Business Associations

1. Business Associations So how do business associations work?

2. Introduction • Business Associations membership is voluntary • Micro-enterprises • joint marketing or purchasing • share equipment • Common economic activities • Advocacy & lobbying • promote members’ interests • Shared social services • health insurance • child care

3. Introduction cont • Business associations must • remain independent of govt • be located near their members • represent their members interests • lobby Govt about SME needs

4. Rationale • In developing countries not many formal jobs • Micro-enterprises to alleviate poverty • Informal – therefore not eligible for formal services • Health benefits, market information, assistance packages etc • Join together to help each other • SMEs operate in competitive market • Lack time, finance & experience/skills • Work together in researching market/products • Source reliable training

5. Role of Associations • Networking • Act as a hub for business information dissemination • 1st stop for short-term advice & referrals • Self-regulation • Business arbitration & standard setting • Lets govt concentrate on privatization, democratization • Intermediation • Bridge between govt & SMEs • Act as voice of SME sector - PPDs • Cooperation between private & public sectors

6. International Experience • Business of representing business is thriving • Business Associations participate in official meetings with Govts • More SMEs join, more business associations are being formed • Business association find new ways of serving SMEs

7. International Experiencecont • Successful industrialized economies (such as Japan & Germany) work with associations • Encourage involvement in policy making • Implement programmes on behalf of Govt • new research • development projects • quality control on imports

8. Types of Associations • Trade Associations • Single sector • Organized locally or nationally • Chambers of Commerce • Private sector within specific area • Countries, provinces, districts • Umbrella Associations • Federations of smaller bodies • Organized nationally to deal with Govt • Employers Associations • Normally organized nationally

9. Types by services

10. Benefits • More cost effective to help business associations • than individual micro-enterprises or SMEs • Can provide sustainable services & assistance to associations • Businesses can help each other & learn from each other • Resources more likely to be shared • than benefiting one or two

11. Starting a business association • Many help each other, without being organized • Informal ways of help work well • Unofficial forms of assistance can work better • So setting up an association does not spring to mind • Groups exist to provide mutual support • Clubs, community & church groups, cooperatives • Advisable build on existing informal/formal groups • Voice opinions of common interest/concern • Lobby government

12. Developing a business association • Why micro-enterprises organize themselves? • Increase profitability • Defend rights & interests • Overcome economic, even social, barriers • Can be driven externally • Government want to support a sector • Traders, street vendors, service providers • Provincial or district groups • Donors want to support many micro, small & medium enterprises

13. Embryonic Infancy Adolescence Life cycle – early stages One or two people form group to solve common problems. Membership limited, work is voluntary Association becomes visible Members committed & enthusiastic Experience lacking, mistakes made. More members join

14. Prime of life Maturity Decline Life cycle – late stages Experience gained Professional services provided Diversification Goodwill from membership New alliances made & expansion Constructive partnerships Members interest starts to wane Out-lived its usefulness: powerful members lose sight of aims; bureaucracy more important than services; members split off to form new groups or branches

15. Member participation • Successful associations assist members themselves become successful • Leaders should facilitate members’ participation • Active commitment enhance by leaders who • Listen, consult & create opportunities for members’ participation • Leaders develop different services to address members’ needs • National assembly determines members’ rights & associations’ obligations

16. Involvement of women • Establish a women’s committee • Ensures women’s concerns are on the agenda • Use quota system to ensure equitable participation on management & working groups • Sensitize male members to women’s needs • Changing roles of women in today’s society • Develop & encourage literacy amongst women • Organize meetings at time which suits women’s family obligations

17. Leadership • Good leadership essential for success of association • Leader provides link between association & political, social & legal environment in which it operates • Leaders need to distinguish between own business & that of the association • Should not abuse their position for own gains • Prioritize collective interests

18. Leadership cont • Leaders understand their members & their needs • Need to elicit good decisions from meetings • Listen to members • Have planning & time management skills to implement decisions • Leadership shared through committee heads • Not lie with one person (chairman) • Bring in new leaders annually elected

19. members leaders leaders members leaders leaders members members members Business Association Communication • Three-way communication: • Leaders – members – business community Business community

20. legal financial market technology Communication • Internal within association • External with key people, groups & agencies – the business community • Good communication needs to be • Timely • Accurate • Articulate • Meetings – well organized, prepared, appropriate • Negotiation – set goals, fallback position, strategies

21. Vision, Mission, Constitution • Every association needs a vision & mission • Everyone understands core purpose of association • Simple language, motivational • Constitution to guarantee fair & accountable decision making & authority • Outlines member benefits & services • Compiles with national laws • Needs a lawyer’s input • Part of registration process

22. Roles & responsibilities • Association structure comprises • General assembly of members • Executive committee • Audit committee • Members & officers know their roles & responsibilities • For mature associations • Hire General Manager • Admin & technical staff

23. General Assembly of Members Audit Committee ExCo President, Secretary, Treasurer Finance Committee Policy Committee Training Committee Marketing Committee Organization

24. Strategic plan • Association must have plan to strengthen its activities • Use SWOT & PEST analysis • Understand member profile • Needs of existing members • Attract new members • Needs of women members • Understand stakeholders • Govt Agencies • Private sector • Trade Unions • Employers federations

25. Employers’ & workers’ organizations • Employers’ organizations • Management training • Certification • Org trade fairs, seminars & marketing • Workers’ organizations/trade unions • Work safety & occupational health • HIV/AIDS awareness • Both these orgs have wider role on business now • Stronger dialogue with govt

26. Revenue • Memberships fees – aim 40% of income • Fees for services – aim 60% of income • Key is having a broad membership base • More members, more revenue, better services • Leads to more members, better representation • Greater credibility, more members • Fee structure for members • Charge non-members more for services • Seek external funds • Donors, govt subsidizes

27. Financial management • Association must have a budget • Forecast of revenue • Plan for covering cost of providing services • Financial statements • Balance sheet • Profit & loss statement • Cash flow forecast • Need for audits & audit committee • Need for transparent book-keeping

28. Services • Typical services that associations can provide their members - but on a commercial basis • organizeseminars, exhibitions & trade fairs • provideinformation, internet & library services • adjudicatecontracts/provide legal advice • certifyproduct quality & documentation • providesecretarial services for smaller associations or companies

29. Services cont • Offercounseling services • Build networks & commercial links • Access to financial services • Respond to social needs of members • Associations will not be able to solve all problems • Must prioritize based on financial resources & needs of members • Must assess each service for costs & benefits • Use brokers to provide & negotiate some services

30. Financial Services • Access to finance helps build enterprises • Better able to exploit opportunities • Invest in technology, plant & equipment • Hire talented staff • Improve facilities • Banks prefer to deal with larger organizations • Perceived lower risk • Lower transaction costs • Credit provision is a real business in itself • Needs careful management • Must to run on commercial principles at marker rates

31. Financial Services cont • Best to start with savings • Organize members into savings clubs • Act as an intermediary first • Help members apply for loans from FIs • Establish a guarantee fund • Ensure financial service provision is a separate legal entity • Has its own ExCo

32. Counseling Services • Use experience of members, experts or mentors • Provide one-on one business advice • Tailored to younger members • Refer members to websites, information & investment centres, chambers of commerce • Check information for accuracy & appropriateness • Provide ethical filter

33. Training Services • Conduct training needs assessment of members • Not training for training sake • Use older members to pass on skills • Larger/older associations provide direct training • Smaller/younger association negotiate with training providers • Use action learning techniques not lectures • Broaden training outside classic business • Entrepreneurship, selling & salesmanship, negotiation etc • Introduce gender, work safety, health issues

34. Commercial Services • Negotiate better terms for members through collective bargaining • Use economies of scale • to bulk purchase • to meet larger orders • Provide such services for a fee • Demonstrate business like behaviour • Provide shared-services • Back-office services – accounting, call centre • Provision of specialist equipment, laboratories etc • Transportation & freight forwarding

35. Advocacy & Lobbying • Defend & promote members’ interests • Represent smaller & women run businesses • Simplification of regulations & procedures • Develop credibility to level where association is consulted on policies at early stage • Become a recognized voice of members • Requires professional approach • Backed by research & data • Supported by champions • Use media

36. Social Support • Entrepreneurs are exposed to social issues which affect their business • Health, education – funeral clubs • Work safety • Security & crime • Basic education provision & literacy programmes • Guards & night watchmen services • Child care & crèches

37. Discussion Points • In what way do you think a business association can help you? • How do we make business associations stronger? • How can we help to establish new associations? • What role do you think is best for business associations in SME development? • Can business associations be an effective voice in PPD? • How can we gain true independence from Government influence? • At what stage do you think your business association is at? • What is the best example of a business association, that you know?