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.

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Are AMC-Managed Organizations Recession Resistent?

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.

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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.

AMC-Managed vs. Standalone Organizations – ‘No brag, just facts’

Michael LoBue writes: In a soon to be published white paper, that I authored, comparing the profiles of AMC-managed and standalone organizations, two major conclusions are clear.

First, there is no difference between the types or organizations managed by AMCs and those that “own their resources”. An organization that owns its own resources is one that employs its own staff, leases (or owns) its own office space and spends its scarce revenue on capital goods (e.g., furniture, furnishings, IT resources, etc.).

Second, AMC-managed organizations out perform standalone organizations across conventional operating metrics like:

  • Operating Efficiency
  • Net Profitability
  • Leverage (a measure of risk)

Oh, and let’s not forget that standalone organizations pay, on average, almost a 50% premium to “own” those resources that, on average, produce lesser results! How this translates into “fiduciary responsibility” is lost on me…

The white paper will be posted on the AMC Institute website for downloading, but I would also be happy to email a copy of it to anyone that is interested. Just send me an email request at: LoBue@LM-Mgmt.com

This is not to suggest that all standalone organizations up to $5M in annual revenue, the threshold up to which the comparisons were done, are irresponsible for using the standalone model of management. But, we now have hard data that governing boards and management can use to ask: “Is the premium we’re paying for our management model providing the right return for our unique needs?”

The real value of the comparisons in the white paper is that organizations can begin to explore this question beyond half-truths or simply because the standalone model is what they’ve been use to.

The comparisons in the white paper do not give us the most important analysis all organizations need to conduct, which is how an organization’s programs connect to the impacts outside the organization that each was formed in the first place to have. But, it’s a start!

AMCs More Like Agents Than Partners

Michael LoBue writes: An all too common characterization of the relationship between an AMC and its client organizations is that of a “partnership”. As “feel good” a notion as this may be, I contend that it is fantasy more than anything else. There’s a danger being too literal when borrowing a concept — after a fashion we begin to believe our own spin. I admit that our firm has used it before, but always with some discomfort; we won’t make this mistake again.

A partnership is defined as:

“A partnership is a type of business entity in which partners (owners) share with each other the profits or losses of the business undertaking in which all have invested.”

There’s nothing about the relationship between an AMC and its client organization that meets the above definition. AMCs don’t cover the risky ventures and bad debts of a client organization, anymore than a client organization co-signs on leases or capital improvement projects of its AMC. We certainly shouldn’t share in the earnings of client organizations.

Clearly both parties in the AMC-client relationship have risks and rewards resulting from the provider-client relationship, but aside from enhanced reputations, there isn’t anything they really share. And, shouldn’t that be enough? AMCs certainly value their reputations as much as any other business asset. An organization can grow, but there’s no guarantee that this growth represents expanded revenue for the AMC — it all depends on the nature of the growth and whether it increases demand for the AMC’s particular offerings.

Before someone interprets this position as: “he’s saying there’s nothing in the AMC-client relationship that leads to common goals”, let me be clear — there’s plenty to bind the two parties together for mutual benefit, but we should not kid ourselves into thinking it directly involves shared investments and returns. If I’m right and this relationship is not a partnership, characterizing it as such can lull both parties into thinking it is and inevitably lead to making lesser choices over the course of the relationship.

An Agent Relationship
A more likely candidate is that of an agent relationship. AMCs work on behalf of their client organizations to find and take advantage of opportunities for the clients. If the AMC is successful in this role the client benefits by having more impact in its profession or market, revenue continues to flow to the AMC, perhaps even increasing from the client’s successes, and the firm’s reputation is enhanced as a trustworthy and results-driven AMC.

There’s one other aspect of “agency” that I like; I think it’s more likely to focus on finding the client organization real successes — ones that make an impact in the organization’s profession or market segment, than merely generating busy work.

More on ‘AMC Clients Measuring Up…’

Michael LoBue writes: Last month I shared the comparative analysis between AMC-managed clients and standalone organizations in terms of key performance indicators. This post contains a slightly more refined grouping of the standalone organizations — the following will be included in a soon-to-be released white paper discussing about 13 different comparisons.

Net Profitability
Figure 5 below reveals that in the case of organizations up to $1M in annual revenue, AMC-managed organizations enjoyed a nearly 10-fold increase in their profitability vs. organizations under the standalone model, which was barely profitable at a half of a percent. This gap closes considerably for organizations between $1M and $5M in annual revenue, but AMC-managed organizations still enjoy a 33% greater rate of profitability at 8.4% vs. standalone organizations at 6.3%.

Operating Efficiency
Operating Efficiency is charted in Figure 6 below. According to the ASAE Operating Ratio 13th Edition, this ratio “tell us how many dollars in revenue are being generated by each dollar of assets employed in running the organization.” This comparison reveals that in the case of organizations up to $1M in annual revenue, the operating efficiency ratios are comparable between the two management models. However, in the case of for organizations between $1M and $5M in annual revenue, AMC-managed organizations at 1.3% are enjoying a 38% better level of efficiency than standalone organizations at .94%.

The last metric in this series of key performance ratios is Leverage. This is often used when evaluating an organization’s need and/or ability to borrow funds. Given that most associations would not seek to acquire debt to support operations, like a profit-driven organization might, leverage then can be a useful proxy for general operating risk. In this case, a lower ratio is probably more desirable. This ratio is derived from dividing total liabilities by total fund balance; thus, the higher the ratio, the less able the organization is cover its commitments.

Figure 7 below reveals that for organizations between $1M and $5M in annual revenue, those AMC-managed organizations enjoy a slight, but probably insignificant edge over standalone organizations. Whereas, for organizations under $1M in annual revenue, those managed by AMCs appear to operate with 25% lower risk profile than organizations using the standalone model (.25% vs. .40%).

Model for Audience Engagement

Michael LoBue writes: Yet another shoe seems to have dropped for the crumbling industry we’ve known for almost two centuries as “newspapers”. Well, it’s actually larger than just print newspapers; it’s also crumbling for some of the recently popular electronic media formats. The fact that newspapers and some traditional TV news formats are crumbling is not news — what is at least noteworthy is that we’re beginning to see the new, successful form emerge. I think this is instructive for associations and how we communicate with our target audiences.

Let me repeat — nothing fundamentally new here, except that we are seeing some trends emerge from what has seemed like a tsunami of information cascading at us from all directions (e.g., print, broadcast, website, blogs, etc.).

TMZ chief is speaker at Cal journalism school
On Thursday (3/12) The San Francisco Chronicle reports on the visit of the guru of celebrity news to UC Berkeley’s Graduate School of Journalism. While the faculty at this prestigious journalism school don’t seem to get it yet, their students appear to recognize the entire model of reporting news has already changed and Harry Levin’s TMZ model seems to be one of the more effective models.

Washington Post Folds Business Section Into Front
This story could have been filled with “Latin filler text” as I think it missed the real story. The story is NOT that the Post needs to cut costs. The story is that this is yet another example of the print media alone isn’t cutting it; there’s not enough of a market to sustain either the “print-form writing style” in newspapers, or the print-form by itself.

Stay with me…this is a build…

TMZ’s Financial Page
Whoa – TMZ, the leading paparazzi channel that got its start focusing on the Thirty Mile Zone in Hollywood is now using its investigative style to report on the intersection of politics and the economy.

TMZ is not the first to use this form of engaging dialogue vs. the over-powdered, teleprompter reading talking heads — TMZ takes Jon Stewart’s “The Daily Show” style even further.

What does this have to do with associations and how we communicate with members and non-member target audiences? Everything! We need to complement our traditional “publish” model where we’re feeding audiences bits of “history”. Even if the news or information was created just this morning, it’s still fixed-in-time.

The success of TMZ and The Daily Show is not that they are telling us what we want to hear; but they are engaging news-makers with questions that we’d want to ask – questions that strip away the highly controlled message the news-makers wants to tell us. I realize that traditional journalism has been about just this — but they have allowed their medium to control their reporting — their days of reporting history appear to be over!

If you’ve never watched TMZ, you should. Not because the subjects are all that interesting, but for the style they use. It’s very dynamic; you feel that the story is unfolding in real time. If you’re not convinced, then watch ET (Entertainment Tonight) and you should see the extremely dramatic contrast.

The successful communication channels of the association world will be the ones that capitalize on this model. One obvious feature is to allow visitors to go beyond just reading the pronouncements of the experts, and be able to engage the experts in a dialogue.

Clients of AMCs Measure Up Just Fine

Michael LoBue writes: Recently I’ve been comparing the “performance indicators” between AMC-managed organizations to standalone organizations. The comparison is between certain common indicators found in the ASAE’s 13th Edition of the Operating Ratio Report (ORR — 2006-2007 data) and the AMC Institute’s Client Operating and Financial Benchmarking Survey Report of 2007. While not all of the data are in complete alignment across the two studies, I think three of the indicators do lend themselves to valid comparisons.

The Data:
Those familiar with ASAE’s ORR know the organizations were studied by type (e.g., trades vs. societies — as were the AMC-managed organizations) and by revenue size (e.g., <$1M, $1M – $2M, $2M – $5M, etc.). The Institute’s study involving 311 AMC-managed organizations is divided into smaller ranges. The comparisons below are between the 71 >$1M AMC-managed organizations to the 73 standalone organizations between $1M and $2M in annual revenue.

Key Performance Ratios ASAE
$1M – $2M (73)
> $1M (71)
Net Profitability
(Total Revenue minus Total Expenses as a % of Total Revenue)
4.8% 8.4%
Operating Efficiency Ratio
(Total Revenue divided by Total Assets)
1.3% 1.3%
(Total Liabilities divided by Total Fund Balance)
0.8 0.3



  • Net Profitability — AMC-managed organizations are almost twice as profitable as standalone organizations (also more profitable for AMC-managed organizations <$1M in annual revenue);
  • Operating Efficiency Ratio — AMC-managed organizations are just as efficient as standalone organizations across all revenue sizes compared;
  • Leverage — Standalone organizations are almost twice as leveraged as AMC-managed organizations for all revenue sizes compared (leverage in this sense translates into operating risks).

Why Does This Matter?
This matters because it brings into focus for association leaders real data that they can use to determine if they are being as prudent as possible in the governance and stewardship of their organizations. This data support what so many of the thousands of association leaders with direct experience using the AMC-model already know — that the model is not just cost efficient,it’s also effective!