Lessons we should learn from the AMA-Sunbeam crisis
By J.C. (Chris) Mahaffey, CAE
Rarely are the internal operations of an association so publicly exposed as was the ill-fated partnership between the American Medical Association (AMA) and the Sunbeam Corporation this past fall. From mid-August to mid-September, the Chicago media was drenched in the details of an all-too-typical association board battle. On the surface it was a question of professional ethics, but the underlying issue is the political and economic forces that shape how not-for-profit organizations are governed and economically motivated.For background, the (Chicago-based) AMA signed a marketing agreement with Sunbeam where the AMA logo would be used on Sunbeam personal health care products in exchange for royalties to be used for AMA public health campaigns. The agreement was announced and widely publicized during the International Hardware Show here in Chicago. The resulting negative member reaction, however, was swift and caught both the AMA leadership and staff by surprise.
Like you, 99 percent of what I know is what I've read in the paper. Since Sunbeam has sued the AMA for breach of contract, anyone at the AMA who knows what happened isn't talking (nor have I inquired), but that hasn't stopped the Monday morning quarterbacking in the association community.
Are we prisoners of nonprofit mentality?
Nonprofits in general are suddenly the targets of corporate sponsorship backlash. Corporate advertising has infiltrated every conceivable "space" imaginable in recent years, yet corporate involvement with nonprofits somehow crosses a threshold that raised public concern.
Remember the commercialization furor of the Olympics? Colleges that designate an "official soft drink" sold on campus are subject to criticism. And even the Field Museum's (Field Museum of Natural History in Chicago) recent acquisition of "Sue," the T Rex dinosaur, is being questioned because the lab and exhibit hall will be named after corporate sponsors.
Obviously, nonprofits are held to a higher standard. When it's the crass commercialism between two for-profit entities, that's OK. But, if it's a corporate partnership to benefit a public service endeavor, then we're accused of selling our souls for the almighty dollar.
Well, the simple fact is that nonprofits can't sell stock or raise taxes like corporations and government can to generate capital. And, most corporate sponsorships are used for public service ventures that for-profit business have neither the expertise nor the motivation to conduct.
Economic theory holds that people join or donate to organizations purely for self-interested purposes. Hence, the return on investment for a member/donor must directly benefit that individual, be it for products, services or an altruistic feeling from contributing to a worthy cause. This underlying theory prevents nonprofits from allocating money into external activities that derive little revenue or member satisfaction.
Thus, to engage in public service ventures, nonprofits often turn to corporate sponsors for support. Admittedly, the quid pro quo is a delicate balance and each organization has its own boundaries as to how far it will go. Apparently the Sunbeam deal crossed that boundary with the AMA's members.
My fear is that one deal gone awry will send association boards into a panic and many worthy public service causes will go unserved. In fact, association-corporate partnerships are a marriage of positive, yet opposing economic forces. For-profit corporations have one goal: maximize shareholder value. Nonprofits have a different value system, so we often engage in activities that don't make money, per se, but benefit both the public and profession/trade.
The for-profit has no desire to engage in such unprofitable ventures, so it, in effect, can "out source" this marketing function to nonprofits with the expertise and reputation to get the job done. It's a win-win for both parties.
However, the devil, as they say, is in the details. Structuring a mutually advantageous relationship requires agreements that carefully stipulate the rights and responsibilities of both parties.
The Association Forum has sponsored programs on this very topic, including a CEO Breakfast earlier this year at the Franchising and Licensing World Center. Learning the mechanics is easy; the hard part is getting members and/or the public past the nonprofit economic mentality.
Are your leaders accountable?
In the AMA case, there are two schools of thought on the elected leadership's knowledge and reactions to the Sunbeam pact. One school is that the elected leaders were unaware of product endorsement activities. The other school is that the elected leaders knew of product endorsement ventures, but were unaware of member sentiments on the issue and surprised by member reaction.
Are your leaders really "in touch" with your members? Are your leaders representative of the rank and file? Whatever the issue or initiative, do you conduct needs assessments, member opinion surveys or attitude polls? If so, do you thoroughly brief your leaders on the results? Politicians may be criticized for governing by opinion polls, but let's face it, there's a method to their madness.
A few years ago, John Carver wrote a book titled Boards That Make a Difference. Carver's thesis was that nonprofit boards are inefficient because they manage too much and fail to lead. Carver advocated a governance model where the board tells staff what they cannot do instead of what they can do. Certain boundaries are set via policy and budget, then everything else is fair game for the staff. Meanwhile, the board should be focused on strategic issues and planning, not micromanaging staff or other volunteers.
While Carver's theory is aimed in the right direction, it fails to recognize that in lieu of stockholder profits, the member of a nonprofit organization buys intangible ownership rights--an institutional boundary of nonprofits, like it or not.
The Association Forum's new governance model recognized this institutional limitation. We embrace Carver with self-directed committees, a more empowered staff, and a board that is focused on strategic issues and planning. But the member's fingerprints are still on every issue or initiative. Each committee has a "committee leadership team" composed of the chair, board liaison and staff liaison. They act as a backstop for errant ideas. Any one member of the CLT can "veto" a committee action, appealable to the board. In theory, the board liaison represents the rank and file member (do they want this program or support this initiative?) and the staff liaison represents the logistics, budget and staffing capabilities.
Unfortunately, all the safeguards in the world cannot prevent elected leaders from using staff as scapegoats for their ultimate failure to govern. The nonprofit sector is not alone here--we see it daily in corporate, government and nonprofit life.
Love it or leave it?
These are a few of the macro-issues that inherently limit our ability to be more for-profit, entrepreneurial and market driven. These economic and political boundaries make us not-for-profit prisoners in a for-profit world.
Every organization has to recognize these structural boundaries and decide whether the 501(c) world is right for them in the 21st century. The good news is that you do have options! And every executive must decide if this is the business environment in which they wish to work. The boundaries make it more difficult, but ultimately more challenging and rewarding.
The author is president and CEO of the Association Forum of Chicagoland, which represents 3,000 association executives and staff. The article contains Mahaffey's opinions, which do not necessarily reflect the policy of his association. The article is reprinted with permission from Forum, the publication of the Association Forum of Chicagoland, November 1997 issue.
