Tuesday, April 6, 2010

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

(This is the last 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.)

The Fifth Stage of Decline – Capitulation to Irrelevance or Death

We have already taken a look at the first four stages of decline – hubris born of success, the undisciplined pursuit of more, denial of risk and peril and grasping for salvation.  Assuming an association struggling with the prior stages was able to make adjustments and rational choices, then perhaps Stage 5 will have been avoided. However, associations that experience the prior stages without remedy are likely facing the final stages described below.

Jim Collins narrows it down to three common paths in the end.  One path leads the organization to contract until it reaches a certain stasis point and then it limps along as a mere shadow of its former self. The second path involves proactive management of organizational demise, selling off assets and intentionally shutting down. The third path points to, as unlikely as it may seem, recovery as if hitting bottom was what it took to revive the leadership. I believe the culture within the association will be the deciding factor in which path the leadership will choose to take.

The following are five major factors, some of which are in your control and some of which that aren’t, that may have a bearing on which direction the association is destined to go in. They are salient points that must be honestly assessed and coped with before any final determinations can be made about the association’s future.

Can We Keep the Lights On? – Cash. We may not necessarily be out of sponsors, members or even hope - but we might be out of cash. In that case, the organization faces a potential death spiral - lurching from cycle to cycle, paying what bills they can and myopically focusing on meeting short term obligations. New programs may be necessary but out of reach because of staff layoffs or lack of investment capital on hand. As cash continues to tighten, choices become narrower and the ability to provide value becomes a practical impossibility. Recovery depends on the ability to stop the spiral and recapitalize without further jeopardizing the debt-to-equity ratio.

Is It Just Our Time? – Are we actually incapable of adapting? Have we buggy whipped ourselves into oblivion? Singular focus on mission and vision is admirable – unless we picked the wrong vision in the first place. Perhaps we have prudently managed ourselves into irrelevance and failed to notice innovations happening around us? Maybe our profession has run its course and we are no longer in a position to provide anything valuable to our members? Maybe the writing is on the wall. Recovery depends on the ability to confront and to be able to make a rational case to reject those lines of reasoning.

Do We Have Hope? – The rollercoaster emotional energy of dealing with the “high” of the overly successful, screaming fast ramp-up, only to confront the disappointment and disillusion of the fall and the devastation of the aftermath can drain even the most dedicated of volunteer and staff leaders. A key quote from Jim Collins is this, “It is one thing to suffer a staggering defeat…and entirely another to give up on the values and aspirations that make a protracted struggle worthwhile.” Hope without enough cash in the bank is not enough, but enough cash in the bank without hope is deadly. Recovery depends on hope for the future – realistic or not.

What Do We Do Now? – Merger? Bankruptcy? Complete reformulation of structure and services? Selecting a new strategic vision? Consider all options. What will the world lose if we are not here? Will it lose something valuable and irreplaceable? Can the hole be filled? Is our reason for existing still powerful and compelling enough that even under excruciating circumstances the will to fight remains? Are we committed to existing, even if in a new form, with new leadership or new staff? Recovery depends on making a deep commitment to evolve and maintaining a stoic will in order to emerge from turbulence as a wiser, more resilient association.

How Do We Wrap It Up? - If all else fails, double-check the wind up and dissolve clauses in the bylaws. (Oh, and if the organization doesn’t have strong affiliate agreements with their chapters that include clear directions on what happens upon dissolution of the main entity you could be in for BIG trouble). 501(c)(3)s will need to donate remaining assets to another 501(c)(3), 501(c)(6)s have additional options such as rebates to members, etc. Get legal counsel and do it right. Just ceasing operations may not be enough to get you off the hook with the Attorney General, Secretary of State, the IRS or to head off potential lawsuits from vendors or other stakeholder groups.

Thank you for joining us as we explored the concepts surrounding how even the mightiest of organizations can fall from prominence. Our sincere hope is that you were able to take some food for thought from the stories of others experiences and apply that knowledge as appropriate in your own associations. Best to you in the years to come!

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