When association leadership loses its way

Is it OK for a U.S. 501(c)(3) non-profit association to make large profits, pay its four top executives well over $1M per year, and yet do little for its members?

In an astonishing article, Professor Dorothy Vera Margaret Bishop, FRS FBA FMedSci, who is Professor of Developmental Neuropsychology and Wellcome Trust Principal Research Fellow in the Department of Experimental Psychology at the University of Oxford shares an example of an association that’s guilty of all of the above.

“The Society for Neuroscience (SfN) makes humongous amounts of money from its journal and meetings, but spends very little on helping its members, while treating overseas researchers with indifference bordering on disdain.”
—Dorothy Vera Margaret Bishop, Has the Society for Neuroscience lost its way?

Why the SfN lost its way

Bishop’s article gives the financial details, also available from the association’s 2016 (latest) IRS Form 990. To summarize, the Society for Neuroscience:

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A new kind of association service — Open Collective

A new association service, Open Collective, offers an intriguing way to raise funds and provide radical financial transparency to members.

I like to think of an association as a group of people with a shared mission, the incarnation of a community of practice. Open Collective supports communities of practice like meet ups and open source developers that can benefit from an open administrative and financial structure, but the service could be used by any association that wants to outsource fund raising and offer financial transparency on how funding is raised and spent.

Here’s how it works.

Fund raising
Open Collective makes it easy to request funds for specific activities or goals (example). You can quickly create a sharable link to the request, which can be one-time or monthly. Flexible donation tiers allow you to create named donation levels, like “backers” or “sponsors” and feature them appropriately on your website. You can also sell tickets to events (currently in beta).

One interesting feature allows an umbrella organization to empower local or networked chapters/projects to raise money and have their own budget, without having to open a separate bank account for each one.

Financial transparency
Unpaid expenses and available funds can be seen by all members (example). Definable (and changeable) core members can approve or reject submitted expenses (example). Anyone can see the money flow in and out of the organization.

Cost
From the website: “Open Collective takes 10% of the money raised by the collective for managing bookkeeping, taxes, and admin (fiscal sponsorship), as well as providing your Open Collective page and the software it runs on. We share this commission with the fiscal sponsor (legal owner of the bank account that holds the money on behalf of the collective). Additionally, our payment processors charge a fee, usually 2.9% + $0.30 per transaction.”

This seems reasonable, though it’s not clear how the commission sharing works. The non-profit service Network for Good charges a 5% administrative fee (which includes payment processing charges) for donations, but Open Collective offers many more services than just accepting donations.

More information
As I write this, Open Collective is supporting over two hundred organizations with a combined annual budget of over half a million dollars, and you need to apply to join; it’s not automatically open to anyone who signs up. A two-part article by one of the founders (formerly cofounder/CEO of Storify.com) offers a useful summary of the history and philosophy of Open Collective.

What I think
For the first ten years of its existence, a non-profit association edACCESS I co-founded in 1991 was run informally under the auspices of another non-profit. Because the group was committed to transparency right from the start (our books were always open for anyone to see) Open Collective would have been very helpful for managing edACCESS’s finances.

While a structure like this isn’t appropriate for every non-profit, I think the service offers a novel approach to supporting communities that want to be financially transparent. It could be especially useful for localities that want to support citizen-created collectives using shared infrastructure (example: the city of Brussels). If it fits for you, Open Collective is well worth investigating.

How to become one with your association’s strategic goals

No, I’m not suggesting you rise at 5 a.m. and recite your association’s strategic plan as your daily morning mantra. But I’d like you to try this simple test:

How many of your association’s strategic goals can you recall right now?

(No cheating! And not the easy bits about your vision, mission, who you serve, or your programs and services — just your goals!)

I’ll wait…

Was that a little embarrassing? You’re not alone — when I tried this recently, I was pretty embarrassed too!

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Associations exist only in the mind

Professional, trade, and public interest associations are significant businesses. In the United States alone, associations employ more than 1.6 million people, and generate an annual payroll of ~$50 billion.

Yet, ultimately, associations exist only in the mind.

Stay with me, and I’ll tell you a story that may convince you of the value of this strange point of view.

Fifty years ago, every business that wanted to offer credit to its customers had to have its own independent system to do so. Individual banks were trying to encourage merchants and customers to adopt newfangled things called “credit cards”, but they failed to solve the chicken-and-egg problem that consumers did not want to use a card that few merchants would accept and merchants did not want to accept a card that few consumers used.

Then in 1966, a man named Dee Hock had the vision, determination, resources, and a little luck to break this logjam. Dee described his journey in a fascinating book he wrote after his retirement in 1984, intriguingly titled: Birth of The Chaordic AgeDee was the first CEO of what became the mammoth multinational financial services corporation VISA, a company with a current market capitalization of over $200B.

What has this to do with associations? Well, you may be surprised to learn that VISA has never issued cards, extended credit or set rates and fees for consumers. The company is, in structure if not in capitalist terms, an association of tens of thousands of member banks who offer VISA-branded credit, debit, prepaid and cash-access programs to their hundreds of millions of customers. These banks, while competing with each other for customers, agree to honor each other’s trillions of dollars in transactions annually across borders and currencies.

At its core, VISA is a set of agreements between its members. The company’s value to its owners and customers is created from the mutual agreements its members have made. Without those agreements, VISA would not exist and we would return to the pre-VISA world when every financial entity had to have its own independent system of offering credit to its customers.

Although VISA is an atypical kind of for-profit organization, its core purpose is essentially identical to that of trade and professional associations. Associations are society’s instantiations of communities of practice, groups of people who share a common interest, profession, or passion and agree to actively engage around what they have in common. That leads us to Dee Hock’s (and my) view of organizations like VISA and associations:

“…organizations exist only in the mind; they are no more than the conceptual embodiments of the ancient idea of community.”
—Dee Hock, Birth of The Chaordic Age

This perspective is extremely important because it’s easy for associations to forget their initial and continued reasons for existence. Every association is created when at some moment in time a group of people with something in common wants to further a particular profession and/or the interests of those engaged in a profession and/or the public interest. Typically, the community already exists informally, and its “members” want to create a formal, legal structure to support, deepen, and widen its reach.

Associations can, however, lose sight of this primal and ongoing purpose. When this happens, they concentrate on self-perpetuation and/or expansion at the expense of supporting the community of practice for which they were created. Remembering that an association is, at its core, a set of agreements in people’s minds about the instantiation of a community that is important to them is key to keeping the association relevant to the community it serves.

Lessons from my association leadership transitions

transitions_4141130245_1b07542dfb_oIn June I’m stepping down as President and Executive Director of edACCESS, an association I co-founded 25 years ago. This is the third time I’ve left an association leadership position, and I’m going to share some valuable lessons learned from each transition.

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Unmembership and unconferences

rootsSparked by my article Is unmembership the future of associations?, Joe Rominiecki, senior editor of Associations Now, has published an interview with me: How “Unmembership” Gets Back to the Roots of Associating.

Talking with Joe helped me verbalize the close connection between the core reasons why associations begin and new conferences are born. I’ll leave you to read Joe’s excellent article for the details.

Photo attribution: Flickr user buehlerphoto