Sunday, July 11, 2010

Internalizing the Externalities

In all the coverage about the mismanagement behind the Gulf oil disaster and the corporate and governmental response to it, this analysis by Gregory Unruh on the Harvard Business Blog really stands out. For me , his last line says it all.

Internalize the externalities yourself, or society will internalize them for you, at much higher cost.

In the case of British Petroleum--take responsibility for the consequences of your actions (or inactions) or the federal goverment will force you (and your industry) to take responsibility through regulation--likely in ways you'll find more unpleasant and more expensive than if you had taken responsibility yourself.

I think the same axiom holds true for association leaders. In dealing with your members, take responsibility for the consequences of your actions (or inactions) or your members will force you to take responsibility in ways you may find more unpleasant and more damaging to the relationship.

Thinking back on some of my own experiences in making changes that negatively affect a small segment of the membership but which better serve the industry (or profession) as a whole, I'd say that there are clearly situations in which taking responsibility and communicating proactively is the only way to adequately protect a member's relationship with the association. The challenge is to "fix it before it breaks," because once the relationship is broken, no amount of retroactive posturing can repair it.


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