A High-Stakes Turnaround Strategy

By: Anna Caraveli

How do you turn around an association in a precipitous state of decline? Consider the story of the Metals Service Center Institute, whose CEO relentlessly refocused the organization's strategy and operations on one goal: solving critical member problems

What if you were staring at a once-in-a-lifetime career opportunity, but the stakes were nothing less than the life or death of an association in a free fall?

Bob Weidner, CAE, CEO of the Metals Service Center Institute (MSCI), found himself in this position in 2001, when he was offered his present job. His challenge was to lead what was then called the Steel Service Center Institute out of a mire of irrelevance, dysfunction, and economic decline. Like his peers, Weidner was facing a tumultuous environment in which past assumptions and formulas were no longer applicable or effective.

What makes an organization more successful than another in today's turbulent markets? Ranjay Gulati, a Harvard Business School professor and expert in leadership and strategy, poses this question in his book, Reorganize for Resilience. He concludes that the companies that survived and triumphed over economic downturns were those that were able to reorient all aspects of their business—both strategic and operational—toward customer demand.

Most associations lack this flexibility, weighed down by stiff governance and organizational models. Those that have broken new ground share one element in common: strategic, transformational, and "disruptive" leaders who think outside existing categories and bring change that resonates with demand. Weidner provides an example of how disruptive, demand-responsive association leaders deliver results.

In 2001, when Weidner became CEO, MSCI's revenue was $4.5 million, with a $2 million net operating loss. By the end of 2003, revenue had declined to $4.3 million, but Weidner was able to declare his first triumph: The association returned about $190,000 to member equity from operations and realized a bottom-line improvement of $2.2 million, putting MSCI back in the black. The foundations for the growth strategy he launched in 2004 had been set.

In 2008, MSCI revenue reached an all-time high of $9.3 million. Even though revenue declined during the recession, it has bounced back to 80 percent of the 2008 figure, and the organization projects $8.7 million in operating revenues this year. This is an extraordinary accomplishment in one of the toughest economic slumps in history, at a time when most associations in manufacturing industries have been shrinking.

Eight Building Blocks

Instead of initiating new programs or structures, Weidner refocused foundational pieces of the organization—culture, practices, operations, and strategy—on one goal: solving critical member problems. He based his growth strategy on the following eight building blocks, which he laid down during the first three years of his tenure.

Demand-responsive leadership. To be effective, Weidner needed the freedom to explore new options outside existing assumptions and product lines and without having to tiptoe around sacred cows—the freedom, as he saw it, to lead rather than manage. Before accepting the position, he asked the board to guarantee that he could exercise this kind of leadership.

A focus on root problems rather than symptoms. Weidner resisted the pull of quick fixes to visible and immediate challenges, focusing instead on uncovering underlying problems and putting in place sustainable solutions. He applied a fearless lens to every aspect of the association, starting with the stories behind revenue and operating profits over the previous 15 years. He discovered:

  • In spite of the association's strong balance sheet, operations had been in decline for years, masked by a healthy stock market and increased portfolio earnings.
  • The $2 million loss in 2001 was not an isolated incident; the association had been in the black only three of the last 15 years. "This told me that that the issue was systemic and the fundamental business model was flawed," Weidner says.

A broader definition of member. Weidner quickly realized that the association would not survive if it continued to limit membership to steel companies. Stunned by the number of metals-based associations, he judged that the trend toward consolidation in the business world would soon affect associations as well. "Why stand on the sidelines?" he thought. "I wanted to get out in front of these trends, before it was too late. "

The opportunity he saw was to serve the entire metals base, including carbon, steel, stainless steel, and aluminum. In 2002, the organization merged with the National Association of Aluminum Distributors. It continued to expand its membership base to include other metal industries and broadened the affiliate membership category to include all companies with a vested interest in the business of both producers and distributors. The number of affiliates rose from eight to 63, increasing sponsorship, dues, and conference revenues.

Weidner's organization now served three primary categories of members: producers, distributors, and affiliates, diversifying its revenue sources and enabling it to leverage interactions among member segments into high-value benefits.

A new name. To underscore the change in membership and align stakeholders with a new vision of the organization as a premier metals association, Weidner made the bold move of changing its name to the Metals Service Center Institute.

A business model focused on strategic solutions. Weidner wanted to find out what would make MSCI indispensible to members. His conclusion was that crafting targeted solutions to the critical issues that kept members up at night delivered far greater value than providing programs and services that had increasingly shorter shelf lives and were easily found elsewhere.

Weidner redefined MSCI's business from producing conferences and other benefits in exchange for annual dues to providing information-based strategic solutions on a consultative basis. This was a quantum leap and reoriented all aspects of the association toward demand.

MSCI began to leverage its access to a wide spectrum of the metals-industry value chain to provide a one-stop shopping destination for members, with opportunities to make meaningful connections. Conferences, for example, delivered more than content; they enabled members to engage and do business with clients, potential clients, partners, investors, and lenders efficiently and cost-effectively. "And, because our conferences are members-only," Weidner adds, "members cannot find this kind of top-to-bottom connection anywhere else." Conference attendance soared.

New innovation and product-development models. Weidner knew that identifying problems and crafting innovative solutions requires an entrepreneurial approach. "Breakthrough insights into needs and opportunities stem from unique moments in time within your marketplace—an unexpected encounter with a member, an informal conversation around the water cooler, an online discussion among members," he says. "Opportunities are all around you, rather than confined within a formal study or focus group."

To discern and exploit such opportunities, Weidner made it clear that all MSCI staff were expected to contribute to the association's understanding of members and their needs at various stages of their working lives. He led by example, making dozens of trips to visit member companies at their sites. In service industries, like associations, "you have to spend time with customers face to face to really get to know them and to extract the implicit stories beneath easy answers to questions," he says.

Weidner instituted new performance criteria and incentives for staff to emphasize this important change in their role. Staff is expected to uncover concealed needs even before members are fully aware of them and to help members plan for the future "and not just what's on their desk today," he says. As a result, staff members' focus shifted from tactical process and program management to continuous member engagement and solutions development.

Staff roles and responsibilities were no longer confined within narrow silos, and job descriptions became flexible. At the same time, liabilities and rewards were equally shared, and every staff member was accountable for a percentage of membership recruitment and retention.

Weidner established an open, collaborative environment that promoted product development that went beyond extension of current products or services. Product development was freed from committee-driven processes and committee approvals and was guided by conversations with customers.

"You cannot stay on top of your market through slow and cumbersome processes," he says. "People don't form ideas and experiences by committee; neither will they wait around for you to identify one need before experiencing their next need. You have to reach them on their terms, and at their pace, place, and time."

Creation of a value-generating network. Realizing that access to and management of key relationships had enormous value to members, Weidner reconceived MSCI's membership model around strategic interactions and relationships rather than benefit-based dues. Instead of simply expanding the number of membership categories, Weidner created a value-generating network by

  • strategically selecting the right mix of members within the value chain
  • crafting efficient, one-stop-shopping opportunities
  • facilitating interactions so that they furthered the business objectives of real-world relationships within the value chain, in ways that could not be achieved outside the association.

Weidner understood that that the success of one industry segment often contributes to the success of another and that MSCI would do well to provide opportunities for high-value interactions. "In one single event, for example, an executive from a metal service center can network with an affiliate member, a manufacturer of overhead cranes, a recruiter specializing in the industry, and/or an investment banker who may be able to finance market expansion," Weidner says.

Sustainable systems for running operations and strategy on business principles. MSCI's operations are driven by the restatement of what they do in business terms rather than abstract mission statements. MSCI defines its business as providing information-based solutions to members across the metals value chain and operates more like a consulting firm than a trade association. It has rethought and redesigned operations—for example, outsourcing certain functions to strategic partners—and developed demand-based metrics, incentives, and benchmarks that align vision, strategy, and operations.

Assessing Success

Applying only the supply-driven metrics most associations use, one might miss the degree of MSCI's success. After all, the number of member companies declined during the recession because of industry consolidation and bankruptcies. However, the association's success in retaining, diversifying, engaging, and generating revenue from its member base is significantly higher than ever before:

  • Of the 381 member companies today, 202, or 53 percent, were not members at the end of 2001.
  • In 2001, MSCI had 457 company members and average per-member revenue of $10,000. Among its 381 current members, average per-member revenue has more than doubled, to $22,000.
  • Conference attendance has risen substantially. Even though the cost of attending a conference is considerably higher 2011 than in 2002, attendance has increased 20 percent.

Weidner attributes this growth to the exponential increase in the value of MSCI membership. The association's focus on targeted, strategic solutions increased its relevance to members' success.

Additionally, Weidner priced aggressively, based on value rather than cost-plus. For example, in pricing executive programs, MSCI considered what executives were willing to pay for the value they derived, gleaned from analysis of prices at top-ranked university-based leadership programs. The association's motto is to deliver experiences and outcomes that merit the price.

Overcoming Hurdles

None of this was easy. Weidner's push for a new strategic direction ran up against several tough, but common, obstacles:

  • pervasive denial of the severity of the challenges MSCI faced
  • silos, sacred cows, and legacy programs that hampered effective responses to demand
  • narrow assumptions and categories, such as the definition of "member"
  • the pull of business as usual and a lack of urgency

Weidner's strategy was to steer clear of discussions based on emotionally charged opinions, subjective arguments, and attempts at persuasion. Instead, he developed criteria for decision-making based on what was beneficial for the association, relying on facts, especially financial data, to demonstrate the impact that decisions would have.

Weidner is an example of a leader who is focused on how to position his association to thrive in the future rather than merely survive in the present. "Associations," he says, "should begin thinking about making changes when they are at the height of success, rather than as a response to crises."

Anna Caraveli is managing partner of Connection Strategists in Alexandria, Virginia. Blog: www.demandperspective.com; Email: [email protected]

Anna Caraveli

Anna Caraveli, managing partner of The Demand Networks, LLC, of Alexandria, Virginia, is author of The Demand Perspective: Leading from the Outside In.