ASQ Story: Coronavirus Forces Organizations to Adapt Business Models
Guest Post by James Kline (first posted on CERM ® RISK INSIGHTS – reposted here with permission)
As readers of my pieces know, there are concerns about how ASQ is being managed. These concerns have caused a split among the membership. Some hold fast and support corporate management, while others want changes. This piece is the result of a question and an exchange on the LinkedIn Restore ASQ community.
The original discussion question on Linkedin was: ‘Why didn’t the risk analysts see the pandemic coming’? The exchange quickly devolved into those who felt that the disbanding of some ASQ Chapters is the fault of chapter members, not corporate and those who place ASQ’s troubles on corporate management. Considering the Coronavirus is forcing everyone to review assumptions, associations, and business models, it is worth visiting these issues.
No One Saw the Pandemic Coming
If one looks at almost any list of possible risks that can adversely impact an organization’s operations, pandemics frequently appear. However, their priority varies. As discussed in an earlier piece, Pandemics were not among the top ten current risks listed by global movers and shakers at the 2020 World Economic Forum. While considered a long-term risk with high impact, pandemics were still rated low. Obviously, the world’s movers and shakers can be wrong.
In the case of the Coronavirus, it is frequently called a Black Swan. A Black Swan is an event which is unusual and has a catastrophic impact. A misunderstanding is that a Black Swan event is unique in the sense that it does not represent any other type of risk event. That is not correct. An example is the Deep-Water Horizon oil spill. While Deep-Water Horizon is considered a Black Swan, oil spills are common. What made it a Black Swan was the circumstances leading to the event, its geographic spread and the damage.
The Coronavirus is similar. The world has experienced worldwide pandemics. The last one of comparable impact was the Spanish Flu of 1918. There are three differences, between the Spanish Flu and the Coronavirus. One is the speed with which the Coronavirus spread worldwide. Once the Coronavirus left China, it spread worldwide within a month. The second is the contagion rate. While the Spanish Flu was extremely contagious, the Coronavirus may be more contagious. The last is the global economic impact. In this sense, the world has never experienced anything like this pandemic. It is truly a Black Swan. No one could have predicted its economic impact.
Having said that, the Coronavirus has pointed out the fallacy of much of the conventional thinking of the past fifteen years about globalization and allowing China to become the dominant manufacturing hub. Under the globalization idea, trade with China was supposed to result in the Chinese government becoming more democratic. That has not happened. Placing more manufacturing plants in China and allowing the China to become the country that produces 80-90% of the world’s basic medicines and medical equipment in order to keep prices down has been folly. The dependence on China is now costing many American organizations financially.
ASQ and China
The pandemic has forced organization to revisit business assumptions and business models. One of the organizations that went all in for China, was ASQ. It went so far as to change its name from American Society for Quality to ASQ, because it would be less offensive to China. As a result, some accused ASQ’s corporate management of Kowtowing. Moreover, their main magazine Quality Progress often sided with China.
In February 2019, I commented on a piece entitled “Tariffs Trigger Trade War”. It appeared in the December 2018 issue. The piece was critical of the United States position with respect to China. In my comment to the editors I made two points. First, in the 1980s we had a similar issue with Japan. Therefore, this was nothing new and all would be worked out, as it was. Second, I did not believe that taking sides in a trade war was appropriate for an organization which emphasizes quality.
Financially, the emphasis on China has strained the budget. ASQ had an operating deficit of $2.2 million in 2019. For 2020 the projected deficit is $1.2 million or much more. Part of the deficit is from global operations, which includes China. For 2020 the deficit from global operations is projected to be $850,000. This is down by $368,000 from 2019. The deficits led to ASQ corporate’s decision to appropriate the revenue reserves from the local chapters. This appropriation has led to a split among members.
ASQ and Local Chapters
At the outset of this piece I noted the discussion on the LinkedIn Restore ASQ community. Restore ASQ is a group of members who believe that corporate management is headed in the wrong direction. One of the problems is the decline in membership. The 2019 report indicates that ASQ membership will decline by 3% and new membership will not meet expectation. Membership decline has led to the dissolution of chapters.
In 2019 the Board approved the dissolution of five chapters. It would be inappropriate to comment on the efficacy of any dissolution, since the specific situation of each dissolved chapter is not known. But those involved in the discussion fell into two camps. Some argued that the viability of the chapters depends on the efforts of chapter members, not corporate. The other side felt the problem was caused by corporate. I believe the efforts of chapter members help determine viability. However, my ASQ chapter is an example of the impact of corporate actions.
I belong and have belonged to ASQ Portland Oregon Section 0607 for fourteen years. Oregon is the location of numerous electronic and medical device companies with significant quality control operations. A typical meeting, prior to fund appropriation, had about fifteen attendees. On occasion there could be twenty or more. It was not unusual for several to be either first- or second-time attendees. The section, while not a big, was viable.
After the appropriation, attendance dropped to five or six. Moreover, from June to November 2019, there were no meetings. There was a tour in November 2019. Since November there have been no meetings. Further, the ASQ Local 0607 website has been discontinued.
I checked the corporate website to see if any meeting was listed for Section 0607. There was none. For all intense and purposes, Section 0607, after more than fourteen years, is not functional.
One justification for the appropriation of chapter funds was to protect them from risk and to earn more interest revenue. Collectively local chapters had about $12 million. These funds were in low interest savings accounts and money market funds. Thus, corporate saw an opportunity to increase interest income.
But that means investing the funds in higher yield ventures, like the stock market.
Unfortunately, the Coronavirus and the subsequent countrywide lock down resulted in interest rates going to zero and the stock market dropping at least 30%.
The continual deficit from the global operations, the loss of interest income and the decline in the value of investments will reduce revenues further. However, the adverse impact of the virus goes beyond the immediate impact on investments and interest rates. It cuts at the heart of ASQ’s corporate strategy and business model.
Coronavirus and ASQ’s Corporate Strategy
Corporate’s strategic plan fundamentally divides ASQ into two entities. One entity stresses membership. The second stresses training and conferences.
With membership declining and the appropriation of funds helping to accelerate this decline, ASQ corporate appears to have decided to focus on workshops and conferences, at the expense of membership and chapters. This decision damages ASQ’s membership base.
As membership declines, the number of people desirous of attending conferences declines. A similar relationship exists for workshop attendance. It is viable chapters which support both activities. The chapters are the connection to ASQ for the individual member.
It is at the chapter meetings that an individual member can talk to a Master Black Belt, hear about the quality efforts occurring in China or the Netherlands, become more engaged with the profession through presentations and hear about career advancement and development opportunities. Once professional germination and nurturing has occurred at the chapter level, corporate, by providing the world conference, training and certification, can solidify membership in ASQ.
Conference, training and certifications have been money makers for ASQ. Of that, there is no doubt. The problem is that the Coronavirus has disrupted all the ASQ’s 2020 projections now business model. The May 2020 world conference has been cancelled. Registration fees are to be refunded. In fact, any scheduled training or meetings have been cancelled for the near future, as a public health measure.
What constitute the near future is debatable. Likely it will be at least six months. If that proves to be correct, then ASQ will essentially have lost revenue for almost a year. Further, the psychological impact on individuals could make them wary of attending events with more than ten people. Similarly, the economic impact will likely cause companies to reduce their expenditures for discretionary items like training.
But perhaps more problematic is that the whole approach to workshops and conference might change. For instance, O’Reilly Media, an event and conference provider, has laid off all it in-person event staff. The expectation is that events and conference will be virtual, not in person. If this expectation is correct, then ASQ’s world conferences and workshops will be few and far between.
ASQ Going Forward
With a continual deficit, declining membership and corporate action which has created a rift among membership, the prognosis for ASQ is not good. The O’Reilly Media action points towards a fundamental change in the way conferences and workshops will be conducted. That change, if it comes to fruition, knocks the props out from under the conference, training and certification strategic plan element. This problem is complicated by the lack of emphasis on chapter solvency. Without viable chapters, there will be a decline in the base for the conference, workshops and certifications.
All members want ASQ to stay viable. There are concerns, however, that the direction ASQ’s corporate management and Board has taken is going to destroy ASQ’s viability. Consequently, the Board should rethink its strategic plan.
James J. Kline, Ph.D., CERM, is the author of numerous articles on quality in government and risk analysis. He is a senior member of the American Society for Quality. A Manager of Quality/Organizational Excellence and a Six Sigma Green Belt. He has consulted for the private sector and local governments. His recent book, Enterprise Risk Management in Government: Implementing ISO 31000:2018, is available on Amazon. He can be reached at email@example.com.