In a recent report by the Association of Summer Olympic International Federations (ASOIF), the umbrella organisation of all world governing bodies involved in the summer Olympic Games, one of the main conclusions was that International Federations - and their National Federations - have to think like a business.
The central argument of ASOIF for this view is that the traditional sports organisations need to adapt to a new reality where they are competing with private, commercial companies for the right to govern and control the sport. In other words, the monopoly of the traditional sports organisations - on an international and national level - is increasingly under pressure.
While it is in principle a good thing for consumers in any market or industry if monopolies are challenged, and while International Federations could probably improve on various levels, it would be wise for all of them not to jump into a conclusion that "we must now become a business".
Why? Because ultimately, they are not businesses - and yet at the same time, can also not be viewed as a traditional not-for-profit.
Which all leads to the question: what are they?
As we argue in the recently published Burson Cohn & Wolfe book, The New Sports Organisation, sports managers, prior to focusing on how to manage international or national sports organisations effectively, should start by defining exactly what it is that they are expected to manage - more specifically, the frame in which they are operating.
In the sports practice of Burson Cohn & Wolfe we have identified two simple, but yet really important key parameters, which can help define the fundamental operational frame of an international or national sports organisation by differentiating themselves from not-for profit organisations on one hand, and commercial businesses on the other.
Let’s first look at the differences with a not-for-profit organisation.
The not-for-profit label has been used to differentiate sports organisations from the corporate world, and at the same time move them closer to the cause-related not-for-profit organisations such as Greenpeace, the Red Cross and others. Such a label has also been used to justify Governmental financial support, various sorts of tax exemptions and, in general, a kind of "protected" position inherent in being considered an important, positive pillar in modern society.
But in fact an international or national sports organisation is fundamentally different from a Greenpeace or a Red Cross, because of the key aspect of growth.
For most sports organisations, growth is the central criterium of success. More members, more spectators, more television viewers - basically more of everything which can make the sport grow on an international or national level. Success equals growth.
Compare that to any cause-based not-for-profit organisation, where growth of the market is normally what they are there to prevent, whatever be the primary cause they are seeking to address: less pollution, fewer political prisoners or reduced poverty, for example. Many not-for-profit organisations have grown over the years and some of them are now employing thousands of people all over the world. And yet, their fundamental aim is ultimately to become superfluous and, while regrettably for many that might not be attainable in the foreseeable future, this does mean that organisational growth can never become a core strategic objective for them.
So, the focus on growth clearly differentiates sports organisations and traditional not-for-profits.
But what about the differentiation with corporate business? Isn’t the focus on growth exactly what sports organisations and commercial companies have in common? Yes and no - because there is a subtle and important difference here.
For a business, growth is an important indicator of success, and the value of the business is often based as much on its potential for growth as it is on current performance. Whilst top line growth (increased revenues) might be a strategic issue in the short to medium term, the focus for any business will at a certain stage always shift to growing the bottom line (profitability), which can be achieved by an increase in revenues or a decrease in costs – rather than achieving growth per se.
Compare that to any international or national sports organisation. Here growth is typically focused on top-line growth through an increase in revenues, which in turn will allow the organisation to increase spending and further develop the sport. While the corporate world is filled with famous and admired ‘cost cutters’ who help increase profit, few - if any - leaders of sports organisations will be praised over time for simply for reducing costs and improving the bottom line. That’s simply not what they are expected to do.
So the answer to the question must be, "No": an International Federation - and their national members - should not be managed like a business because they are fundamentally different, while at the same time also being fundamentally different from a traditional not-for-profit.
For both differentiations the key word is growth and in order to secure a healthy future for International Federations and their members, a sustained effort on creating such growth must be the focus of any short- and long-term strategy,