Wednesday, February 24, 2010

How the Mighty Fall - Associations at Risk - Part 2 of 5

(This is the second in a five-part series and a break from my normal format.  During times of economic crisis many questions haunt executives, boards, staff members and volunteers alike.  How will we weather this storm? How long will it last?  How are our members being affected?  Will this signal a decline for our organization?  How will we know for sure and what can we do about it?  In his most recent work, How The Mighty Fall: And Why Some Companies Never Give In, Jim Collins posits five signs of an organization at risk of or beginning the descent into chaos, decline and - at the very worst -  destruction.  This five-part series will take a look at each of the main stages identified by Jim Collins and relate them to issues you may be facing as association professionals.)

After the first stage of decline - hubris born of success, the second stage is the undisciplined pursuit of more.  Think of it as akin to managing a group of race car drivers.  Association volunteers and staff that feel invincible and overconfident will begin to lean into the accelerator pedals in the turns.  The speed is fun, maybe just a little out of control and the adrenaline rush is addictive.  Each time around, they lean into the pedal a little more.  The trick is laying off the gas enough to maintain momentum without losing control.  The Stage 1 and Stage 2 run-up in the race may be long or short, but the Stage 3 crash is the same.

Remember, the five stages of decline are just markers along the way.  Organizations can conceivably rescue their enterprise at any point.  The trick is honestly facing and evaluating what stage your association may be in.  Both Stage 1 and Stage 2 behaviors gain traction while leaders are feeling powerful and the association seems to be thriving.  Continued success often masks indicators of potential danger leaving the leadership less inclined to listen to warnings.  Because of this, concerns expressed by other stakeholders can be viewed as negativism or worse, obstructionism.

Members, Members, Members – Beware of leadership which, absent direction from legitimate needs outlined in the mission and vision, begins to obsessively focus on new member acquisition.  More members, more members!  The leaders who focus on “more” often judge staff and volunteer performance on new member recruitment numbers rather than current member retention.  Leadership obsessed with recruitment at all costs will champion such things as running reckless membership promotion campaigns, offering deep, unsustainable dues discounts, offering commissions for new member sign-ups, or offering lavish prizes in member-get-a-member contests.  They can even recruit more members than the association staff can adequately serve leading to disappointment and low retention rates for new recruits.  The zeal to attract new folks can lead to creation of a multitude of member categories that range far a-field from the organizations base creating tension in the ranks and core misunderstandings about the value of membership on the part of the newly recruited.

Rapid Chapter Expansion – Beware of excited yips around conference rooms that sound like, “Of COURSE we need a chapter in Yreka, population 7,368!”  Leaders engaged in Stage 2 behavior often pursue membership increases and chapter expansion simultaneously. Chapter/section/region/component development is a process that should be thoughtfully engaged in and carefully negotiated.  Governance concerns, financial reporting and accountability, division and billing of dues and all of the hundreds of other issues covered in a comprehensive affiliation agreement are often rushed through.  Sometimes association leaders even forget to consider whether enough members even exist in a given geographic area to ensure a healthy and functioning group or whether there are political landmines involved with current chapters who may be angry about a new group starting up in their own backyard.  Concerns on the part of the executive regarding appropriate staffing levels needed to develop, manage and maintain close relationships with the new chapters are frequently shoved aside in the zeal to hit that “X number of new chapters this year” goal.

Mergers and Acquisitions – If your association leadership has that “more” gleam in its eyes, keep a sharp ear out for talk that bubbles up about sister associations within your profession or industry.  If leaders are feeling cocky they may suddenly and aggressively pursue potential mergers and acquisitions that may not serve the long-term interests of either organization. Due diligence is often the first casualty of any aggressive merger effort.  Weaker, “pounc-ees” may be only too happy to capitulate, leaving the “pounc-er” in dire financial straits when they finally get a look at the detailed financial statements.  Mergers may fly in the face of the actual mission and vision of the organization, offend members of both and can create bad blood in a profession or industry.  The dark side of rebuffed advances can lead “more, more” associations to conduct “raids” on the others membership as a way to weaken or discredit the other organization and “force” the eventual outcome.

Non-dues Program Proliferation – If a little non-dues revenue is good, more is better right?  Not necessarily.  Beware of leaders who become obsessed with non-dues revenue programs as a way to generate additional income.  Often in their zeal to pursue profitable business arrangements boards and committees will endorse any and every program that comes their way without doing enough due diligence and determining if the program will serve a strategic purpose, offer genuine value to the membership or if the proposed partner is willing to operate within the ethical guidelines and stated values of the association.  Again - in almost every instance whether based on a simple royalty basis or a more involved structure – any non-dues revenue program will have some staff impact and in some cases that impact can be significant.  If you hear volunteers blithely saying, “No worries, we’ll make enough money in the first year to hire another staff member to help absorb the hit,” you can almost guarantee you are in for a rough ride.

Balance Sheet Insanity – Association leadership on the “more” bandwagon will often waffle between two financial extremes.  They either become obsessed with spending money or saving it.  Boards can fall victim to reckless spending and borrowing in order to acquire more office space, more staff, more stuff, more lobster, more whatever.  The flip side is becoming miserly and hoarding more and more in reserves and investments at the cost of member service.  Instead of balancing fiscal responsibility with member needs and expectations, they spend freely on the things they feel will make them more important in the eyes of the members or on the other extreme, indiscriminately cut staff, programs and services to prevent any incursion into their savings accounts.

The bottom line is this - expansion is a good thing when done responsibly and when contingencies are thoughtfully planned for.  Even rapid expansion can be just fine if the issues brought up are appropriately assessed, honestly debated and intelligently handled.  Expansion at all costs including the abandonment of the strategic vision of the organization, recruitment for recruitments sake and other risky behaviors are a recipe for disaster.  The undisciplined pursuit of more is a heady mixture of danger and daring and often includes stifling dissent, pie eyed optimism and coping strategies (i.e., the hiring of additional staff with the incoming profits) that are wholly contingent upon the launching of the venture in the first place.

If your association leadership is after more and you aren’t feeling good about it, you may need to take steps to counter.  Education will be a key part of your strategy and putting appropriate policy in place to attempt to address some of these concerns before they gain traction will be helpful.  You have a responsibility to speak up and represent the best long-term interests of the members and the organization.  However, be aware that executives and staff who express concerns during this stage often run the risk of being painted as negative and unsupportive.  Executives who express too many concerns are sometimes replaced by executives who are perceived as “more innovative” and willing to take bigger risks.  In that case, it’s okay to be replaced.  If you manage to keep your position, you will just end up being blamed when they hit the wall in Stage 3 anyway.

Join us next time as we evaluate the third stage in decline – denial of risk and peril.

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