The Business of Associations
By Jerry L. Bowman, InfraGard President & CEO
If you ask the IRS, they will give you the following definition of an association, “In general, an association is a group of persons banded together for a specific purpose.” Associations are generally classified by the IRS as “not-for-profit,” which can include a wide range of organizations including homeless shelters and soup kitchens, colleges and universities, churches, temples, mosques, hospitals and community health centers, advocacy and public education groups, membership and trade associations, and performing arts and fine arts organizations. The IRS definition leaves a lot of room for interpretation, since associations are formed for a wide variety of purposes and engage in a broad range of initiatives and activities, from proving networking opportunities for like-minded people, to setting standards for industries and professions, to publishing magazines and providing adult education.
America’s associations have deep roots in our history. The first American settlers formed “guilds,” patterned after British traditions, to address common challenges and support each other’s work and lifestyle. In 1830, French statesman and author Alexis de Tocqueville toured America and remarked that the new nation seemed to be succeeding so well at democracy because Americans of all ages, all stations of life, and all types of disposition were forming associations. In fact, both John Adams and Thomas Jefferson were the volunteer leaders of associations when they ran against each other for president. More recently, Peter Drucker, known widely as the father of management, had a career that produced 39 books, as well as lectures, classes, consultations, and even movies. Drucker anatomized the functioning (and dysfunctioning) of companies and was a passionate proponent of the social and economic importance of non-profits, which he deemed the “most distinguishing feature” of American society. He created a set of management principles specifically for that sector, and urged businesses to draw lessons in establishing a mission and motivating workers from the non-profit world.
The complexity of associations and their role has evolved significantly. However, today’s associations still share the purpose of coming together to produce positive results for their members and society. Unfortunately, the passion for their collective purpose often overshadows the business of the association and can get well-meaning not-for-profits in the penalty box with the IRS or worse. In fact, the management of associations has become complex enough that there is an association for associations. The American Society of Association Executives (ASAE) was founded in 1920 as the membership organization and voice of the association profession. Headquartered in Washington, D.C., ASAE represents more than 21,000 association executives and industry partners representing more than 9,300 organizations. They provide a centralized resource for association professions offering educational and other best-practice resources for their members. ASAE members manage leading trade associations, individual membership societies and voluntary organizations across the United States and in nearly 50 countries around the world. Kelly Woods Vaughn, our executive director, is a member of ASAE and can introduce anyone interested to ASAE or can often tap into the resources of ASAE on our behalf. A final note on ASAE is that it sponsors the Certified Association Executive (CAE) professional certification program. As InfraGard adds staff members over the coming years, look for us to seek out these certified professional association managers.
Not-for-profit is a tax status and is often misinterpreted as implying relaxed regulatory and business requirements. This couldn’t be further from the truth. Maintaining 501(c)(3) status with the IRS, or even more importantly, maintaining a viable business has to be a priority for all those in leadership positions in not-for-profits. There are more than 1.5 million nonprofits in the United States. Of those, three-quarters (almost 1.2 million) have annual budgets under $1 million, and most are even smaller than that. These “small” organizations which includes many IMAs respond to localized needs and are staffed by people with deep knowledge and caring for InfraGard and the communities where they live and work. Since deep knowledge and caring doesn’t necessarily carry with it the business acumen or resources required to run the business affairs of the IMA, the INMA has begun to evaluate implementing “shared services” models that can assist those IMAs who struggle with the business of running a not-for-profit. We have initially discussed offering accounting services and are exploring other areas where we can lessen the back office burden on IMAs and provide an increasing number of these shared services over time. We are currently evaluating the cost and funding sources for these services, but look for a pilot offering some time this year.
Finally, not-for-profit organizations share some major issues with for-profit companies, such as management, budgeting, and staffing. Yet, their approach to these issues comes from a unique perspective. Nonprofits have different business goals, and have to tread carefully to know when to learn from business examples and when to follow their own paths. There is no one-size-fits-all in the not-for-profit world. The chief goal of a nonprofit is not to make money, but to serve a public mission. However, to serve that mission, it needs to make money. Balancing a mission and funding is what defines the not-for-profit organization and separates it from for-profit companies. INMA is focused in 2016 on output. With more than 44,000 members, we have a huge pool of resources and we believe that we can fund back office support and special IMA and INMA projects simply by creating educational output. Stay-tuned as we look for an implement new ways to support the business of InfraGard and assist our IMAs with this work. More as I know it. — Jerry