Membership in Business Organizations
Background
Members and Non-members
Types of Organizations
Desired Benefits from Business Organizations
a. Members
b. Non-Members
Provision of Information
a. Types of Information
b. Meetings
Rejecting Membership in Business Organizations
Final Comments
Background
Small-business owners join over 14,000 national business, trade and professional organizations each year and a vastly greater number of regional, state, community and neighborhood associations. The purposes and activities of these organizations vary enormously; the size and geographic focus do as well. The sophistication and professionalism of paid staff (and unpaid volunteers as the case may be) also run the gamut. But one thing all business organizations have in common is that they function as information exchanges, places where business-related information is formally or informally traded in order to advance the members’ commercial interests. At times, a business organization is virtually the only place where current industry-specific information can be found. This is particularly true in small, technically oriented industries. Still, many business organizations as well as general purpose clubs, fraternal organizations, etc., have fallen on hard times and lost members or folded. The reasons for this situation are not entirely clear. Yet, these groups play such an important role for so many small-business owners that this issue of the National Small Business Poll focuses on Membership in Business Organizations.
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Members and Non-members
Nearly three of five (58%) small employers report that they personally or their firms are members of at least one business organization (Q#1). Members of at least one organization are highly likely to be a member of more than one. Just 28 percent of members say that they belong to only one organization while 32 percent belong to two (Q#2); another 20 percent belong to three. In fact, 19 percent of organization members, or 11 percent of the total small-employer population, belong to four or more business associations. If a member of at least one organization, small employers belong to an average of about two and one-third. If a member of at least one and also employing 20 people or more, small employers belong to an average of three and one-half business organizations.
Employee size-of-firm is related to membership in business organizations. The contrast between owners of relatively small firms and the remainder is stark. Those employing more than 10 people are almost twice as likely to be a member as are those employing 1 - 4. However, size makes notably less difference beyond a 10-employee breakpoint. Over four in five are members once above the 10-employee level and nearly nine of 10 are members once the 20-employee level is breached.
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Types of Organizations
The survey asked respondents about the organization to which they belonged, or in the case of those belonging to more than one, the organization that is most important to them. Forty-six (46) percent say that their only or most important organization is a national or international group (Q#2a). The responses show virtually no variation by size of firm owned. Owners of the smallest were just as likely to say that a national organization is their most important as were owners of the largest. The remainder are almost equally divided between those with primary allegiance to a state or regional organization (28%) and those with one to a local or neighborhood group (26%).
Sixty-three (63) percent characterize their most important organization as a trade or professional association, that is, a group whose members have similar technical or industry interests (Q#2a1). Examples are the National Restaurant Association, the Printing Industries of America, and the American Medical Association. These organizations customarily cut across firm size, meaning that very large businesses as well as the very small are members. The second most frequent type of most important organization is a general business organization. Just over one in four (26%) cite them as their most important. The National Federation of Independent Business and the national Chamber of Commerce fit this characterization. The relevant point here is that members of these groups cut across industry and professional distinctions. The type of organization least frequently mentioned as most important is a promotional or booster organization. Eight percent list this type of group as their most important. Typical is a neighborhood or shopping area business association.
The scope and nature of organization questions were repeated for those who belong to at least two organizations. This time the questions referred to the organization that the respondent classified as the second most important. The results are similar to those for the most important group, though locally-oriented organizations are more frequently mentioned. Forty-one (41) percent reported that their second most important group is national or international while 34 percent said it is local or neighborhood (Q#2b). Just 24 percent identified theirs as state or regional.
Most (58%) also characterize their second most important organization as a trade or professional association (Q#2b1). Thirty (30) percent classify it as a business organization and just 7 percent describe it as a booster or promotional group.
Organizations need volunteers even when they employ paid staff. That means member volunteers are critical to the success of organizations. Fourteen (14) percent of member small-business owners consider themselves “very active” in their most important business organization/association, the top rank on a five-point activism scale (Q#2a2). That percentage is equivalent to about 470,000 small-business owners. Meanwhile, 8 percent say that they are “very active” in their second most important organization. That percentage translates into 200,000 owners. There is virtually no overlap. Those very active in one are not likely to be very active in another. Since the questionnaire did not define the term “active” for the respondent, the extent of involvement/participation remains an open question. Still, the numbers show that comparatively few members of organizations, even the individual’s most important, are very active in them.
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Desired Benefits from Business Organizations
Organization members were asked the importance (desirability) of each of 12 benefits (activities) that an organization might conduct or carry out. For those who are not currently members, the survey framed the same questions in terms of attractiveness of the 12 benefits (activities) if they were to consider being a member of a business organization. Respondents ranked each listed benefit on a scale of 1 (not at all important/ not at all attractive) to 5 (very important/highly attractive).
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a. Members
Some benefits or activities are substantially more preferable to small-business owners than are others. The most important benefits business organizations provide in order of preference are (average scores on the 1 - 5 scale appear behind the benefit):
• Informs you about government rules and obligations (3.9) (Q#3L)
• Promotes your industry or community (3.9) (Q#3E)
• Provides technical information specific to your industry (3.7) (Q#3I)
• Represents you or involves you in government matters or public policies that affect your business (3.7) (Q#3B)
• Provides an opportunity to network with other business owners (3.6) (Q#3A)
• Develops industry standards or procedures (3.6) (Q#3D)
• Sponsors a continuing education type program (3.5) (Q#3J)
• Offers useful management or marketing ideas (3.3) (Q#3F)
• Holds trade shows (3.0) (Q#3H)
• Makes you part of a group that can purchase discounted goods or services (2.9) (Q#3C)
• Supports one or more charitable activities (2.9) (Q#3K)
• Has social activities (2.3) (Q#Q3G)
The organizational benefit priorities of members correspond most closely to the functions of a trade or professional association. Note that two of the three top priorities, and arguably all three, involve industry specific activity. Providing technical information specific to the industry is the most obvious example, and promoting your industry or community is probably another. Even government rules and obligations are often highly industry specific. More general functions such as useful management or marketing information or discounted purchasing, benefits typically found in a general business organization, are rated lower.
Just four activities were assessed at 3.0 (the mid-point) or below. All tend to be ancillary to the fundamental functions of a business association. For example, while many, if not most, business organizations involve themselves in some type of charitable activities, it is not often a central reason for joining a business group.
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b. Non-Members
The evaluations of members and non-members regarding benefit importance/attractiveness do not vary appreciably. They both seem to prefer (and not prefer) the same things. The order of desirable benefits to members is similar to the order expressed by non-members. A major exception is: makes you a part of a group that allows you to purchase discounted goods and services. Members ranked the benefit tenth most desirable (out of 12) while non-members ranked its attractiveness fourth.
Despite similarities in benefit priorities, members rated organizational benefits notably higher (more valuable) on average than did non-members. For example, members scored their highest rated benefit at 3.9 (out of 5) on average and 43 percent considered it “very important.” In contrast, non-members scored their most attractive benefit as 3.3 while 32 percent termed it “highly attractive.” The same occurred for those benefits evaluated as least important or attractive. Members saw them as more important than non-members as would be expected.
The following is a list in order of those organizational benefits non-members consider to be most attractive:
• Provides technical information specific to your industry (3.3) (Q#9I)
• Promotes your industry or community (3.3) (Q#9E)
• Informs you about government rules and obligations (3.2) (Q#9L)
• Makes you part of a group that can purchase discounted goods or services (3.1) (Q#9C)
• Provides an opportunity to network with other business owners (3.1) (Q#9A)
• Offers useful management or marketing ideas (3.1) (Q#9F)
• Represents you or involves you in government matters or public policies that affect your business (2.9) (Q#9B)
• Develops industry standards or procedures (2.8) (Q#9D)
• Sponsors a continuing education type program (2.7) (Q#9J)
• Supports one or more charitable activities (2.7) (Q#9K)
• Holds trade shows (2.4) (Q#9H)
• Has social activities (1.9) (Q#Q9G)
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Provision of Information
A primary function of business organizations is to either transmit information or facilitate its transmission. Organizations adopt various strategies to perform these functions, but most employ similar vehicles. When asked from where most of the useful information that they receive from membership in a business organization or trade group comes, 50 percent of small-business owners cite the organization’s magazines and newsletters (Q#5). These are the standard communication vehicles for almost all organizations. The second most frequent choice (21%) is networking. The networking answer obviously implies that members attend and find valuable (at least relatively so) meetings and/or conferences. More will be said of this later. Eighteen (18) percent note continuing education type activities. In the current context, continuing education is vague, but implies an on-going series or sequence of training sessions, perhaps even leading to certification of some type. Organizational Web sites generate least interest. Just 8 percent find them of greatest value. This datum is consistent with other data regarding small-business owner use of the Internet.
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a. Types of Information
While the priority of information sources appears clear, the content of the information found valuable varies. Respondents divided their highest three priorities for information content almost equally. Twenty-four (24) percent reported that “new technologies and the latest ways of doing things” is the single most important type of information that they obtain through membership in a business organization or trade/professional association (Q#6). “Your specific industry’s news and information” polled next (23%) followed by “applicable laws and regulations” (22%). All three, collectively constituting 69 percent of responses, are arguably highly industry specific. The possible exception is new technologies and the latest ways of doing things. That response could cut across industry lines. The fourth most frequent response, just short of the three leaders at 18 percent, is markets and customers. That response is not necessarily industry specific, particularly if the interest is marketing techniques rather than issues with specific customers. Last on the list is general business skills (9%).
The survey posed a parallel question to non-members. It asked them for the single most important type of business information that they have trouble acquiring, and then offered the same set of responses that was provided members. The answers of non-members generally were more focused, though a substantial number could provide no answer. The most frequently mentioned type of information that non-members had difficulty acquiring is applicable laws and regulations. Thirty-one (32) percent said that this type of government-oriented information is the most difficult for them to find (Q#10). Twenty-one (21) percent identified information about markets and customers. Only 12 percent listed new technologies and the latest developments, about half the frequency of members. Again, the type of information least frequently considered difficult to acquire involves general business skills (9%).
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b. Meetings
Common wisdom holds that small-business owners do not attend meetings; common wisdom is wrong. Forty-three (43) percent of members said that in the last year they attended a conference, seminar, meeting, trade show, etc., sponsored by a business organization or trade/professional association requiring them to spend at least two nights away from home (Q#4). That means that during an economically poor year approximately one in four small employers attended out-of-town meetings or their equivalent requiring at least a two-night stay. All association sponsored meetings small-business owners attend are obviously neither out-of-town, nor do they require a two-night stay. Therefore, the number who attend organization sponsored meetings of any type is probably substantially higher. The survey did not gather any information on that issue.
Most who attended the organization-sponsored sessions report that the primary benefit they received was continuing education, that is to say, staying on top of trends, developments, technologies, etc. Half (50%) cite this benefit (Q#4a). Twenty- nine (29) percent believe that networking opportunities was the primary benefit they received. Another 19 percent noted attendance or participation in a trade show, and virtually none (1%) used them primarily as a reason to get away.
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Rejecting Membership in Business Organizations
Small-business owners can reject business organizations either by not joining them in the first place or by quitting them after they have once become a member. Over 2.3 million small employers are not members of a business organization. The most frequent reason (40%) that they do not join is that organizations have few or no visible benefits (Q#8). The survey did not address the response further. The second most frequent answer (22%) is that respondents claim not to be “joiners,” closely followed (21%) by the rationale that they have not yet had time to look into membership. The next most frequent reason is that membership is too expensive (9%). A small percentage offered other reasons or did not respond.
Nineteen (19) percent terminated membership in at least one business organization over the last three years (Q#7). If this group dropped only one organization each over that period, it would amount to approximately 350,000 cancellations annually. Since this estimate does not capture multiple quits nor the experience of closed businesses, it understates the number who leave every year.
The most frequent reason given for quitting a business organization is that the benefits are not worth the expense of belonging. Nearly 45 percent cited the reason (Q#7a). Another 20 percent believed that the organization failed to fulfill membership promises. Roughly the same number (13%) listed insufficient time and expense as their primary reason with just 6 percent saying that they really did not want to be a member in the first place.
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Final Comments
Membership in business organizations is closely related to business size. Owners of larger, small businesses are almost universally members of at least one organization, and more likely are members of two or more. One can reasonably speculate, therefore, that information gathered and other benefits received through organization membership(s) helped, at least in part, those businesses achieve a larger size. The data presented here can neither confirm nor deny a causal relationship, but they do leave a plausible hypothesis.
A curious, associated issue is the difference small-business owners see in the value of business organizations and the reasons for it. Some organizations are more responsive to member needs and wishes than are others. Organizational responsiveness likely accounts for some of the differences in perceived value of business associations in general. Yet, member dues are usually modest, particularly for owners of smaller firms. A possible explanation is that many find the real value of membership is not just belonging, but attending events such as annual conventions. However, events can be expensive. A two-night out-of-town meeting can run well over $1,000 with registration, hotel, food, and transportation. If cost freezes out owners of smaller firms from the most valuable benefit of membership, it is little wonder that they join less frequently and are more likely to say that they do not belong due to a lack of perceived benefits. Likely related is the perceived need of association executives for non-dues revenue. One way to do that is with relatively expensive events. The effect is to target an organization’s program to larger, small firms.
Business organizations serve unique functions for business owners that virtually no other type of institution is organized to provide. This is particularly true for trade associations where industry-specific knowledge is the staple. While countless consultants and professional advisors can provide valuable help regarding management, marketing and accounting techniques, few have adequate industry familiarity to advise on the relative merits of various pieces of equipment, appropriate distributions of inventory, seasonal effects, and so on. Industry associations through its members can. Less industry specific organizations serve other useful functions such as bringing the benefit of large numbers to a particular issue or problem. Sponsorship of group insurance plans, support/ opposition for various public policies, and joint promotions are just three examples.
Belonging to a business organization(s) is not likely to be the most important action that a small-business owner will take in creating a successful firm. But business organizations and trade associations are an important part of the business landscape and provide benefits, particularly informational benefits, that many more could profit from than currently do.