Monday, November 10, 2014

Associations as Investments

By Steven M. Worth, President at Plexus Consulting Group, LLC

There’s a saying coined by the French — "the more things change, the more they stay the same." It’s a phrase that, until recently, didn’t apply much to the association world. Outside of perhaps the church, associations were among the only dependable islands of stability in a sea of social and economic change. Association members were loyal and leadership turnover was slight. Associations were, to paraphrase the theme song from "Cheers," places you could go where everyone knew your name.

Those days started to fade during the merger and acquisition frenzy of the 1980s and were definitely relegated to the history books with the arrival of the global economy a decade later. A few years ago, a roundtable conference was held entitled, "Evaluating Trade Association Membership." Executives from major corporations compared notes on how each determined which associations their companies joined. It was fascinating!

All had a similar story. Their budgets had been cut, forcing them to reduce the size of their staffs. And their budgets for association memberships had been cut as well. One executive of a very large corporation reported that her budget had been cut by 30 percent, so she simply told all the associations her company belonged to that they would be cutting their membership dues contributions by the same amount.

Another executive had a different approach. Five years ago, he had a staff of 15. Now that number is reduced to three, yet his company expects him to do the same job he did before with a staff that was five times as large. He saw the company’s association membership, which he controlled, as a way to help him do his job. In fact, he had constructed an "association report card" that helped him evaluate how well an association served his and his company’s needs. Those associations that "failed" were simply cut from the list. Those that "passed" received an additional infusion of funds — depending on how well they scored.

This executive said he used the report card he had invented as a tool for evaluating his company’s "investments" in trade associations. In this era of highly publicized, lean, innovative start-up companies that are aggressively seeking and creating new markets around the world, even those of us who don’t have a dollar invested in the stock market are beginning to know the difference between a good and bad investment.

As nonprofits, associations have long held that they "do well by doing good." Now even this truism has changed. More than ever before associations are not only being compared to for-profit companies, they are competing with them as well.

What association has not had to adapt to some or all of the following trends? For-profit corporations increasingly contributing to and participating in cultural, environmental, and civic causes — subjects that were once the exclusive domains of nonprofits. For-profits attracting away the employees of nonprofits with salaries and benefits packages that are many times more generous. And, for-profits making in-roads into education, training, and certification that all used to be reserved for nonprofit organizations.

Companies, like individuals, are increasingly reluctant to pay dues to a membership organization. They will pay to attend conferences, to purchase books, and to obtain advice; or they will pay for education, training, and certification — but don’t ask them to pay for something as intangible as "membership." Those associations have done best that have succeeded in increasing the ratio of nondues to dues revenues. Many of those that are struggling have not. Associations are becoming providers and sellers of products and services — just like commercial companies — and this, too, is further blurring the line between for-profits and nonprofits.

Many associations are finding that they need to rethink the very reason that they exist. Indeed they should. Their members are. With our economy making ever increasing demands on us, all of us are having to become more circumspect about where we invest our time and resources. Whether we are conscious of it or not, all of us have our own "report cards" in which we evaluate where we invest and where we cut back our investment.

As an association executive, where would you place your association? Are you a "good" investment?

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