Presentation at the ASAE Annual Meeting 2010 at the AMC Pre-Con event. LoBue presents findings of his comparative studies, examining the performance of associations managed by AMCs vs. direct staff hired model (standalone).

1. 2010 AMC Preconference Program
AMC-Managed vs. Standalone Models:
Evidenced-based Comparisons
Michael T. LoBue, CAE
President
LoBue & Majdalany Management Group
August 21, 2010

2. Table of Contents
 Context – The AMC “business case”
 General approach common to both studies
 Study #1: Operating Ratio Comparisons
 Study #2: Surplus – Deficit Analysis
 So What? What good are these results?
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August 21, 2010

3. Marketing the AMC-model
Case Studies: Feature-set collateral:
show how we got all of the good to describe the AMC
client’s ducks in a row… service model…
 Provide specialized staffing
services
 Overhead costs, like occupancy,
are shared across numerous client
organizations
 Access to typical capital goods
…but enumerating our services,
or how we deliver them, only
…but generally lack sufficient implies what the received
information that allows audience benefits might be for the
to know if the spectacular results organization or their governing
apply to their situation. board.
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4. New line of inquiry
 What: Head on comparisons between AMC-
managed and standalone organizations
 Uses: Conventional metrics for organizational
performance
 Goal: To establish a baseline of credible,
evidence-based distinctions between these two
leading management models for membership-
based organizations
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5. Study Limitations
 Data – type, reliability & quantity
 Metrics – at best, proxies for what really
matters impact and performance outside
the organization
“But the organization is an abstraction. Mathematically, it would have to
be represented as a point – that is, as having neither size nor
extension. Even the largest organization is unreal compared to the
reality of the environment in which it exists.
“Specifically, there are no results within the organization. All the results
are on the outside.” ‡
‡ “The Effective Executive”; Peter F. Drucker, © 1966; pg. 13
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6. Why head on comparisons to
standalone organizations?
 Because, there are so many of them!
89,409
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7. … and …
 More than half of the business leagues are in
our sweet spot in terms of annual budgets
Potential?
More than 50%
are ≤$5M
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8. Tale of Two Studies
 AMC Managed and Standalone Organizations – A Sibling
Study
May 2009; by: Michael T. LoBue, CAE
 Compares the operating ratio studies by ASAE (13th Edition) and
AMC Institute (2007 Client Operating and Financial
Benchmarking Survey Report)
 Are AMC-Managed Organizations Recession Resistant?
April 2010; by Michael T. LoBue, CAE
 Compares surplus and deficit trends of two groups of
organizations by examining 990 returns for 2006, 2007 and
2008
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9. General approach common to both
 Comparison of two management models:
 Organizations ≤ $5M in annual operating revenue
 AMC-managed organizations are “full management”
 Used existing data from known sources:
 13th Edition of ASAE OR Study (© 2007)
 Institute’s 2007 Client Operating and Financial
Benchmarking Survey Report
 990 returns for FYE 12/31 for 2006, 2007 & 2008
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10. #1: AMC Managed and Standalone
Organizations – A Sibling Study, May 2009
Net Profitability
Operating Efficiency
Leverage
Revenue Profiles
Expense Profiles
13th Edition ASAE Operating 2007 Client Operating &
Ratio Study Organization Profiles: Financial Benchmarking
Tax Status Survey Report
Member Type
Geographic Scope
Primary Interest/Subject Area
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11. How samples compare:
Standalone Organizations AMC-Managed Organizations
ASAE 13th Edition ORR AMC Institute Survey
Total Orgs in Studies 660 317
Size of Pool Solicited 8,000 1,134
(8.25%)* (28%)*
$1M or Less 74 (1) 235
(16%)* (76%)*
$1M to $2M 73 (2) 45
(15%)* (14%)*
$2M to $5M 110 (3) 25
(22%)* (8%)*
$5M or More 310 6
(47%)* (2%)*
* Percent of Sample (1) Page 47 of ASAE OR Report
(2) Page 73 of ASAE OR Report
(3) Page 93 of ASAE OR Report
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12. Performance Ratios
 Net Profitability – The amount of revenue collected less total
expenses incurred over a period of time (e.g., one year).
5.2% isn’t
exciting, but it is 8.4% is 22%
10x’s greater than greater than 6.9%
what standalone and
organizations ≤ 55% greater than
$1M produced! 5.4%
From page 11 in report
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13. Performance Ratios, continued
 Operating Efficiency – tells us how many dollars in revenue are
generated by each dollar of assets employed in running the organization
AMC-managed
Slight advantage by orgs >$1M are
AMC-managed, but enjoying 38% better
probably not OE performance;
material
plus
75% of the AMC-
managed
organizations are at
or above where
only 50% of the
standalone orgs
are…
From page 12 in report
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14. Performance Ratios, continued
 Leverage Ratio – is a measure of an organization’s ability to cover its
financial commitments – this is a good proxy for a risk profile – lower is
more desirable.
Slight advantage by
AMC-managed, but
probably not
material
From page 13 in report
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August 21, 2010

15. Revenue Profiles
 Standalone
organizations derive Revenue Profiles by Management Model
85% (≤$1M) and 90%
($1M-$5M) of revenue
from 3 sources.
 AMC-managed
organizations are less
dependent on these
three sources.
 Conclusion: An
organization with a
more varied revenue
profile is less at risk
during volatile times.
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16. Expense Profile: Meeting Expenses
 AMC-managed organizations spend more
resources on member programs!
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17. Expense Profile: Insurance (risk)
 Not big #’s – but differences are striking:
 Organizations between $1M and $5M in revenue operate at twice the
risk of AMC-managed organizations…
 …for organizations ≤$1m, the AMC-managed model is 16% less risky
50% less risky?
16% less risky?
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18. Expense Profiles: Infrastructure
Aka: the “Standalone Premium”…
14.1%
= 46%
30.5%
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19. How do organizations compare?
 …or, “how are the organizations managed under these
two models similar?”
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20. By primary interest/subject area
 While some differences
exist between the two
models (e.g., Business/
Commercial, Education and
Healthcare/Medical), each
management model has a
strong presence across the
range of organizations by
Interests/Subject Areas
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August 21, 2010

21. Summary of OR Comparisons
✓ ✓
✓
✓
✓
✓ ✓
✓ ✓
✓ ✓
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August 21, 2010

22. Data supports:
 Organizations ≤$5M managed by these two
models are essentially the same in terms of:
 Tax status  $Member type
 Geographic scope  $Interest area
 Organizations ≤$5M managed by AMCs:
 Generate greater surpluses
 Generate greater revenue from each $ of asset in running the organization
 Operate under a lower risk profile
 Have a more diverse revenue profile
 Spend a higher percentage on meetings and member programs
 Spend about a 1/3 less for infrastructure
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23. Analyzing costs using a bell curve
 The bell curve is the shape of a “normal distribution of
observations” for independent, random variables, like
the percent of revenue organizations spend on
infrastructure services
Mean, Mode and
Median values are
the same
% of revenue
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24. Standalone Infrastructure Costs
 Average % of revenue spent by standalone organizations for the
basket of services they could obtain from an AMC is 44.6%
% of revenue
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25. AMC-Managed Infrastructure Costs
 Average % of revenue spent by AMC-managed organizations for the
basket of services they would have to shoulder on their own is
30.5%
% of revenue
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26. Compare Infrastructure Costs
 The only valid comparison of this data is that “on average”
standalone organizations pay >46% premium to own their resources
1st Quartile 3rd Quartile
% of revenue
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August 21, 2010

27. #2: Are AMC-Managed Organizations
Recession Resistant?
On October 30, 2009, CEO
Update publishes shocking
results about their analysis
of “more than half of the
national associations…”
WOW! The number of
associations operating at a
deficit on 12/31/08 was
“DOUBLE the rate of the
past two years.”
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August 21, 2010

28. So, Are AMC-Managed Organizations
Recession Resistant?
YES – at least at the
outset of a
recession! The data
strongly suggests
that AMC-managed
organizations are
better able to handle
a recession than
their standalone
siblings!
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August 21, 2010

29. How samples compare by revenue size
 Average standalone in study was more than 2x
larger than AMC-managed organization
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30. How samples compare by organization type
 Standalone organizations more prone to trades
vs. societies… does this account for differences?
doesn’t appear to matter
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31. Surplus profiles by organization type
 Societies and trades managed under the
standalone model have dropped proportionally
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32. Surplus profiles by age of organization
 Standalones, on average, were older (42 yrs. vs. 34
yrs.), but 3 out of 4 oldest were AMC-managed orgs
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33. Surplus profiles by exemption type
 Very consistent with operating ratio comparisons (see
slide #19)
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34. Summary of Surplus – Deficit Study
 The number of standalone organizations operating with a
surplus between 2006 and 2008 dropped 45%, whereas
the number of AMC-managed organizations operating
with a surplus over the same period dropped only 3%.
 The profile of AMC-managed to standalone organizations
supports the findings of the 2009 OR study – there’s
basically no difference between organizations regardless
of their management models – apart from AMC-managed
organizations enjoying greater operational benefits.
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August 21, 2010

35. So what? • Why do these #’s matter?
 Today, claims about the value
of the AMC-model are based
more on faith than evidence!
Like a building without a
foundation…
 These results are important
because they substantiate
claims of value and results
? ?
delivered.
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August 21, 2010

36. Calls to action
 Update firm collateral with findings
(see example)
 Add a boilerplate statement
emphasizing one or more of the
results
 Educate other association service
professionals you know (e.g.,
lawyers, accountants, consultants,
etc.) about these findings and the
AMC-value proposition
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August 21, 2010

37. Further Research Opportunities
 L&M is already gathering 2009 990 returns on the study groups
to update the Deficit - Surplus study
 ASAE & The Center’s new Form 990 Online Database – help get
AMC-managed organization data included!
Questions / Areas of Exploration:
HR Comparisons – tenure, professional certifications, benefit packages, etc.
Professional Development – comparison of two models
FTE Assignments – comparison of two models
Standalone ROI – What justifies the 46% premium a standalone would pay vs.
using an AMC?
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August 21, 2010

38. Suggested reading
(The) Effective Executive
By: Peter F. Drucker
© 1966
Hard Facts Dangerous Half-Truths & Total Nonsense
By: Jeffrey Pfeffer & Robert I. Sutton
© 2006
How to Lie with Statistics
By: Darrell Huff
© 1954
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39. Contact Information:
Michael T. LoBue, CAE
President, LoBue & Majdalany Management Group
Phone: +1.415.561.6111
E-mail: lobue@lm-mgmt.com
Website: www.lm-mgmt.com
Special thanks and acknowledgement to the following for their assistance in
contributing data and guidance: Rick Cristol, John Dee, CPA, Bryce Denton, Steve
Drake, Taylor Fernley, Jay Hauck, Esq., CAE, Jaime Nolan, CAE, John Ruffin, CAE,
Greg Schultz, and Gregg Talley, CAE; and to Francine Butler, PhD.
And a special thanks to Ms. Cheryl McKinney for assisting in the creation of the bell
curves used in this presentation.
August 21, 2010