A new white paper examines the two leading management models for trade associations and professional societies.
According to the numbers, organizations managed by Association Management Companies (AMCs), on average, enjoy stronger performance across a variety of industry standard metrics than organizations that hire their own staff, own or lease their own office space and spend their revenue on capital expenses.
The first comparison of its kind in the association management field, AMC Managed and Standalone Organizations – A Sibling Study measures and interprets independent study findings on net profitability, operating efficiencies and risks, and revenue structure for both management models.
A resource for nonprofit leaders evaluating management and staffing options, the full white paper is available for free download at www.AMCInstitute.org. than taking a position on the question of which management model is better, the white paper lets the data tell the story, and helps identify some of the questions nonprofit leaders might ask in seeking out the best management model for their organization,” said white paper author Michael T. LoBue, CAE.
LoBue is president of LoBue & Majdalany Management Group, and a longstanding AMC Institute
board member. “Ultimately, the data points to the overall strength and profitability of the AMC-managed model.”
The white paper focuses on two primary questions: 1) Is there some inherent difference between types of organizations based on their management and staffing model? and 2) Are there different operating characteristics for organizations based on these two different models?
In his analysis, LoBue took a quantitative look at the results of two sibling benchmarking studies: a 2007 AMC Institute Client Operating Ratio Study, which spanned 319 associations managed by 50 AMC Institute member AMCs; and the Operating Ratio Report, 13th Edition, published by the American Society of Association Executives (ASAE), analyzing a group of standalone associations. Both research projects were independently conducted by Industry Insights.
Based on head-to-head comparisons, the data shows only slightly different profiles in the types of organizations managed by the two models.
Each management model has been implemented for a range of trade associations and professional societies, representing a broad spectrum of budget sizes, geographic scopes and service profiles.
But of note, the white paper illustrates outstanding differences between the operating and expense ratios of AMC-managed and standalone associations, drawing attention to the efficiencies of the AMC model across the following categories:
Net Profitability: Organizations with annual revenue up to $1million experienced at least a 10-fold greater net profitability when managed by AMCs versus their standalone siblings.
For organizations with annual revenue between $1-5million, this advantage for AMC-managed organizations was at least 22 percent greater than for standalone organizations of this size.
Operating efficiency: Organizations with annual revenue up to $1 million enjoyed a small improvement in operating efficiency when managed by an AMC vs. a standalone arrangement.
For organizations with operating revenue between $1-5million, this advantage for AMC-managed organizations jumps to at least a 30 percent improvement when compared with standalone organizations of the same size.
Risk Profile: For organizations with annual revenue up to $1 million, those managed by AMCs appear to operate with a 25-50 percent lower risk profile than organizations using the standalone model.
This risk profile is about 10 percent lower for AMC-managed organizations with annual revenue between $1-5million.
Total Dues Revenue: Organizations with annual revenue up to $1million generate comparable revenue from dues between the two models, but for organizations with annual revenue between $1-$5 million, the AMC-managed organizations derive considerably less revenue from dues (26.2%) than standalone organizations (41.8%), providing a more diversified – and perhaps balanced – revenue profile than for standalone organizations.
In sum, AMC-managed organizations generate higher productivity and higher net profitability, while enjoying more diverse revenue profiles and lower operating risks than standalone associations.
In terms of cost comparisons, AMC-managed associations pay on average a third less for the staffing, occupancy and capital costs than sibling standalone organizations.
Standalones appear to be paying, on average, a 50 percent premium for comparable services from the AMC-managed model.
The full white paper is available for free download at www.AMCInstitute.org, along with considerations for further research.
