Association management firms must cope with scope creep by our clients. Basically, scope creep is the gradual addition of tasks expected of the AMC, without additional compensation.
While it is impossible for any AMC to anticipate exactly what will be needed to service a contract, we develop a scope of work for each client, and we price accordingly. We look at our cost to provide each service based on the time, frequency and level, and present a proposal to the client. They accept or reject our proposals. If they want more, we add to the fee. If they want to pay less, we reduce tasks. Through negotiation, we settle on a scope of work and compensation.
That is all fine for a while, then scope creep can set in. It is usually unintentional.
It might be a decision by the president to have two calls a week with the ED instead of the one call in the scope. The theory is that they will take less time and so it will even out. The calls take twice as long as anticipated. If the extra call is an hour, that is an extra hour for the Executive Director each week. It can add up fast. The treasurer could decide they want a new monthly report from accounting. The Membership Chair may decide that management should start providing pie chart graphs monthly. The Communications Chair decides the newsletter format needs to change and the frequency increased. The Legislative Committee is hit with a bill that they must vigorously oppose, and that requires eblasts and testimony coordination. The Events Committee decides to combine two small events into one very large one that is much more complex than the two separate events. Taken individually the changes are not that dramatic. Collectively they can easily lead to losses for the typical AMC with small profit margins.
Sadly, when this situation is developing it is usually not noticed by the volunteer leaders. The AMC team members all have a customer service mindset and try to please. But, in the end, the AMC suffers, as do its team members who find themselves working longer hours.
The AMC will generally try to correct this situation with a scope review. Usually, this results in an increase or the AMC cutting back on services.
Some AMCs build in an increase each year to account for escalating costs.
Either way, the fee for services rises. Associations don’t like to pay more, even if they are getting more for the added fees. The association may decide to put out an RFP to try to get a lower price. Current management often will terminate their contract. Now the association must find new management.
The association will develop an RFP based on their perception of what is required. Usually, these perceptions are off, and many tasks are not listed.
Bidders base their proposals on what the RFP says. Because the needs are understated, the bids will come in lower than current levels. Some new companies will be selected, and the scope creep will begin again.
The sad part of this cycle is that everyone loses, especially the association. The association loses momentum and relationships. A management change is disruptive. While there may be short term gains in terms of reduced fees, fees will quickly rise to match reality. The original AMC loses a client they have nurtured for years. The new AMC takes a financial hit because the scope of work as presented in the RFP is understated.
Why does this happen? One big reason is some clients have a hard time understanding that the AMC is not their full-time employee. An employee is paid what has been agreed to and what they do is up to the discretion of the employer. If they have to put in extra hours to get the job done, so be it. An AMC is performing a scope of work. Those working for the AMC have their own scopes of work defined by the AMC and meshed with the master contracted scope.
Is there a solution? Awareness of the potential problem by client associations will help. Those of us who run AMCs need to educate our clients and those who work for us. Everyone needs to be sensitive to the potential problem and be proactive in avoiding it. Changes in how things are done is fine, but the cost of the changes needs to be understood.
