The case for single-entity associations

John Peacock

The structure of an association can have major implications for its effectiveness in advancing the ‘cause’ the association represents. This article gives thoughts on why single entity associations, often national structures, work better than multi-entity associations such as federations of state-based associations or umbrella groups.

Financial advantages of single-entity associations

There are definite cost advantages to associations in being one body. Some functions of a membership association can be centralised, delivering economies of scale eg. membership database maintenance, subscriptions issuing and processing, bookkeeping, publications and major events. Other activities such as seminars and membership promotions are best decentralised as long as ideas and comparative financial performance is shared. Profitability is better monitored in single-entity national associations if good accounting practices are employed. Standard charts of account aid comparability. Wise leaders of associations realise that central operations and some chapters perform above or below expectations from time to time. Because the advancement of the single association in the medium to longer term is of paramount importance, recriminations for bad results will be minimised. Single-entity associations - with the membership focussed on the good of the whole association - will correct the reasons for the financial shortcoming and move on quickly.

Investment and allocation of funds is also carried out better by single-entity associations. If the financial reserves of a single-entity association are pooled and invested well, it will benefit the whole association in leaner times. Also, single-entity boards can decide thoughtfully on the best allocation of membership income. Chapters will be supportive of sensible investment and allocation of funds if there is an understanding that poor performing sections (be they a chapter or a central operation) will be taken to task and the situation rectified.

Lobbying advantages of single-entity associations

A clearer message can be presented to external parties about the issues relating to the association. With federations which have independent entities as their members, separate entities may have different opinions which clash and the impact of the federation, for example, on a campaign to change a law is marginalised by this dissent.

When a multi-entity federation is appropriate

In Australia, more legislation is becoming national and associations are being placed under greater financial pressure. This means more multi-entity federations are becoming single-entity associations.

However, if the cause of the association is to promote tourism or investment in a particular geographic area, it is not sensible to amalgamate with similar associations which promote tourism or investment in rival areas. But such associations may have reasons to have a loose relationship with each other.

Federal organisations are more likely to be an umbrella group of regionally based associations, each a legal entity, with some common interests. Here, the individual entity is of greater importance than the federation, but the federation has a role to play.

The primary way to decide if a national or federal structure is more appropriate to an association is relatively straightforward:

• If the primary objective of the membership of an association is to advance the ‘cause’ in question across a country or internationally, a single-entity model is best.
• If the primary objective of the membership of an association is to advance the ‘cause’ in question in a particular region, but collaboration with other regional associations is necessary, a federal multi-entity model is best.

Disadvantages of multi-entity federal associations

Unnecessary internal squabbling and disagreements within associations waste time, divert resources from the cause of the association and are terrible public relations for the association. The worst disputes often involve organisations with cultures of weak national boards and strong sub-groups that are involved in power struggles.

Whilst disputes certainly arise in national single-entity associations, the problems are fortunately not on question of “which is the key entity that should be supported?”

In a single-entity national association, regular elections solve the question of which individuals are in charge. Once the board is elected, the majority rules.

Multi-entity associations have a tougher task. If a state or territory based association elects a representative to the Federal Council of an association, in whose best interests should that individual act: the state or territory they are from or the federal body? As well, the individual may be pressured to act in a certain way by the state body that has elected him or her.

The other problem of multi-entity associations is that of equal representation on a Federal Council by bodies with different membership numbers. If a Federal body with a constituent association from every state and territory in Australia gave equal representation to each constituent entity, the larger states will feel their say is under represented when issues are put to the vote.

Board authority and elections

A significant issue is the authority of the Board:

• In a single-entity organisation, the Board should have authority over chapters, which are subsets of the organisation
• In a multi-entity organisation, the Board often has less authority over constituent bodies, which should be able to leave the structure if they so choose

Fairness suggests ‘one member, one vote’ but multi-entity organisations may have ‘one entity, one vote’. In an umbrella group that brings together somewhat different entities for a special campaign, one entity, one vote is appropriate. But the closer the membership of an entity to the membership of another entity, the greater the reason for the groups to merge into a single entity association and implement one member, one vote. The most democratic way to elect the National Board of a single-entity association is direct election by the membership. Electing the best candidates should be the goal of an election. The best candidates will then become the Board and the Office Bearers who should make wise, non-parochial decisions for the advantage of the association as a whole.

A compromise by single-entity associations wishing to guarantee representation by chapters is to give larger chapters more representatives on the Board, but not in direct proportion to their membership.

Responsibilities of directors of a single-entity’s Board

Corporations Law in Australia requires Directors to act in the best interests of the organisation as a whole. Therefore, Directors should not act in the interests of the geographic area that they come from if this is different from the good of the whole entity. If chapters of an association are able to appoint and dismiss a Director of the National Board, it is less likely that the Director is able to think independently and act in the best interests of the organisation as a whole.

The Directors of the Board, who are legally personally liable, should be able to carry out their responsibility to control the activities of the organisation. If powers are permanently given to a chapter by a constitution, with no ultimate power of the Board to override the chapter, Directors should consider whether they are able in fact to fully fulfil their legal obligations.

Value of chapters to single-entity national associations

Chapters are an ideal way of bringing member services to many areas of Australia very economically through the volunteer members and appropriate financial support from the association.

In fact, why not have more chapters based on geography or population rather than on the state or territory? Associations could have extra chapters in, for example, the Townsville / Cairns region which is a long way from Brisbane. Or Australasian associations could have chapters in different parts of Australia plus Auckland, Wellington, Christchurch and Singapore.

But wise associations will not have any chapter with a separate legal entity nor with a right to a vote way out of line with their numbers of members. A voice (as opposed to a vote) should be given to any member or group of members but a voice should not be confused with a vote. Further, a single entity association should have the right to form or dissolve chapters according to the chapter’s performance or adherence to the objectives of the association. Entrenching particular chapters in the Constitution of an association makes it harder for a Board to direct the operations and performance of an association.

Role & power of chapter committees in single-entity associations

The role of chapters committees in a single-entity association is different to the role of the Board of independent entities that comprise parts of a federal group. Chapters may be asked to concentrate on provision of local member services and growth of local membership. Chapters may have other tasks delegated to them but the Board should be able to rescind such authority.

State or territory based chapters in a national single-entity body will have less power than independent state Boards of geographically based associations (which may belong to a federation). This fact is the major reason in such separate associations resisting unincorporating and joining a national single-entity organisation. They will have less power in a single-entity association whereas they may now be ‘big fish in a smaller pond’.

This desire for localised power often causes the financial, democratic and public relations advantages of being a national body to be overlooked or misunderstood. The closer the goals of the separate legal entities are, the more likely the groups will benefit from being a national organisation with democratic representation. But established federal associations may have difficulties in restructuring as National single-entity organisations because of the vested interests of the local Board and management.

Moving from a multi-entity to single-entity structure

The natural direction is for multi-entity federations, if the bodies have close goals, to be reformed as single-entity bodies. Established federations sometimes consider the advantages of becoming single-entity bodies but the transition is done piecemeal and with compromises, and little advantage may result.

Whilst individual members will see the advantages of a single body, a federation’s constituent organisation may resist change for parochial reasons. Clear communications on the gains to be derived will help in getting the acceptance of the membership at large.

Constituent bodies of a federation who support the move to a national body, but who do not receive the full support of all their colleague associations in the federation should consider merging anyway with like-minded progressive members of the association. For example, several state or territory bodies may form a “semi-national” entity. If well run, such a body will be able to prove the advantages of a single-entity structure and other bodies in the federation could unincorporate and transfer their assets to the national body in the future.

Why clear structures are best: be they single or multi-entity

Compromise structures sometimes evolve which have components of single-entity and multi-entity structures. For example, an organisation may seem to be a national body, with the same name in every state, but when the constitution is investigated, there are separately incorporated chapters or the chapters do not have to implement the Board’s resolutions. The problem discussed previously then recurs: it is not clear which interests are paramount: the national body or the subsidiary chapter.

The constitution of the entity should be examined to see that it is genuinely a single-entity association. The Boards and membership of both organisations desired a national body and for the constitution to reflect this goal. Both bodies achieved their goals and developed constitutions appropriate to their needs and circumstances - including unambiguously being single-entity associations.

Conclusions

If the goals of the membership are close, there are great advantages to associations in being a single-entity body rather than a federation of organisations. However, parochial attitudes will endanger national associations if the constitution and transition phase are not well considered in advance. A hybrid one, which purports to be a single-entity association but is not in reality, can create serious confusion and internal friction.

To conclude, three points are made:

1. Too many associations waste money, energy and goodwill on internal squabbles rather than working for the benefit of the ‘cause’ that the association represents.
2. Associations with only one legal entity are less likely to waste time in internal disagreements than associations with multiple entities. If it is not clear what the primary entity is that an individual committee member or board director represents, problems may follow.
3. National associations with equal representation from regions regardless of the membership from that region will have ongoing problems from those regions that contribute significantly more members and money.

This article was first published in August 1999.