Myth #1: AMCs are good incubators for start-up organizations, but when organizations mature they deserve their own staff.

While the first part of this is certainly true, there's market evidence that actually contradicts the second part. The mythical part goes like this: "AMCs are good incubators, but when an organization gets on its feet, it's time for that organization to have its own staff and resources."

If the AMC-model is best for incubation, then we might expect the average age of AMC-managed organizations to be much lower than the average age of standalones - indeed we might expect the majority of AMC-managed organizations to be less than 10 years of age. Why 10 years? Seems like a reasonable amount of time for an organization to get on its feet and move out of the incubation stage.

The chart labeled #5 below displays the ages of two sets of organizations (108 standalone and 114 AMC-managed organizations) as of 2008. While the average age of standalone organizations is greater that the average age of the AMC-managed organizations in a recent study1 (42 years vs. 34 years), this is not the profile of an incubation management model. Indeed, three of the four oldest organizations are AMC-managed organizations and each is older than 100 years.
Chart-5.jpg

1 "Are AMC Managed Organizations Recession Resistant?"

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Myth #2: AMCs are only interested in their own profitability and will sacrifice their client's financial viability for their own profit.

This was actually written by an executive director (CAE no less) with a standalone organization as a comment to an article in the September 2010 AMC Connections online newsletter. Perhaps this individual experienced this situation in one case, but it simply doesn't make sense on the face of it. How would a for-profit firm like an AMC remain in business if it put its financial well being before the client's financial well being? The opposite is true - the long-term success of a client organization is the AMC's success. Further, there's evidence to support this.

surplus-graph-2010.gif This graph, comparing the percentage of organizations by management model, shows annual operating surpluses at the ends of each of the years 2006 though 2010. Prior to the recession standalone and AMC-managed organizations are almost identical in terms of profitability during normal market conditions; however, the two management models perform very differently through the recession. Indeed, it appears that AMC-managed organizations left the recession behind in 2009, but standalone organizations were still struggling through it in 2010. 2

2 "AMCs Manage Client Bottom Lines Effectively Through Recession" © 2012 LoBue & Majdalany Management Group; April 2012

The AMC-model appears to be taken care of the bottom-lines of their client organizations.

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Myth #3: Board members of AMC-managed organizations have less control of their organizations than standalone organizations.

This is one of the easier myths to bust, especially if the AMC uses industry best practices promoted by the AMC Institute in its core membership eligibility requirements and its accreditation program based on the American National Standards Institute's (ANSI's) "Standard of Good Practices for the AMC Industry."

Every association managed by an AMC should have an up-to-date service agreement in place with their AMC. The service agreement should set the duration of the agreement term, and all aspects of the agreement should be reviewed by both parties at least at the agreement's anniversary, if not annually.

Board leaders of standalone organizations concerned about loosing control if they switch to an AMC should look at what controls they have in place under their current structure. If they are pleased with those controls there is no reason these same controls couldn't be included in an AMC service agreement. They might even be surprised to learn their controls could be greater under an AMC service agreement.

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Myth #4: Board members of AMC-managed organizations are not as free to exercise fiscal control as a standalone entity is able to do.

This myth is as baseless as #3 above, and for much the same reasons.

There's nothing inherent in the AMC-model that transfers an organization's assets, or control of those assets, to the AMC. Regardless the organization's management model, it should have policies pertaining to the handling of all assets. If the organization is managed by an AMC, the AMC would follow those policies and be contractually bound to them.

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Myth #5: Organizations need staff to be part of our profession or industry segment - such staff only comes from a standalone structure.

There are two parts to this myth. First, that an organization needs staff to be part of, or from, their profession or industry. Apart from a familiarity that might come from this qualification, it's actually not necessary. Besides, a society of say lawyers, accountants or doctors doesn't exist to actually practice law, public accounting or medicine. The society's reason for being is to provide benefits to its members and represent the interests of the represented profession.

Second, AMC staff are trained to be association professionals, which includes the versatility to deal with the dynamic needs of each client organization. AMC staff can learn what they need to know about the profession or industry segment to successfully support the organization and its members. They also bring a fresh perspective to each organization they support, which according to a variety of research is an important success factor for any organization. AMC staff can help an organization maintain fresh perspectives.

Some organizations may need staff from the profession or industry segment it represents; however, organizational leaders should try to distinguish between when this is actually necessary versus a matter of familiarity or convenience. Besides, an AMC is well positioned to bring in the specific expertise needed without creating excess capacity at the client's expense.




Conclusion

Managing associations is serious business. More care should be taken evaluating all management options and whenever possible important decisions should be evidence-based. Over the past three years several studies have been conducted that bring us a deeper appreciation of the comparative benefits of the AMC model. While it is impractical to conduct an empirical study for every decision, more and more data sources exist that are easy to access to test critical assumptions about important organizational decisions.

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By the Numbers

$1 Billion

The total operating budgets for those associations managed by AMC Institute member firms.*

*AMC Institute

By the Numbers

2.8 million people

The number of members in associations under management by AMCs.*

*AMC Institute

By the Numbers

3,500

The total number of individuals employed by AMCs that are member firms of the AMC Institute.*

*AMC Institute

By the Numbers

10 years

The length of time L&M has been a Charter Accredited AMC – making it the only remaining Charter Accredited firm west of the Rockies.*

*AMC Institute

By the Numbers

19 out of 20

The number of industry segments that AMC-managed organizations have in common with organizations managed by employed staff.*

*Client Operating and Financial Benchmarking Survey Report 2011; © 2011 AMC Institute, pg. 21

By the Numbers

1,700

The number of associations managed by AMCs that are member firms of the AMC Institute.*

*AMC Institute

By the Numbers

32%

On average, the premium standalone organizations pay to directly employ staff and shoulder the full costs of occupancy and capital expenses vs. the AMC alternative.*

*Client Operating and Financial Benchmarking Survey Report 2011; © 2011 AMC Institute, pg. 23

By the Numbers

32%

The rate over which the AMC-managed model outperformed the standalone model during the Great Recession (2008 – 2010) in terms of operating surpluses.*

*AMCs Managed Client Bottom Lines Through Recession; © 2012 L&M, page 2 (derived from data reported)

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