Why Associations Fail

Andy FreedExecutive Vice President & COO

Virtual, Inc.

About Virtual

• Evolved from PR company founded in 1989• Full management services

– Range from startups to multi national associations

• Outsourced technology solutions • Consulting and strategic services

Ground Rules

• Be as rude as me• Listen, don’t read• The power of Diet Coke & The Good

Doctor• Thanks, Tom• Lifetime guarantee

The many flavors of failure

• Bankruptcy/closure• Forced merger• The Walking Dead

The 10 Big Causes1. Lack of mission focus2. What now? syndrome3. Failure to communicate benefits4. Free riders5. Customer service issues6. Resisting change 7. Straying into the wrong business8. Mergers gone wild9. Failure to keep up with competition10. Pricing structure

The 10 Big Causes1. Lack of mission focus2. What now? syndrome3. Failure to communicate benefits4. Free riders5. Customer service issues6. Resisting change 7. Straying into the wrong business8. Mergers gone wild9. Failure to keep up with competition10. Pricing structure

Lack of mission focus

• What do we believe?• Whom do we serve?• What do we do?

--Endowment Leadership Program, Eli Lily Foundation

Lack of mission focus

• Colin Powell– Mission—Why?– Strategy—What?– Tactics—How?

Who’s minding the mission?

• Without the connection, organization can quickly go adrift

• Association boards love to get mired in the tactical at the neglect of the mission

• Mission focus answers the tough questions

“Strategy meetings held once or twice a year” to “Strategy meetings needed several times a week”

--New York Times on Meg Whitman (Ebay)

Practical Strategies

• Put mission statement on every board agenda

• Revisit mission statement on a regular basis

The 10 Big Causes1. Lack of mission focus

2. What now? syndrome3. Failure to communicate benefits4. Free riders5. Customer service issues6. Resisting change 7. Straying into the wrong business8. Mergers gone wild9. Failure to keep up with competition10. Pricing structure

What Now? Syndrome

• Organizations of all types confront this question:– March of Dimes– Dartmouth College

What can you do?

• Declare victory and shift focus– REIMAGINE your mission– ESPN vs. SI

• Declare victory and shut down• Create your competition—start building

Saturn today...

“It’s generally much easier to kill an organization than change it substantially.”

--Kevin Kelly

Out of Control

The 10 Big Causes1. Lack of mission focus2. What now? syndrome

3. Failure to communicate benefits4. Free riders5. Customer service issues6. Resisting change 7. Straying into the wrong business8. Mergers gone wild9. Failure to keep up with competition10. Pricing structure

Failure to Communicate Benefits

• Endemic distaste for marketing and self promotion within associations & non-profits

• Turnover within membership• Budget pressure on membership

Thump your chest!

• Newsletters• Visits with members• Regular “value reports” with solid data• Member meetings

The 10 Big Causes1. Lack of mission focus2. What now? syndrome3. Failure to communicate benefits4. Free riders5. Customer service issues6. Resisting change 7. Straying into the wrong business8. Mergers gone wild9. Failure to keep up with competition10. Pricing structure

“Rational, self-interested individuals will not act [voluntarily] to achieve their common or group interests”

--Mancur Olsen

The Logic of Collective Action

Put another way…

• For a lot of groups, this is bad news bears!– Environmental organizations– Advocacy organizations

Close the door

• Members only benefits• Make the argument—if not for your

support, how will it happen• Make it hurt when someone drops their

membership

The 10 Big Causes1. Lack of mission focus2. What now? syndrome3. Failure to communicate benefits4. Free riders

5. Customer service issues6. Resisting change 7. Straying into the wrong business8. Mergers gone wild9. Failure to keep up with competition10. Pricing structure

“The single most important thing to remember about any enterprise is that there are no results inside its walls. The result of a business is a satisfied customer.”

---Peter Drucker

Lack of Customer Focus

• Is your organization customer friendly?– Can people find things on your web site?– Do members know how to call?– Do you have response policies to member

requests?– Benchmark against the best, not just your peers:

• Nordstrom• LL Bean

Block and Tackle Well!

• Invoice process• Contact information• Going a step further—strategic use of

information– Are you spotting problems before they

happen?– Mine, Mine, Mine

• Don’t forget internal customer service!

The 10 Big Causes1. Lack of mission focus2. What now? syndrome3. Failure to communicate benefits4. Free riders5. Customer service issues6. Resisting change 7. Straying into the wrong business8. Mergers gone wild9. Failure to keep up with competition10. Pricing structure

Key Strategies for Keeping Up

• Ask the tough questions– Are we still in the right business?

• Ask the “wrong people”• Learn from everywhere!• Try. Fail. Repeat.• Don’t wait for your members! Lead

them!

“Breakthroughs come from an instinctive judgment of what your customers might want if they knew to think about it.”

--Andy Grove

Chairman, Intel

The 10 Big Causes1. Lack of mission focus2. What now? syndrome3. Failure to communicate benefits4. Free riders5. Customer service issues6. Resisting change

7. Straying into the wrong business8. Mergers gone wild9. Failure to keep up with competition10. Pricing structure

MHA’s Mission

• Provide information, perspective and advocacy to hospitals in Massachusetts

Some of the Things I Managed There

• A software company…• A print shop…• A construction project…

“We own all the intellectual property, we farm out all the direct labor.”

--Jim McDonnell

Vice President, IBM

Put another way…

• Don’t do what you’re not very good at!• Outsource wisely to maintain focus• In some cases, you can be an

outsource service provider

The 10 Big Causes1. Lack of mission focus2. What now? syndrome3. Failure to communicate benefits4. Free riders5. Customer service issues6. Resisting change 7. Straying into the wrong business

8. Mergers gone wild9. Failure to keep up with competition10. Pricing structure

“When asked to name just one big merger that had lived up to expectations, Leon Cooperman, former cochairman of Goldman Sachs’ Investment Policy Committee, answered: I’m sure there are success stories out there, but at this moment I draw a blank.”

---Mark SirowerThe Synergy Trap

Merger Mania

• Big uptick in mergers among associations

• It’s not easy…culture can kill you• Leave yourself an out

The 10 Big Causes1. Lack of mission focus2. What now? syndrome3. Failure to communicate benefits4. Free riders5. Customer service issues6. Resisting change 7. Straying into the wrong business8. Mergers gone wild

9. Failure to keep up with competition10. Pricing structure

Competition

• A whole new (global) world!• If you don’t think you have competitors,

you’re probably wrong!• Elance.com• What are your “only”s

“You do not merely want to be the best of the best. You want to be considered the only ones who do what you do.”

--Jerry Garcia

The 10 Big Causes1. Lack of mission focus2. What now? syndrome3. Failure to communicate benefits4. Free riders5. Customer service issues6. Resisting change 7. Straying into the wrong business8. Mergers gone wild9. Failure to keep up with competition

10. Pricing structure

Pricing

• Last on the list…it’s not the price, it’s the value

• Remember, members often equate price with value– Sometimes cutting your price becomes the

reason you sell less!• Not every price needs to be charged

Creating value: Birthday Cakes1940: Cake from flour, sugar (raw materials economy): $1.001955: Cake from Cake mix (goods economy): $2.001970: Bakery-made cake (service economy): $10.002003: Party @ Chuck E. Cheese (experience economy) $250.00

Is your membership raw eggs or a party?

If you take away nothing else:

• Know the business you’re in and why you’re in it

• Service above all else• There’s no substitute for good data

Andy Freed

Virtual, Inc.

781 876-6205

Afreed@virtualmgmt.com

www.virtualmgmt.com

5. Measure. Benchmark. Repeat.

• Annual formalized membership satisfaction surveys

• Don’t just measure performance, measure expectations

• Doing “Ok” is NOT OK• Benchmark constantly and broadly

“I’m in [insert department here], not membership, so I don’t have to do that”

--Any number of people I’ve worked with

“That’s right, I forgot—your salary doesn’t come from dues or revenues from products or services we provide the members…”

--My typical response*

*Not what I really wanted to say!

“The deepest human need is the need to be appreciated.”

--William James

“The two most powerful things in existence: a kind word and a thoughtful gesture.”

--Ronna LichtenbergIt’s Not Business, It’s Personal

“Never forget to say thank you.”

--My mom

Put their name up in lights!

• Awards programs• Ad hoc correspondence• Newsletters• Don’t forget “formers”

“Service is just a day in, day out, ongoing, never ending unremitting, persevering, compassionate type of activity.”

--Leon Gorman, L.L. Bean