At Association Hub, we love Association Management Companies. The model is excellent for so many of our clients that are making the move from purely volunteer associations to professionally managed organizations. While an AMC may not be the right solution for every association, the statistics speak for themselves. There has been good research over the years that looks at comparative bench-marking of staff run versus AMC run associations. Not surprisingly, a number of good studies can be found at the AMC Institute.
A full third of our clients are run by AMC’s and while we remain agnostic, we always encourage associations to consider all possible models for professional management. Our quandary lately though has been how to provide advice to client boards with good, long standing AMC relationships that want to ensure some degree of due diligence. Consider yourself in this situation:
- Well established, healthy association
- Long standing relationship with an AMC
- All staff are employees of the AMC
- Numbers are good, reserves are healthy, association is growing
- The board has no reason to be unhappy with their AMC
- They love the staff and love the growth and continual improvement of the conference and programs
But, the board has a duty of care to spend members’ money wisely and ensure they are getting value. More than half of the association’s total revenues are paid to the AMC. This is not an unusual situation. In fact, many associations with AMC’s are in a very similar position. So everything is fine. Everyone is happy and getting along, but there is a twinge of uncertainty. Is the board exercising reasonable due diligence about how all the money is spent? When the board usually has questions like this, they ask their management and staff…who are also the AMC. Who can they talk to about this? These questions generally arise when the AMC is negotiating their contract. The AMC is usually driving the conversation about fee increases based on increased services.
There is no reason to go to RFP…if not the nuclear option, this is at least like telling your spouse you want to see if there is anyone better out there. How can a board perform realand meaningful due diligence regarding the majority of association expenditures without metaphorically poking their best partner in the eye? Find out in the next blog…
Last blog we discussed the top 5 indicators your association board might be slacking…or at least lacking full engagement. We have had plenty of feedback on the blog and suggestions for 5 more indicators to round out a top 10 list.
- Active and effective committee leadership is critical to success for many associations. While there are many board members that step up and provide the leadership required, there are many other examples of board members that pay lip service to this role. Association managers are counting on board members to drive the mandate and work of important committees forward, but all too often low committee engagement just causes more work for staff.
- Active engagement in cultivating volunteers is something board members often see as the sole domain of association staff, but this is a critical space where we need board support. Board members are in the best position to turn regular members into volunteers and volunteers into super volunteers. Association management can help with a clear and disciplined process for volunteer engagement, but board members need to be prepared to take an active role.
- Active participation in board succession may be as obvious as attendance, but many board members pay mere lip service to their role. Any first time association board member will tell you that ensuring effective succession is central to association sustainability, but do they know what that means? Again, association management will provide a strong process, but we need every board member cultivating future directors and ensuring a full and strong slate every time.
- Director skill development is also given cursory and spotty attention by many board members. Beyond director orientation and initial board training, we need directors to constantly be honing their skills to really serve associations effectively. We may recruit directors for their specific skills, but we need them to learn the basics of the association. After one year on your board, can all your board members tell you your association’s annual budget, or reserves? What about board members that have served many years? From our experience, the vast majority cannot.
- AMC oversight is simply the most important function that many boards overlook. With an average of 50% of revenues going to their association management company, boards have an obligation to members to ensure they are getting full value year after year. While we do see boards that get obsessed with monitoring and squeezing their AMC, we also see boards that let the tail wag the dog.
Association board members are mostly tireless, passionate volunteers and we love them for it, but there are too many directors that are passive and disengaged. Imagine the success of your association if every board member was fully engaged in all the right areas.
How do you measure engagement of your association board? Aren’t volunteer boards engaged by their very definition? They aren’t paid, so isn’t it enough that they just show up most of the time?
A few weeks ago, we wrote about the role of boards in taking association strategy sessions more seriously. While we believe that making and actively stewarding effective strategy is one of the most critical areas requiring strong engagement, there are a number of other areas where we need our boards to be engaged. So much of our focus on association board performance is what happens in meetings that we neglect all the areas where we often need board assistance. Every board is different and so is every board member, but here are the first 5 of our top 10 where association boards generally have room for improvement. We will cover 6-10 in our next blog.
- Attendance is the obvious one and although we have actual bylaws setting out performance requirements, most boards are hesitant to take action when attendance goes off the rails. There are of course legitimate reasons why people cannot attend board meetings. If travel and other work obligations are in constant conflict with association board attendance, then give the spot to someone else.
- Assistance with local engagement is critical to many associations and a strong barometer of board engagement. For most smaller associations, board members are the only representatives of your association on the ground. Associations that don’t have strong chapters or staff that can fly across the country count on board members to build and maintain local engagement. How does your board measure up?
- Access to their personal network is a critical measure of board member engagement. Associations don’t just elect board members because of what they know…but who they know. Associations often need access to their own industry or practice area and the most direct path is usually through the board. If your board won’t make occasional introductions, are they engaged and effective?
- Active engagement in your conference seems easy enough but there are so many examples when board members are more of hindrance than a help at association conferences. Do your board members clump together or do they fan out and help members maximize their networking and overall conference experience? We need board members to take a very visible and active role across a range of important conference duties.
- Sponsorship support from their own company and others is one of the ultimate tests of board engagement. While this does not apply to every type of association, many of us need boards to tap networks to get us funding. Asking for money or just making an introduction to staff to ask for money takes a certain skill set and makes many volunteer board members uneasy. But isn’t this one area where we really need their active support?
Association Board Engagement. Are your board members slackers?
When associations become too large to be managed solely by volunteers they are left with a choice to hire staff or an Association Management Company (AMC). We know that the board’s objective is to deliver great value to members so should they hire staff or go with an AMC? Each association needs to take time to have a discussion about what is best for them.
Here are four essential questions your board should consider when choosing between hiring staff or an AMC.
- What is realistic for our budget?
- Are there people who are part of the association who can take on staff roles?
- Is there a clear goal that you hope to achieve by bringing in an AMC or Staff?
- Is that clear goal trackable and realistic?
When your board considers those four questions they will be able to make a better choice. By setting realistic goals your association can get the results they need from either an AMC or staff. What else would you consider before deciding between a staff model or AMC for your association? Let is know in the comments or on social media.
To help promote common understanding of and adherence to what constitutes acceptable or required behavior, many boards adopt an explicit code of conduct that define the standards to which directors must adhere. Unfortunately, a compliance-based approach to board culture does not necessarily engender constructive group dynamics and respectful relationships.
Codes of conduct and other rules-based approaches to influencing director behavior cannot address the common cultural ailments faced by many boards:
- discussion that is based on opinion rather than factual data;
- long and protracted discussions that lose focus on the original topic;
- the frequent introduction of “wildcard” issues not originally on the meeting agenda;
- an inability to explain or strong defend a Board’s decision;
- a lack of support by every director of the collective decision of the Board; and,
- a nagging feeling that decisions do not represent the best thinking of the Board.
Evidence of a healthy board culture most often shows up in the decision-making process. Once a board has reached a decision, all directors need to take ownership for and support the outcome, regardless of personal views. Individual directors need to respect the collective nature of board decision-making, recognizing that there is rarely one right answer or approach to addressing a particular issue or opportunity. While good debate and deliberation are hallmarks of a healthy board within the confines of the boardroom, director solidarity in public is also a critical requirement.
As much as board structure and governance processes play a critical role in the decision-making process, it is really the boardroom culture that will determine the quality of those decisions, the health and effectiveness of the board and an organization’s success in achieving its vision.
At the heart of a healthy boardroom behavior is the degree of candor between the association Board and Management. By candor, I mean that freedom with which directors are able to raise issues and speak out. A lack of candor slows down decision-making and represents one of the most significant obstacles to board success. A lack of candor blocks smart ideas, fast action, and directors from effectively using their skills and experience.
Candor helps to ensure all views and issues are put forward for consideration so that directors are equipped to make the best decision possible relative to organizational strategy and other corporate considerations. This inherently means that a healthy board culture exists when contrarian views, various options and constructive challenging or testing of conventional thinking and the status quo are welcomed, encouraged and expected.
Poor performance in the boardroom is usually indicative of a failure to appropriately recruit, orient, and integrate new board members. Without being properly equipped, board members may not understand their fiduciary responsibilities and individual directors may not embrace board work as teamwork. Many boards, though properly structured and supported with governance best practices, still encounter troublesome behaviors that point to poor people skills on the part of individual directors.
If a good defense against director liability is a good offense, boards put themselves at risk if they don’t take responsibility for their own performance. Key to this is adopting lead governance processes and practices, implementing them effectively, and assessing whether they are contributing to the board’s performance in meaningful ways – all with a high degree of candor.
When looking back at the evolution of governance over the past 20 years or so, there’s been an interesting and marked progression from a structural focus in the early days to a recognition that board work processes have a significant impact on good governance. More recently, there’s been a recognition that board culture is the third, and perhaps most important, leg of the governance stool.
Association board culture really speaks to the group dynamics and boardroom behaviors among directors and with management: the free expression of ideas and issues, the trust and confidence among directors and with management, and a collective focus on the organization’s mission and vision in the decision-making process.
The basic fiduciary requirement that directors act in the best interests of the corporation and exercise a duty of care is often viewed in legal terms. Similarly, director independence has been defined in terms of structural perspective with respect to management. Both have significant behavioral and board culture implications that trump any legal or structural requirements when it comes to board effectiveness.
Rather than defining director independence in terms of an individual’s relationship with management, real, or behavioral independence, is more about a director’s ability to exercise meaningful oversight and holding management accountable, without sacrificing the ability to also partner with management to help the organization deliver on its goals.
Serving on an association board is not an intuitive skill. The role of a director is both art and science. It must be learned and refined over time through practice and ongoing education. An effective process to support the board in its work is an annual assessment designed to root out issues before they become irreparable problems – issues related to board leadership, board culture and behaviours, the board/management relationship, and other factors that determine board success.
When I think of healthy boardroom behavior and a constructive partnership dynamic between directors and management, I look for substantive evidence that:
- Directors have the opportunity and the freedom to ask the substantive and relevant questions that will give them the necessary comfort and confidence that they have fulfilled their oversight obligations;
- the relationship between the Board and Management is characterized by the highest possible level of trust and open communication;
- it is not acceptable for Directors to simply conform, acquiesce, criticize or control matters during boardroom deliberations;
- the Board understand their role and that of Management and guards against becoming operationally focused, micromanaging or acting in a manner that is passive and subservient;
- Management regards the Board as a strategic partner and asset and actively seeks the advice and counsel of Directors; and,
- meetings characterized by fulsome dialogue and debate with Management respecting the need for Directors to conduct meaningful due diligence.
A clear and shared understanding of the roles and accountabilities of the board and staff are critical in creating a foundation for a productive relationship. Many association boards rely on mirroring what peer organizations do or what best practices prescribe. Legislation or regulation usually only provides a high level framework that is rarely helpful when it comes to success in the boardroom.
Generally speaking, the role of directors is to direct and give oversight. Exactly what these duties mean needs to be considered within the broader organizational context. There are choices to be made, largely based on the depth of staff expertise.
Once specific accountabilities are determined for both the board and staff, an even more critical matter is seeking agreement on how these two power groups will work together.
I believe there are two principles that help form a constructive, results-focused board/staff relationship.
First, a healthy board/staff dynamic depends on a common appreciation of their roles, mutual respect, open and ongoing dialogue, and strong board leadership.
Second, board/staff relationships tend to be either too collegial or too adversarial. When the former prevails, accountability is put at risk; in the latter case, the relationship can suffer from lack of trust. The optimal board/staff dynamic depends on establishing and maintaining an appropriate balance of partnership and accountability where the board acts both as a resource to management while holding them responsible for results.
Adherence to governance best practices don’t stand a chance of impacting board effectiveness in the face of wonky board behavior.
The level of director of engagement, the thoroughness of deliberations, and the quality of decisions make up the litmus test for association board effectiveness –- a test boards can easily fail if it is populated with dysfunctional director types who, with their personal agendas, only serve to undermine a productive board culture.
The root cause of a dysfunctional board is ineffective director recruitment. A narrow focus on skills, experience and influence leaves out a critical factor in a director’s effectiveness – their ability to function well within a group decision-making process.
While democratic elections by an organization’s “owners” sound good in theory, building the right board team demands a carefully managed mix of skills, experience, personality types and understanding of stakeholder issues. What motivates a director to serve is far more critical to overall board effectiveness than the doors they can open, their achievements, or reputation.