Research

Are AMC-managed Organizations Recession Resistant?

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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?"

MAJOR FINDINGS:

  • There are no differences in the types of organizations examined in the two groups (AMC-managed and standalone organizations) whether by tax exempt status, member type, geographic scope or age of organizations;
  • AMC-managed organizations experienced only a nominal drop in the number of organizations operating with deficits in 2008 as compared to the two previous years (a drop of 2.19%);
  • Standalone organizations experienced a dramatic drop of more than 31% in the number of organizations operating with deficits in 2008 as compared to the two previous years (more than 14 times greater than AMC-managed organizations).

CONCLUSIONS:

It is difficult to escape such an overwhelmingly obvious conclusion based on the results of this study. Organizations managed by AMC Institute member firms enjoy greater net profitability, greater efficiency, lower operating costs, and, at least for 2008, the avoidance of deficit operations due to harsh economic conditions. A clear advantage over standalone organizations was shown.

The results of this study are consistent with the white paper published in 2009 comparing the operating ratios of organizations based on the standalone and AMC management models. Based on common parameters of size, type, age or tax exemption status, there are demonstrated differences in the operating results.

During these challenging times we need more than opinions and conjecture to justify the important strategic and management decisions being made by associations. Toward this end, this study is another evidenced-based analysis of critical performance measures supporting the bold steps leaders need to take to ensure healthy operations.

Associations are created to have positive impacts on professions and market segments. This report will help leaders of standalone organizations better understand the AMC option and how it can deliver the types of results and value enjoyed today by approximately 1,500 societies and trade associations under management by members of the AMC Institute.


 

For more information about whether an AMC is right for your organization, contact L&M for a no cost, no obligation conversation with us. If we're not the best fit for your organization, we can refer you to other excellent firms in the field that may be a better suited for your challenges and opportunities.

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)