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OPERATIONS

Built by Association

We've found the best little trade association in America. Why doesn't the one for your industry do this much for you?
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We've found the best little trade association in America. Why doesn't the one that serves your industry do this much for you?

Our first impulse in a story about trade associations is to look for ways to make you laugh. So we're leafing through the three-volume, six-inch-thick Encyclopedia of Associations. Our eyes light on the listing for, oh, the National Academy of Nannies. We smile, and we write it down. That's a good one, we're thinking. But we're just getting started.

What on earth do the dues-paying members of the National Coil Coaters Association talk about when they gather in convention? we ask you. Where were the marketing types when the founders of the National Association of Margarine Manufacturers chose a name for themselves? Which gang sounds like the most fun, the National Pecan Shellers Association, the National Ornamental Goldfish Growers Association, or the National Toothpick Holder Collectors Society? (All right, so NTHCS isn't a trade association, precisely, but so what? Neither are the National Association of Full Figured Women, the National Association of Lefthanded Golfers, and the National Coalition of Psychiatrists Against Motorcoach Therapy, but we managed to find room for them here.)

Why are we doing this? Our immediate goal is yawn prevention. We know there's something musty about the whole concept of trade associations, something that has vaguely to do with your father's generation. If you're young and ambitious and bearing down on business, what do you care about your trade association? You might wonder, Why pay dues to an organization that probably can't teach me anything? Why go to chapter meetings when I don't spend enough time with my family as it is? Why travel thousands of miles to attend a convention that I just know is going to blend into one big cocktail party populated by so many hale fellows well met I'd just as soon not meet, thanks?

"The entrepreneurs who have the very hot growth businesses want to be a part of knowing what's around them," concedes David Fiore, president of Reunion Time, a sizzling former Inc. 500 company. "But they're going to win no matter what the conditions are. And they're not going to depend on other people or an association to determine how fast they're going to grow." We're guessing that's what forms the basis of an opinion expressed by another Inc. 500 chief executive we polled, Kenneth Ryan of Airmax, an international-transport-service company. "Trade associations suck," he hollered into the phone. "Suck, suck, suck!"

But, listen, not everybody feels that way. When we asked Michael Tamasi how he justifies the dues he pays to the National Tooling and Machining Association (NTMA), he told us, "It's a no-brainer. There's no question that it's well worth it."

Tamasi, 32, is president of AccuRounds, a $3-million precision machine shop in Avon, Mass. Companies like Tamasi's grind parts destined for larger assemblies in complex products such as cars, armored tanks, medical devices, and flutes. It's an industry that has struggled lately in the face of worldwide recession and fierce competition from Europe and Japan, and it's invisible. "Very seldom do any of our companies make a product that you can hold up and sponsor 'Monday Night Football' with," says John Cox, NTMA's lobbyist.

Those themes -- anonymity and struggle -- come up again and again in conversation with Tamasi. He talks about "the beating we've taken," and how "it has made us pull together." How "we're trying to help each other out because we've got a pretty good bunch of down-to-earth people in our industry that nobody really knows about."

Tamasi, like many company owners in the industry, is second generation, the son of a journeyman machinist who one day got tired of working for somebody else and started his own business. Leonard Tamasi joined the association and paid his dues faithfully. Now that he's retired and living in Florida, he socializes with friends he made through NTMA. Mike, an engineer with an M.B.A., hip to JIT, TQM, and ISO 9000, is no less devoted to NTMA than his father was. For the lobbying it does on his behalf. For the benefits and services it provides. And for the community building it promotes through his local chapter, of which he's treasurer.

"It's meeting up with your peers and making friendships," says Tamasi. "Surviving as a group. Growing as a group. That camaraderie, that chance to make connections with people in the industry on a regular basis, is very important."

Frankly, we haven't found too many CEOs in other industries who speak the way Tamasi does about his trade association. "Trade associations don't look outward, they look inward," Ryan went on to say after his initial outburst. "They're rarely visionary, and they aren't taken seriously." Joseph Mansueto of Morningstar, a financial publisher, says of his involvement with the Information Industry Association: "As time went on, I got less out of it. If you're on the cutting edge, it usually doesn't happen in trade associations."

All the more reason, we humbly suggest, to take a closer look at NTMA and its special relationship with the industry it serves. If other trade associations can't compare, well, that's the point. Jennifer Bremer, director of the Kenan Institute, a Washington think tank, was "blown away" by the number and variety of trade associations she encountered in her research. She believes trade associations are an "underutilized resource" that can and should do more for American industry. "I think it's a gap in our system," she says. "The fact that they don't work as well as they could is a barrier to our competitiveness. And we ought to fix it."

* * *

Dues
"Dues are like taxes," says Phil Chisholm, executive vice-president of the Petroleum Marketers Association, "and nobody likes to pay taxes."

He's right, of course, and nobody likes to collect them, either. Which is why trade-association executives lie awake nights thinking about ways to reduce their dues dependence. When they do fall asleep, they dream about the National Auto Dealers Association, with its Blue Book, or the Association for Manufacturing Technology, with its hugely profitable biennial trade show in Chicago. Associations such as those are the envy of their peers because they have a single lucrative source of nondues income -- what Bob Dolibois of the American Association of Nurserymen calls a "silver bullet."

Peter Ruane, president of the American Road and Transportation Builders Association, doesn't have a silver bullet, so he has had to scramble. Over the past five years -- by selling advertising, lining up outside sponsorships, and aggressively marketing new fee-per-use services to members -- Ruane has managed to cut his organization's reliance on dues from 85% to less than 50%.

"We're very entrepreneurial," Ruane boasts. "Trade associations today, if they're not entrepreneurial and trying to diversify their revenue base, they're not going to survive."

Perhaps not. Still, we worry more about associations that don't serve their members' needs. That's why we like dues. The more an association depends on them, the better we feel about two issues that ought to be of critical importance to members: accountability and control.

"Why do trade associations hate dues?" asks Matt Coffey, president of NTMA. "Because it's so hard to raise money that way. You have to justify yourselves every time you go out there."

So far that has not been a problem for Coffey. He came to NTMA in 1985 from the National Association of Counties and in 1989 raised dues by 12%. Since then NTMA's 60-member board of trustees has approved a string of 3% annual increases. Dues are levied on a sliding scale based on the number a company employs. Tamasi, who runs an average-size shop with about 20 machinists on his payroll, pays $1,219 a year. That's steep by association standards. But "if the member isn't willing to pay for your services," says Coffey, "doesn't that send you a message?"

Not that NTMA ignores nondues income. It publishes books and training manuals, it has its own magazine with national advertising, and it aggressively pursues government grants for special projects. But unlike other trade associations we're aware of, NTMA says such moneys shall never exceed 50% of its total income. "Our members understand the control issue," says Coffey, "and control means you're a 51% owner."

* * *

Benefits
You hear a lot of talk about "mutual aid" and "giving back to the industry," some of it heartfelt. But typically, that's not what motivates people to join their trade association. "To paraphrase Mr. Kennedy," says Lionel Diaz, senior vice-president of the Manufacturers' Agents National Association (MANA) -- who started out as a member -- "I joined to see what MANA could do for me."

Often there are group discounts on travel, on long-distance telephone calls, on all kinds of insurance. In some industries those discounts are crucial. But while NTMA sponsors several insurance plans, they're not especially big selling points. NTMA's health plan, for example, is strictly last resort; most shops find they can do better on their own. So, Coffey asks, "what is it we contribute to the growth or success of these companies? The only thing we contribute, the only value we can add, is as a center of knowledge."

Last year NTMA fielded more than 16,000 queries from members who called 1-800-248-NTMA. Staff experts at NTMA headquarters, in Fort Washington, Md., just outside the Beltway, handle inquiries on technical and marketing matters. They refer questions on taxes and labor to outside counsel on NTMA's retainer, whose services are available free to members. The last time Bill Turley, president of the Bechdon Co., in Upper Marlboro, Md., revised his employee handbook, he sent it to Alan Berger, NTMA's labor lawyer, in St. Louis. It came back with extensive notations. "I got a first-class labor lawyer for a very low price," Turley says.

Like many associations, NTMA publishes a buying guide, which lists all members and goes out to potential customers. Its annual industry surveys -- one on wages and fringe benefits, the other on operating costs and executive compensation -- help members position themselves in relation to their peers. Sixty-five percent of NTMA's 3,000 members rate the surveys as the benefit they value most. Bruce Braker, head of the Tooling and Manufacturing Association, a Chicago association with ties to NTMA, finds that the operating-costs survey alone justifies membership.

* * *

Education And Training
Almost all trade associations offer their members opportunities to improve their management skills. If NTMA members tend to take the offer more seriously, it may have to do with the nature of their industry.

There are roughly 12,000 tooling and machining enterprises in the United States, a number that has remained remarkably stable since the industry exploded during and shortly after World War II. Most are small family-owned businesses -- with 25 employees, maybe $6 million in sales. Half are precision machine shops, like Tamasi's; the other half are toolmakers. Tools, in this case, are not hammers and saws but made-to-order components that manufacturers buy to make almost anything that's mass-produced: a fender on a car, a cap on a pen, a valve in an engine, even the peens on hammers and the blades on saws.

Like AccuRounds, many businesses in the industry were started by skilled tradesmen. "A journeyman toolmaker is trained to do lots of very important things," Coffey points out. "But the thing he is not trained to do is to run a business." A guy like that might want to attend a management seminar or buy a video on a topic that interests him. Both of those are available from NTMA, but he can learn a lot just from reading NTMA's Business Management Advisories. Free to members, it's an anthology of more than 100 easy-to-read articles, including "Disciplinary Communications with Employees," "When, Where and How to Use Manufacturers' Representatives," and "Business Succession Planning."

Basic stuff. Over time, however, as founding chief executives have passed the reins to their college-educated sons and daughters, and downsizing manufacturers have begun making more complex demands of their suppliers, articles like "Activity-Based Costing," "Implementing SPC," and "Preparing for Your Quality Audit" have found their way into Business Management Advisories.

Local NTMA chapters operate 13 regional training centers -- some of them freestanding facilities, others run jointly with local community colleges -- to train the next generation of toolmakers and machinists. NTMA writes the curricula, publishes the textbooks, and hires the teachers.

* * *

Lobbying
It's not for nothing that so many trade associations -- including NTMA -- make Washington and its environs their home. Trade associations lobby; it's what they're known for.

Actually, though, only 43% do it, according to a report by the Hudson Institute, in Washington, D.C., another think tank. And the process consumes, on average, a bare 6% of expenditures, twice that if you add in so-called public information. Still, when trade-association executives get together at conventions of their American Society of Association Executives (ASAE), it's the big guns like the American Road and Transportation Builders Association that keep the others enthralled with tales of billions diverted from federal coffers into the pockets of their members.

We do wonder, sometimes, whether lobbying is a smart allocation of scarce resources. We're thinking of the point Reunion Time's Fiore made earlier. Dynamic companies don't wait around for the tide to rise in their industry. They usually find a way to prosper no matter what. And the Kenan Institute's Bremer cautions that "the government these days has fewer goodies to give away. So if you're in the business of getting goodies, that's not necessarily a good business to be in."

All the same, we wouldn't say the attempts of trade associations to influence public policy are, by definition, futile or wrong. Lobbying, in fact, was NTMA's original mission back in 1942. Shop owners pleaded that skilled toolmakers be exempt from the draft, on the theory that they were vital to the war effort at home. Congress was so persuaded. Last year NTMA devoted a quarter of a million dollars of its $3.7-million annual budget to lobbying, mainly on issues that affect small business generally: taxes, health insurance, and government mandates in whatever form. "They just don't like government meddling," Cox says of his constituency.

Maybe if Coffey belonged to the trade association for trade-association executives and spent more time with those guys, his attitude toward lobbying would be more macho. ("I don't think of myself in the same context as ASAE thinks of itself," he explains. "I don't think of what I do as building a profession. I think of it as servicing the customer.") As it is, Coffey relegates lobbying to a supporting role, in service to NTMA's larger mission.

"We have to be a center of knowledge on government," Coffey says. "That doesn't mean we need to be a lobbyist. That doesn't mean we need to be a legal intervener. It means we have to know everything that's going on and know what impact it's going to have on the businesses we're trying to serve. It may mean that we actually lobby at some point, but that's not the driver."

Networking
Some blame the Gulf War. Others blame the recession. No matter what the cause, trade-association executives complain that attendance at conventions and seminars is down these past few years.

"In the quality movement so many companies are experiencing, where costs are being cut and productivity and performance are being better monitored and approved, travel is one of the things that takes a hit," says Jon Jenson, president of the Precision Metal Forming Association. "To be effective in the future, we're going to have to deliver closer to home."

The petroleum marketers' group came up against it last August, when a seminar on a topic of proven interest to its members drew only 200 to Chicago, most of them day-trippers. A few months later association executive vice-president Chisholm tried something new: a televised seminar, offered live via satellite to each of the association's 44 state and regional affiliates. The affiliates, in turn, set up centers at which members gathered in small groups to view the proceedings and call in their questions. The technology made Chisholm nervous at first. Then again, he says, "one of our state associations in South Dakota had done a teleconference with its membership. So, it occurred to me, if my South Dakota people were sophisticated enough to do this, then everybody else ought to be." In the end more than 2,000 people participated -- record attendance for a petroleum marketers' seminar.

Coffey is impressed, but he points to surveys that indicate that networking, of the kind that takes place at conventions, is still what his members value most about NTMA. "What's important to them," says Coffey, "is to be able to talk to somebody who's in the business, who's lived their experience."

NTMA holds three conventions a year, in exotic locales like Cancun and Las Vegas. Attendance varies widely, from 5% of the membership up to 30%. "As long as that's what the members want," says Coffey, "we'll keep doing them."

One thing NTMA won't do is trade shows. "Our members have made it very clear to us that they don't want to be sold to," says Coffey. The association's quarterly regional purchasing fairs reverse the equation. Members have the opportunity to meet manufacturers' purchasing agents, review their blueprints, and bid on contracts.

Al Burgess, president of Burgess Brothers, in Canton, Mass., says the purchasing fairs have helped him expand his markets. "If I go to one fair," he says, "and get one customer, the couple thousand dollars I pay each year in dues is worth it."

* * *

International Markets
Few of NTMA's members are exporters, although on average their markets are expanding -- from a 50-mile radius seven years ago to 150 miles today. On the other hand, many of them find themselves competing against lowball quotes from European and Japanese companies. NTMA provides its members with stats and information designed to help them set competitive prices and educate their customers on the true costs of sourcing abroad.

Last January, though, NTMA took steps in a new direction, committing itself to expanding ties with industry counterparts in Mexico and Canada. Coffey admits it was with "some trepidation" that the staff presented members with a draft of NTMA's new long-term goal -- to become the center of knowledge for the tooling and machining industry in all of North America. "We're so used to thinking of ourselves as a national association," Coffey says. "And we thought, 'Oh my god, we'll get in there and they'll America-first us, and we'll get shot for even proposing this.' Instead, what we ran into was all these guys sitting around, saying, 'Well, just do it, guys! Took you long enough!' And here we thought we were going to be breaking all kinds of china."

* * *

Alexis De Tocqueville didn't think trade associations were funny. Not at all. You might even say that Tocqueville, like Bremer, was blown away by "the immense assemblage of associations" he encountered on his travels through early-19th-century America.

"Americans of all ages, all conditions, and all dispositions, constantly form associations," the young Frenchman observed in Democracy in America. That was true, evidently, long before there was a National Association of Nameplate Manufacturers or a National Hot Dog and Sausage Council, much less a National Organization of Mall Walkers.

Tocqueville pondered that "immense assemblage" and its significance in the context of "the most democratic country on the face of the earth," where "all the citizens were independent and feeble."

He concluded that "governments, therefore, should not be the only active powers: associations ought, in democratic nations, to stand in lieu of those powerful private individuals whom the equality of conditions has swept away."

In European society, he noted, "feelings and opinions are recruited, the heart is enlarged, and the human mind is developed, only by the reciprocal influence of men upon each other." But in America he saw that "these influences are almost null in democratic countries; they must therefore be artificially created, and this can only be accomplished by associations."

As Tamasi says, "It's meeting up with your peers and making friendships. Surviving as a group. Growing as a group."




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