Innovation at the Frontier

With concern rising everywhere about taking care of our planet, the first thing you probably think of when you hear the term “sustainable” is the production of environmentally friendly goods.
Unless, of course, you are managing the finances of a non-profit organization. In that case, you are likely to think first about whether your organization is sustainable enough to be around in five or ten years. Countless organizations with worthwhile missions that depended on government or other donor support have faltered or disappeared when funding has dried up.
At first glance, industry associations may seem to be immune to this problem; after all, they are supported by for-profit business members. As long as Indonesia still has a widget-producing industry, then surely a trade association of widget manufacturers will thrive, won’t it? Not necessarily. Indonesian trade associations often count many small businesses among their members; with relatively modest revenues such concerns are not in a position to contribute hefty annual membership dues. Quite often, it is not membership fees, but support from the Indonesian government as well as financing from donor agencies that make up a substantial portion of association income.
Associations that fit this profile may not be in danger of ceasing to exist entirely, but they may be unnecessarily constrained. Government funding is unlikely to grow substantially and it potentially hampers an association’s ability to provide independent advocacy on regulatory matters. Donor income is typically project-based and rarely finances ongoing operating costs. Thus, venturing into new, high-impact but possibly costly initiatives may be difficult for trade
associations that remain reliant on these traditional income sources.
A better approach for associations that hope to carry out their mission effectively is to explore cutting-edge techniques for enhancing organizational sustainability. A number of resources exist to help forward-thinking associations do this (see the links list bellow).
What recommendations do they offer that apply to trade associations in Indonesia?
The essential, and most vital, first step is membership development. This does not simply mean attempting to expand the number of members in an association (which is typically what most associations unfortunately try to do). “Membership development” involves taking a step back and thinking critically about how the association is an asset to its members. What is it worth to members to be part of the association? What high-value services does the association offer (or, if these are limited, what services should the association begin to provide)? What value, in explicit financial terms, should be assigned to those services? One example of a readily quantifiable, high-value service that associations can offer is skill or technical training. Other assets may or may not be as tangible: examples include trade promotion and advocacy efforts on behalf of members that can lead to important revisions in tax, labor or custom laws. While such benefits may seem hard to quantify, it is important to do so and communicate this to members: for example, customs reform may lead to a significant drop in clearance times for imported components of a locally manufactured product, or to a reduction in the need to pay expensive
bribes. Trade promotion may result in new overseas markets for exporters.
When association leaders determine the value of their assets, they can set appropriate membership fees and create service packages that reflect the true needs of their membership.
Another important step in achieving financial sustainability is to diversify income sources. Every non-profit organization should strive to have at least three revenue sources. For industry groups, a particularly promising revenue category is fee for services.
Associations are well placed to know exactly what businesses in the industry they represent need – whether it is training programs, an information clearinghouse or website, technical assistance in gaining international certification, and/or other services.
Meeting these needs for a price can simultaneously benefit association members and round out the association’s revenue. Sophisticated association managers can also look toward developing partnerships with the private sector. A good example is the partnerships Exxon Mobil Corporation has developed with entrepreneurial associations in several countries. Exxon Mobil has underwritten the development of business centers that operate on a for-profit basis, offering
services such as training, meeting facilities, and other forms of business support.
As important as these strategies are, they are incomplete if they do not occur within a context of long range planning. Associations that thrive do so not only by taking advantage of near-term opportunities but by planning for their financial future.

Caesar Layton
SENADA Grant Manager
(Competitiveness at the Frontier, Mar 2008)
Links list:
• http://www.uneptie.org/Outreach/bi/practices.htm
This site is devoted to the role of industry associations in promoting sustainable development. It contains a collection of 18 case histories that introduce associations from more than 10 sectors. It also provides commentary from industry association partners such as governments, NGOs, and trade unions.
• http://searchsecurity.techtarget.com/tip/0,289483,sid14_gci994335,00.html
Provides tips on whether joining an industry association will be worth the cost, and how to make the most of membership. (The site is targeted to the IT sector, but the advice is applicable to all firms.)
• http://www.faa.gov/about/office_org/headquarters_offices/ast/media/vol_std.pdf
Offers a thoughtful look at the role of voluntary standard setting by trade associations, how such actions should be analyzed in the regulatory context, and benefits and pitfalls of such standard setting.
• http://www.nbsolutions.org/index.html
Targeted at all non-profit organizations, it helps them to develop business plans and to explore what earned-income potential each organization has, and if the potential is there, how to exploit it successfully.
• http://www.npgoodpractice.org/
This “nonprofit good practice guide” sponsored by the Johnson Center at Grand Valley State University offers best practices information in many areas relevant to industry association activity, including advocacy, evaluation, financial management, fundraising, governance, marketing and communications, organizational management, technology, and volunteer management.
• http://pemd-pdme.infoexport.gc.ca/pemd/tradeassociations/bestPractice-en.asp
is devoted to “Best Practices of Trade Associations.” Sponsored by Foreign Affairs and International Trade Canada.