Confederation - the key to sustainability?

December 2014

Transforming how smaller trade associations see “competing” trade associations could be the key to a sustainable future for some membership associations, says the Motor Trade Association’s new chief executive.

Warwick Quinn started at the MTA in August after six years at the Registered Master Builders Association and a career as a valuer, including four years as the country’s Valuer General.

Warwick took over the association after the MTA sold 60% of Vehicle Testing New Zealand (VTNZ) to DEKRA SE, an international testing, inspection and certification specialist. The association retains 40% ownership.

The sale has given the MTA a substantial asset base to mind, grow and use for the betterment of its members. “Our members do get more services than we would otherwise provide if we didn’t have that extra funding stream - such as branding, technical support and help running their business,” says Warwick.

“But we also have to be careful we don’t erode our asset base. We can’t rely exclusively on returns from investments because if something comes up - like the Global Financial Crisis - and we’re not getting the predicted income, we don’t want to suddenly have to put up fees.”

But many trade associations and membership organisations do rely solely on subscriptions from members, and do wrestle with putting up fees to keep offering valued services. However, hiking fees can force some members to give up their membership, putting even more pressure on struggling associations. Many of the costs they face are fixed costs, such as rent, salaries, power etc, that continually eat away at the base funding leaving less available to service members.

“Furthermore, the role of membership organisations is changing,” says Warwick. “Fifty years ago, these organisations were essentially a club. People joined for economic benefits, such as bulk-buying power, and the ability to meet others and learn new ideas at conferences and local branch meetings. But those traditional reasons for joining an association aren’t there anymore.

“Now it’s so easy to communicate with each other, to share opinions and technical know- how. Now you can just jump on the net. Also, business competition is so strong that even bulk buying isn’t as relevant anymore as members can strike great deals themselves. All this means some membership organisations are having to adjust to stay relevant, and it can be difficult.”

Just how trade associations are faring, and what they might do to stay relevant, was something Warwick looked at for his Master of Business Administration, studied extramurally through England’s Henley Business School. He surveyed 4500 trade members, management and board members from New Zealand’s plumbers, builders and electrical associations about what they wanted from their associations.

“What was amazing was that no matter what the trade or the size of the business, the members all wanted exactly the same things,” he says. “First they wanted knowledge and education. Branding and brand value was the next important, to drive customers to their business. Third, they recognised that in order to get the first two you need good capability in the executive and management of their association.”

Warwick was also surprised that the price of subs and the economic benefits, such as cheap phones and petrol deals for members, etc, ranked towards the bottom of the list. “This is important as membership organisations are often afraid to put up fees, and they might spend a disproportionate amount of scarce resources chasing unnecessary savings for members,” he says.

Warwick believes, in thinking about how to deliver better capability, many smaller associations might consider merging or forming “confederations” with other associations from the same industry sector.

“Mergers are already happening, such as the new Civil Contractors Association made up from Roading New Zealand and the New Zealand Contractors Federation,” he says. “But associations don’t have to merge - most have established and respected brands and identities and understandably don’t want to give those up. However, other synergies can come from like-minded associations co-locating to cut costs, sharing back-office systems, infrastructure and staff.

“I believe many of our associations need to start thinking about similar associations as ‘colleagues’ not ‘competitors’. They need to put their strategic hat on and think, ‘If we were to set this up today, in this climate, would we do it the same way?’ The amount of duplication in small underfunded associations is a waste, and developing a ‘confederation’ model is a way of addressing this while retaining each association’s unique identity and brand, which is often a major hurdle to overcome in any merger.”

Warwick says the MTA has its own challenges, even with the comfort of its asset base. “We have such a diverse membership, from huge franchisees to small repair shops. We need to make sure we are offering something unique that each member needs, and that might be to a membership group or even a specific single member. We need to be able to respond to that.

“Like any membership association we need to focus on staying relevant, dynamic and competitive. It’s not enough anymore to just offer members conferences and a newsletter - all businesses want to know what’s going to ‘make my waka go faster’, and it’s our role to help with that.

“We all need to put our differences aside and not be dogmatic by clinging onto the past. We do that at our peril. All our members want are benefits and services to make themselves more competitive. They don’t really care how they get them, but they do care if they don’t.”

Written by Lee-Anne Duncan