The Recession & the Business of Associations

How is the continuing recession likely to impact your association? And, what are you going to do about it?

As unemployment continues to hover around 10%, a couple of recent news items suggest associations and nonprofit organizations need to aggressively look at alternatives to business as usual

First, according to last year's comprehensive research from ASAE and the Center (http://bit.ly/6NwCyM and http://bit.ly/FuTeA), the recession will impact both membership and meeting revenues for the majority of associations. Specifically:

• Two-thirds (66.2%) of associations projected a decline in member revenue and about two-thirds (66.4%) anticipated a drop in overall revenue.
• The portion of members who feel their employment situation will worsen and who intend to drop their membership has doubled in just one year.
• Most organizations expect the declines to continue throughout 2010.

Meanwhile, an article in the Wall Street Journal (http://bit.ly/6L20oI) headlined "Strategic Plans Lose Favor" caught my attention. The key points of the article included:

• As the economy faltered, major corporations determined they needed to be more flexible and shift course on the fly. Thus, they dropped reliance on traditional strategic planning and instituted a flexible review schedule with monthly or quarterly updates.
• Office Depot moved to updating budgets monthly and its CEO said "This downturn has changed the way we will think about our business for many years to come."
• Walt Shill of Accenture Ltd. said "Strategy as we know it is dead. Corporate clients decided that increased flexibility and accelerated decision making are much more important than simply predicting the future."
• Many companies have moved to updating strategic plans monthly or quarterly so they can adjust to downturns and/or capture opportunities from changing consumer habits.

So, what does this suggest for nonprofit organizations? What does it mean for our "long-term" strategic planning? Do we, like corporations, need to change our systems to be more nimble and flexible so we can quickly adapt to changing conditions.

To me, this seems to be more of a “wake up” that “long-term planning” may not be as relevant in a rapidly changing world. Yet, we still need strategy to guide decision making even if short-term decisions.

Someone once said that organizations are better situated if their strategic plan/budgets are a "game plan" rather than a "blue print." Why? Because you can change a game plan “on the fly” or at halftime while changing a blueprint (including “approvals) takes much longer.

As an association management company, we've been working with our association partners to adjust to the changing conditions impacting their mission / business.

Two of our clients have moved to detailed reviews and revisions to their budgets on a quarterly basis ... similar to what companies are doing. Both depend heavily on dues, meetings and sponsorship revenue to support their program budgets. As the economy impacts all three key areas, they are looking for "money in the bank" or strong assurances that the money will come in before they authorize program expenditures. While challenging, this flexibility helps these two organizations end the year without pulling money from reserves.

What about you? How is your organization responding to economic challenges? Have you adjusted your budgeting and planning processes? If so, how?

Steve

Spring Planting

It's late January and my natural inclination is to hibernate (or curl up with a good book and wait till spring). One of the tricks I use to get through the gray days is to look at all the gloriously colorful seed catalogs that arrive in my mailbox. They "plant the seeds" of possibility of amazing things ahead, of the bounty of the summer garden.

Last week our team helped "plant the seeds" of a long-term relationship with one of our client association's new sponsors. Our client team had made contact with a new company (new to the association) and sold them on the opportunities the association could provide them. The company was going to start out small, "testing the waters" by exhibiting at the upcoming annual conference. E-mails and phone calls went back and forth, and it turned out they had an overstock on a product that our association members might be able to use. We discussed ways to offer this free product/service to the members. More e-mails and phone calls followed, and it was decided that we would send all members info about this offer through - you guessed it - an e-mail! Additional info would be included in upcoming e-newsletters.

In my follow-up with the company rep, he was very appreciative of our efforts on behalf of our members and his company. And that's when I "planted the seeds" for future opportunities to "grow" his company's relationship with the association.

Because he was so pleased with our work on behalf of the association and because he sees the benefits of supporting it - for his company and our members - he agreed to provide more support for the association. The company is "planting its own seeds" through advertisements in two upcoming association publications.

Thanks to great client teamwork, an association that has much to offer its members and sponsors, and a company that is receptive to new opportunities, my spring planting is off to a good start.

Innovation and Associations

Steve Drake, Jamie Notter, Jim Quick and I are getting ready to do a presentation on social media at the AMC Institute annual meeting in February. We came across some interesting information when we surveyed our counterparts at other AMCs. According to our informal survey of association management companies (AMC), social media technology has been underutilized or avoided by many AMC leaders and used sparsely by AMC clients.

I, and my fellow presenters, would probably argue that social media is one of the greatest innovations for associations in recent history. Social media allows groups of like-minded people to assemble, share ideas and hold conversations easily, cheaply and without a gatekeeper (read: association buraucracy) standing in the way.

This factoid led me to a question: What association structure is more likely to innovate in the non-profit community -- an AMC or a stand-alone association? And why?

AMC are incentivized to innovate?


Most AMC's are for-profit companies. The number one goal of any for-profit business should be increasing shareholder value. We should be making decisions considering risk and reward, and perhaps be willing to take more chances with innovative ideas such as social media because the better we do for our clients, the more value we create for our shareholders.

But, evidence suggests otherwise. A couple of factors play into that evidence. Often risk (investment) is burdened by the client. It's the client's money that's spent to upgrade a database or invest in video conferencing for educational programs; therefore reward should be theirs, not the AMC's. Yet, there are many barriers to client investment in capital-intensive projects. As we know in the nonprofit community, volunteer leaders are often tight-fisted when it comes to new, unproven or "risky" ventures. So do AMCs and their clients' inherently avoid risk?

Secondly, the risk/reward cliff is steep in the AMC business. And pushing a volunteer board into a decision about new technology or initiative that fails could mean a loss of confidence in the staff, as well as, serious loses for the client and cuts in fees for the company. A serious misstep may mean losing a client, layoffs and the difference between a red or black year.

So do stand-alone associations foster a more innovative environment than AMCs?

In larger associations, specialized staff may have more time for professional development because they are juggling multiple clients, which may keep them more current on trends and innovations. The culture may allow more experimentation and freedom because the organization isn't as concerned about the number of hours a staffer bills versus an AMC where that is a chief concern. Additionally, in a stand-alone association full-time, salaried personnel are a sunk cost, whereas an AMC staffer could generate greater profitability by using his or her downtime to work on another client.

From my experience at Drake & Company, we thrive on innovation and encourage our clients to take calculated and informed risks. We've been riding the wave of social media and are at the forefront of cause-related marketing. We seek innovation that increases member value for our clients and look for new clients who want creative ideas and new ways of thinking rather than sticking to the status quo.

Although I don't have an answer to the question of who is better at innovation, I'm curious to hear what AMC staffers and stand-alone association staffers think.

BTW: Riding a firecracker into the sky is not an effective way of innovating. But it's a hell of a ride.

Power of Timing & Thanks

As we were closing our fiscal year, I received a letter asking for a donation to an educational foundation within our profession.

Great timing!

I authorized a donation to the foundation.

This week, I received a phone call from Sally at the foundation. She was calling to say thanks for the generous donation. She said a formal thank you letter would follow but she just wanted to thank me for the generous donation.

The power of thanks.

Next year, I'll put a donation to that foundation into the budget.


So, as you look at your plans for 2010, have you thought about the timing of your annual giving campaign?

And, more importantly, what is your process for saying thanks?

Remember the power of a simple phone call!