This provocative title headed a well-researched article by Prof Martin Perry that appeared in Business Review Volume 10 No 2 of the University of Auckland Business School. The article identified key factors that promote and inhibit trade associations. And, is based on research in 2008 involving 300 industry and service groups and personal interviews with 101 chief executives. Although the research is quite dated, many factors hold true for today, such as why people join associations.

As a governance and compliance specialist with experience in this sector I found in this article to be a true reflection on the state of this influential voluntary sector. In my opinion very little has changed since the findings were published. As Prof Perry pointed out, trade associations (which find their origins in medieval guilds) continue to provide forums for business networking and the pursuit of shared interests.

Adapting to Change

What is missing are other elements such as influencing terms of trade and prices, which were very much in evidence when I first became involved – and removed for good reason. Doomsayers predicted the demise of many such entities, but found their foreboding unjustified when they adapted to the changed environment with greater emphasis on member services and better targeted advocacy. In many instances this resulted in a higher standard of delivery and public profile.

An earlier study based on the Porter Project found that.. “Few associations reveal a strategic orientation, as indicated by the number able to offer a mission statement for example. There is limited commitment to an end-user orientation and much communication appears to be one way from the association to its membership.” A subsequent survey was more positive, revealing that associations were becoming more effective with an emphasis on influencing government policy. It was also said that a continuing weakness was a failure to upgrade their industries’ competitive advantage. This constraint is particularly relevant to New Zealand with seven types of distinctly identifiable producer and skill-based industries. The inherent principles of collective influence and service hold good to the present day.

Five key Roles of Associations

Prof Perry singled out a mix of five key roles of associations, which he summarised as:
Representation – Assisting regulatory compliance, representation to government and maintaining industry relationships with public sector agencies and kindred organisation, (including a world body);
Maintenance – Promoting professional standards and maintaining industry self-regulation;
Strategic Purpose – Promoting industry growth through the promotion of industry infrastructure, addressing resource constraints and collective marketing;
Transformational – Assisting (member) businesses to adapt to new market environments and keeping them constantly aware of opportunities and threats with effective strategies for action;
Social – Recognising, motivating and informing industry participants, to which I would add maintaining a positive public profile for the industry and its members.

Associations linked to a sector faced with, or already undergoing some, fundamental change in its market, technology or industry structure should see a role for themselves in facilitating the change.

The social role of associations includes activities such as conferences, networking functions and annual awards, as well as representation at international events and trade exhibitions.

Advocacy in the current environment is frequently at the invitation of Ministries and other agencies of the State. Associations are engaged for their expertise, insight (sometimes numerical strength).

Reasons members join associations:

Members join associations for a variety of reason, most prominent among identified causes were:
Representation to Government – With evidence of increasing reliance on critical information based on first-hand experience, government is placing greater reliance on data sources from associations;
Access to Association Activities and Privileges – Networking opportunities to remain in the know on current trends, networking and the ability to learn from each other
Status and Accreditation – Many trade and professional associations base membership entitlement on criteria and performance standards that serve as credentials that have competitive advantages.

An unresolved issue is the position of ‘freeloaders’, who without contributing in any way to their industry representative association, have the advantage of participating in many of the benefits provided by it to its members. At the last count the density ratio is one third to all participants on average. This is unlikely to change with the introduction of more government regulation and certification that set down qualifying criteria that supersede self-policing by industry bodies.

Prof Perry identified the small number of executive staff employed by most associations suggesting limited capacity to plan strategically and implement programmes. This view can be supported by fewer high-profile industry leaders making themselves available for elected positions. Another concern expressed in the survey is that sparse resources are absorbed in maintaining the life of the association rather than supporting meaningful projects to strengthen its position in its market.

It means that associations have to work smarter. Keeping costs low to hold affiliation fees at a reasonable level without impinging on the quality of staff can be a hard call. There is evidence of growing recourse to external providers with the necessary competencies and on-call availability to achieve the same outcomes that a fully-staffed in-house secretariat provides. Greater project orientation with publicity value and sponsorship support as self-financing initiatives can also play a part.

The three prerequisites for success in attaining association aspirations have been defined as
Building co-operation between member businesses
Facilitating conditions conducive to membership growth
Maintaining good relations with government agencies
Presenting a united industry voice.

Prof Perry summed it all up with emphasis on recruitment success, sense of purpose, membership engagement and involvement in activities of potential common good. This is then underpinned by individual benefit in reassessing the importance and future role of trade associations.

As an involved party in a number of trade and professional associations acting in executive, governance and advisory roles, I am conscious of the scarcity of research in this area. The New Zealand Association Resource Centre Trust has expressed an interest and has access to a reliable survey source with academic credentials. This would not involve a major financial investment, but is dependent on the willingness of trade associations and their executives to be active participants. Ideally such a project should be guided with their prior industry input to provide the questions and answers that will form the substance of such an undertaking.

By Ralph Penning