The article below was prepared by the Canadian Society of Association Executives.
It provides a step by step narrative on what to look for when sourcing and selecting an association management company.
Selecting an Association Management Company
By Bob Hamp
While most associations hire their own staff and manage their own assets, many smaller associations and chapter affiliates retain an association management company (AMC) to reduce costs, promote efficiencies, share resources, access expertise and reduce volunteer commitments to administrative matters.
Prepare the Request For Proposal (RFP)
A selection committee that develops the RFP, evaluates proposals, conducts interviews and recommends candidates to the Board normally manages this first step. The committee typically includes both members who understand the organization’s history and past needs, and newer members who have a longer-term investment in its future.
Where do you begin to develop your RFP? What do you want to know about the companies you are evaluating? What will the companies want to know about your association and the services they will be asked to provide? You’ll find help with these and other questions in CSAE’s “Resources Library.”
Generally speaking, prospective AMCs will be better positioned to develop a meaningful proposal if the following information is made available to them:
Bylaws
Board and committee personnel
Previous meetings’ minutes and resolutions
Policy manuals
Number and location of Board and Committee meetings
Audited financial statements
Current budget, policies and procedures
Cash assets
Membership growth and retention trends
Dues structure
Marketing programs
Affinity programs (if any)
Meetings and conventions (number, location, number of exhibitors, booths, revenue and expense profiles, contracts with hotels and other entities, etc.)
Educational needs
Expense reimbursement policy
Newsletters published each year, including their circulation and any advertising that may be associated with them
After supplying this information, what do association representatives need to know about the AMC? Here are some suggestions to look for in a prospective AMC’s capability résumé:
Philosophy or mission of the AMC
Résumés for the principal(s) and summaries for support staff
Services provided
History of business and main area(s) of focus
Geographic range of operations (international, national, provincial, regional, local)
Typical client list
Areas of expertise (full-service, meeting and events planning, publications, research, marketing, affinity programs, data management, financial management, etc.)
Computer systems and software
Data membership management programs
Finance and accounting software
E-mail domain and ability to administer websites
Location of organization
Commitment to continuing education (membership and participation in CSAE).
Weighing the AMC Proposals
AMCs have differing management styles and price points, often making it difficult to compare proposals from several companies. The most important step in analyzing management company proposals is to look at your organization. Are you large or small? Growing or in need of a turnaround? What are the priorities in terms of programs—education; trade shows, publications, membership development or financial services, or some combination? While everything may seem equally important, the purpose of this analysis is to clearly define the most pressing current and future needs to make the best choice among good proposals.
Once you’ve taken a critical look at your organization, it’s time to turn the same critical eye to the AMCs’ proposals. There is no right or wrong answer, but there may be a best answer for your organization. One company is unlikely to be strong in all categories; look for the one that best matches your overall needs.
Creating a rating form can help you focus and clarify the analysis. Here are some general qualities your selection committee should look for when evaluating proposals and interviews with AMCs.
Stability.
A contract between an association and its AMC represents an investment of time and money on both sides. Does the AMC appear stable and able to meet its commitments? Does it have the human and financial resources to take on another client (that is, you)?
Flexibility.
Can the AMC serve your current and future needs? Selecting an AMC is a long-term commitment and transitions are costly. So the AMC you select should be able to grow with your organization and assume additional responsibilities. Although some turnover is inevitable, it involves direct costs and indirect costs, such as those resulting from loss of institutional continuity, memory, and identity.
Location.
Is the company’s location accessible to your organization?
Other Clients.
Do any of the AMC’s current clients present a potential for conflict of interest with your organization? Is the number of other clients suitable to the size and resources of the company? Can it continue to handle its other clients’ needs and those of your organization, or does it plan on adding staff and resources? If so, how will new staff be allocated among current clients and your organization? How will your organization compare in size, in fee, and in needs to the other clients? Will your organization be important to the management company or will it be a minor client among much larger organizations?
Look for a Good Fit.
While larger AMCs may have more resources than smaller ones, how will they allocate those resources to a smaller client? On the other hand, while a large association will be very important to a small management company, how will the company be able to accommodate the needs of a large client?
Office Facilities.
If your organization will meet at the AMC’s office, does it have adequate meeting facilities? There are many home-based AMCs: this may help save you money on overhead fees. The question is whether such an arrangement will work for you.
Equipment.
Does the AMC have adequate equipment and will it stay current with changing technology? How will the AMC’s technology help you achieve your objectives?
Experience.
What is the experience of the individuals assigned to you? Is their experience well matched to your needs? How will the AMC assign staff to your organization and how much internal turnover can be expected?
Cost.
AMC service fees range from full-service, which includes all aspects of overhead, salaries, benefits, equipment, and supplies, to a retainer-plus arrangement, where the client pays for all services, use of facilities and equipment, and supplies as required. To some degree, all pricing plans must include an overhead component (occupancy, equipment, and supplies), a staffing component (salaries, benefits, recruiting, and training), and a reasonable profit.
Like all service businesses, AMCs sell time. Individual worker fees may be separated or packaged in an hourly rate or flat fee. The cost of time may or may not be clear. One thing is certain—it will be difficult to compare fee proposals. Make sure you understand the proposal and know what is included and what is not.
Remember also, that the better the AMC performs the more likely it is your organization will ask it to do more. You need to budget for all the costs, and these may not be included in the proposed fee. Ask what is and is not included. Determine what procedures, controls, and/or limitations exist to help you and the AMC plan for the cost of services.
Terms.
The proposal may or may not include all the terms of a possible contract. Will the contract be for a single year or for multiple years? If multiple, are there provisions for increased fees and services after the first year? What protections exist in the contract for each side? What provisions are made for termination?
Services.
Look carefully at the description of individual services. If you asked the AMC to administer meetings, what exactly does that include and at what cost? Will the AMC take the minutes and circulate them? The exact description of the services to be provided can vary and affect cost significantly. As you consider the services to be provided, ask to see examples of the AMC’s work. What level of service is the AMC proposing and what has it done before? What is the quality of its work?
Quality of Presentation.
Is it well written and error-free? Is it glossy boilerplate or customized? Is it a combination of the two?
References.
Always difficult. It stands to reason that prospective AMCs will provide the names of individuals they expect will give them the best possible references. Current clients may provide valuable information provided you have some open-ended questions. What is XYZ’s greatest contribution to your organization? Can you describe a time when you were disappointed in their performance? What did they do to fix the problem? Do you feel you get good value for your dollars? Why?
Interviewing a Prospective AMC
Choosing an AMC to manage all or part of your affairs demands that both partners get to know each other in an atmosphere of candour, respect, and comfort that will set the tone for a dignified, “No thank you, I don’t think this is the right fit,” or “Let’s go forward.”
Prepare questions to ask each AMC presenting. Assign each member of the selection committee a particular area of the proposal to address. Assess the different responses that each company gives to the same question. Explain your decision process to each presenting AMC and advise them of the final determination date. If you expect to conduct further negotiations, state when you expect those negotiations to take place.
Sample Questions to Ask an AMC
How does your philosophy compare with our association’s?
What are the geographic scope, budget size, and membership traits of current clients?
Are any of your existing clients potential competitors of our association?
What is the range of services and capabilities provided by your employees? Do you outsource any management functions, such as data management, meeting planning, financial record keeping, publishing, or mailing services? If so, how are the agreements with vendors handled?
What resources and equipment do you have to support client needs? Do you have the capacity to serve our organization?
What software programs (such as accounting and membership database) do you use?
Do you have system back-up and how will we access our data? Do you have a disaster plan prepared?
What reports can we expect? In what format will they be presented? How frequently?
Do you provide full-service management, stand-alone functions, or both?
May our volunteers provide some services, and contract with you for others? If so, would you prefer these come through a single, pre-authorized volunteer?
Who would be assigned to our account? What is their background and experience? Who do they report to?
Would we have our own dedicated consultant or be assigned a team that performs a range of functions?
Will we have access to the owner or principal, and if so, on what basis?
What are the strengths of your AMC, and what kinds of clients do you serve most successfully?
Have there been any recent changes in ownership or leadership? Are there any plans for merger, consolidation, or buyout, and if so, what succession plan is in place for a smooth transition?
Is there a conference room or other meeting space at your office? Where do your clients typically meet?
Do you have storage capacity? How will our documents be archived?
What measures do you take to train your employees? What does staff do to keep current professionally? What professional organizations do they belong to?
Do you have the ability to design and maintain a website?
How do you set your fees? Retainer? Time/hourly based? By project?
What about contract terms, evaluation, renewal, and cancellation?
Following the interview process, the committee usually recommends a firm for Board approval.
AMC Contracts
A written contract defines mutual obligations and expectations and provides a structure for the relationship. A standard contract or a drawn contract may suit differing needs. A standard client service agreement might include the service relationship, compensation, and termination. Contract documents may range from simple letters of agreement to those describing every detail of the relationship between the organizations. Letters of agreement, which generally contain the standard elements—offer, acceptance, and consideration—have the legal force of a contract and normally cover broad areas of agreement in general terms. A detailed contract may cover such specifics as number of meetings, number of newsletters published, etc. Most contracts between AMCs and association clients cover these basic issues:
Preserving the client’s rights
Determining the management fee or method of compensation
Listing services to be provided
Defining the duration of the agreement
Setting out the method for terminating the agreement
Stating the client’s obligations to the management firm
Bank accounts shall be solely in the name of the client, not joint with the AMC.
The client is responsible for expenses incurred by the AMC on the client’s behalf.
Annual audit (or review) will be conducted at the association’s expense.
The AMC has authority (or not) to negotiate and enter into agreements on behalf of the client (such as hotel agreements).
The AMC will receive fees or compensation for its services. Specify how the fees will be paid by the client (e.g., direct transfer of funds), when this will happen (e.g., first of each month), and what the fees cover and do not cover (e.g., a simple statement that telephone expense is not a fee and is a reimbursable expense).
When the contract is terminated, all materials should be returned to the association client in usable form.
Compensation
Most AMC contracts define the management fee, retainer fee, or other fees. They may wish to charge a management fee covering certain basic services and bill other services as used. The management fee covers staff time, rent, office use, and equipment. All other charges are on an as-used basis. Arrangements for special services may be addressed through separate letters of agreement independent of the management contract. The contract may specify the number of hours or percentage of time to be devoted to the client by key staff members.
Most contracts attempt to define the services the AMC will provide. While some contracts go into great detail on this subject, some firms prefer to keep the contract language loose. That way, both the AMC and the client depend on the mutual agreement they have reached. Defining services too narrowly may inadvertently lead to an adversarial relationship between the two parties.
Contracts are often drawn up for one year, either with automatic renewal, or with intent to renew. Short-term contracts require both parties to review the contract to ensure it continues to reflect current needs and expectations. Doing this annually tends to focus both sets of needs more effectively. In other cases, an association and its AMC may have a long-term contract. A long-term contract helps ensure the AMC will invest its time and energy for the long haul.
The period of notice required to terminate a contract may run from 30 days to 90 or 120 days. The termination clause for a large association may specify a period of six months or more. Longer notice offers protection for both the association and the AMC to provide both organizations with the necessary time to transition.
An annual review is essential and failure to provide some form of review can lead to misunderstanding. Even if the contract has remained unchanged and unchallenged for some time, it is wise to recognize that associations change.
Each new slate of elected leaders needs to clearly understand the relationship between the AMC and the association.
Developed with files from CSAE, ASAE and other sources.