insights

Membership, governance structure and financing model: considerations for associations

many associations are re-evaluating their financing model or their governance structure to increase their competitive edge

Brussels is said to be host to more than 1,000 European associations or professional federations. A little over than 200 of them have at least three individuals engaged in lobbying (see link). With such staggering numbers, competition is rife. So, many associations are re-evaluating their financing model or their governance structure to increase their competitive edge and win new members. The renewal of the leadership of European institutions – Commission and Parliament – in 2019 is also an opportunity for many associations to re-think their strategy to better match the expectations of their constituencies, whether corporates or national associations.

Perception matters

Beyond the changes in European politics, associations mostly depend on how they are valued by their members. Perception matters. Membership dues often constitute a significant external cost for corporate members. As result, they want greater accountability for the money spent. If the return over investment is insufficient, they may decide to limit their expenses by reducing their memberships or internalise the costs by hiring an in-house full-time lobbyist based in Brussels. This competitive landscape has prompted several associations in recent months to approach Logos to advise them on what may be the best business model and governance structure to attract and retain members and drive up revenues.

If the return over investment is insufficient, they may decide to limit their expenses by reducing their memberships

Four considerations

In a benchmarking study that Logos conducted in August 2018 on associations and federations representing various industrial sectors (rail, pulp, ICT, health, etc), we drew the following conclusions on membership:

  1. Different categories: There are so-called ‘pure players’ that have only corporate or just national federations as members. But most associations have a dual membership or combine both companies and national associations.
  2. Pricing: About 50% of the associations surveyed in the study indicated that the turnover was the main criteria used for the pricing of their membership fees. This trend is most marked for associations that have exclusively corporate members. Associations relying on a dual membership often have a fixed fee for corporate members (based on turnover) and a variable rate for national associations which can use different criteria (e.g. a share of the national association budget, or a fee based on the country’s annual production in a given sector).
  3. Other sources of revenue: Surprisingly perhaps, very few associations generate other revenue streams that of membership fees. For those who do diversify, the most common additional source of income is event sponsorship (either for a general assembly, educational events, or flagship annual events) as they help to cover the general organisation costs. Other sources include EU funding – subsidies (PPP) or the sale of online publications such annual reports, e-books, and statistical compendium.
  4. Strategy: The strategic direction put forward by the board is also essential. The study has shown that associations tend to adopt a more multi-stakeholder approach in their membership to broaden the reach of their association. As such, they also aim to win the support of research centres, universities, or even individual experts. Furthermore, the digitalisation of the economy is blurring the borders between old sectoral definitions: industries are converging. In the automotive sector, will Seattle or Detroit shape the future of cars? The emergence of connected cars reveals the need for more cross-sector and cross-value chain members in associations.

These strategic considerations are also impacting the association sector in Brussels. We are witnessing the rise of new industry coalitions that are no longer sector-specific and that are pushing well-established traditional associations to re-think their membership strategy. Associations embrace a multi-dimensional approach which brings together the industrial, the environmental and the digital challenges.

author

Florian Cartoux
Senior Account Manager