SIC 8611
BUSINESS ASSOCIATIONS



This industry classification includes membership organizations engaged in promoting the business interests of their members. Associations owned by their members but organized to perform a specific business function, such as common marketing of crops or joint advertising, are classified according to the function performed.

NAICS Code(s)

813910 (Business Associations)

Industry Snapshot

In the mid 1990s, approximately 100,000 business associations operated at local, state, regional, and national levels in the United States, posting over a 40 percent increase since the 1980s. Associations annually contribute over $48 billion to the U.S. economy, provide nearly 500,000 jobs, and annually spend $30 billion to host meetings and conventions. According to an American Association of Retired Persons' (AARP) study in 1998, 9 out of 10 adult Americans in the United States belonged to at least one association, and one out of four belonged to four or more associations. As many as 1,000 new groups were being formed each year.

The term "trade association" has been broadly used to described most business associations. Trade associations are non-profit organizations representing a group of businesses within a particular segment of industry. The membership of these associations is composed primarily of individual company representatives. The oldest trade association in the United States is the New York Chamber of Commerce, which was founded in 1768. The U.S. Chamber of Commerce, headquartered in Washington, D.C. (the city with more associations than any other city), is the country's largest trade association. According to the American Society of Association Executives (ASAE), the largest national association convention in 1997 was that of the National Marine Manufacturers Association when over 170,000 members and guests attended. The Association for Manufacturing Technology was the second largest with over 100,000 attendees.

Trade association staff members perform activities that are too costly or time-consuming for an individual company to perform on its own. These activities include monitoring government regulations, conducting industry research, collecting statistical information, and producing educational programs and materials. Businesses and government depend heavily on associations for their statistical information, which is often not available elsewhere. This type of in-depth research has been spurred on by advances in computer technology, which have allowed trade associations to collect and disseminate industry information on a more timely basis and to a more targeted audience. In fact, by the late 1990s, the implementation of database programs and integrated systems became a necessity for all trade associations. Associations also publish newsletters, periodicals, and directories.

Associations rank as a major segment of the health insurance market and are the source of health insurance for more than 8 million people. They are also the originating source for codes of ethics and professional and safety standards, which govern such professions as law, medicine, banking, and manufacturing.

Organization and Structure

The following organizations are included under the classification of business associations: boards of trade, other than security and commodity exchanges; business associations, other than civic and social; chambers of commerce; contractors associations; growers associations, not engaged in contract buying or selling; growers marketing advisory services; industrial standards committees; junior chambers of commerce; manufacturers institutes; merchants associations, not engaged in credit investigations; public utility associations; real estate boards; shipping and steamboat company associations; and trade associations.

Business or trade associations can be organized at the local, state, regional, national, or international level. Groups with similar interests also can belong to a federation or a collection of associations under centralized leadership, such as the National Retail Federation. Most business associations, depending upon the nature of their membership, fall under one of the following tax-exempt categories defined by the Internal Revenue Service (IRS): Section 501(c)(3) includes religious, charitable, scientific, public safety testing, literacy, and educational organizations; Section 501(c)(4) covers civic or social welfare organizations and local associations of employees; Section 501(c)(5) includes labor, agricultural, and horticultural groups; Section 501(c)(6) includes business leagues, chambers of commerce, real estate boards, and boards of trade.

The structure of an association depends upon the size of its membership and its budget. A large national organization may include hundreds of people on its staff. Usually a board of directors sets the policies of an association, and the executives and staff members are responsible for the implementation of these policies. Divisions within an association include the legislative staff, meeting planners, publications executives, public relations personnel, information and research executives, membership services personnel, and fundraisers.

The primary goal of all trade associations has been to improve the business of its members. In pursuit of this goal, trade associations have conducted research, set industry standards, and represented their members' interests before legislative and regulatory bodies. Trade associations also have provided information to many audiences, including the general public, association members, and government officials.

Background and Development

The origins of modern trade associations can be traced to the Middle Ages, when laborers and merchants formed guilds to ensure proper wages and maintain work standards. Associations in the United States began to grow during the Industrial Revolution. Due to the social and economic hardships caused by the Revolutionary War, local organizations developed more quickly than national groups. The rapid industrial growth America experienced after the Civil War created numerous new trade associations and local chambers of commerce. The following prominent organizations were formed during this time period: the American Bankers Association (1878), the National Association of Life Underwriters (1890), and the National Association of Manufacturers (1890).

By 1900, 100 national associations existed in the United States, and by the end of World War I that number had reached 1,000. World War II provided an opportunity for government and trade associations to work together to help meet wartime demands. Since 1945, many associations have changed, reflecting the country's evolving work environment. Those representing declining industries or technologies often merged with other organizations, became inactive, or formally dissolved.

Current Conditions

Two-thirds of all associations conducted research or engaged in statistical gathering in nearly all areas of public interest, including the environment, employment, and product safety. This work enabled businesses to improve their performance by comparing output to costs.

Membership education was also a primary trade association activity. Nearly 90 percent of surveyed associations offered educational programs and services to their members. More than 71 percent also disseminated industry information to the general public. By improving members' knowledge of their particular industry, associations contributed to the elevation of product and service quality and ultimately served the public interest.

Trade associations contributed greatly to setting, certifying, and meeting product safety and quality standards. Both the American Society for Testing and Materials (ASTM), and the American National Standards Institute (ANSI) have been devoted exclusively to standards testing.

One of the most visible activities of business associations in the 1990s was their legislative or lobbying efforts. Approximately 38 percent of national associations had at least one lobbyist, and 35 percent had political action committees. Business or trade associations allocated roughly 10 percent of their total annual expenditures to political education and providing industry information to Congress regarding legislative or regulatory proposals that could affect their membership. These political activities also served to provide association members with skills necessary for further political participation at the local and national level.

Other issues relevant to trade associations included the environment, energy conservation, health care costs, shifting values and attitudes in the workplace, technological innovations, declines in quality education, and a growing global economy.

Industry Leaders

The largest trade association in the country, the United States Chamber of Commerce, is a national federation of business organizations and companies. Founded in 1912, the U.S. Chamber of Commerce maintained its headquarters in Washington, D.C., and had a staff of 1,200 and a $70 million budget. Its membership included local chambers of commerce, trade and professional associations, and private and public companies. More than 96 percent of its members, according to the Chamber, were small businesses with 100 or fewer employees, but almost all of the largest U.S. companies were members as well.

The Chamber of Commerce represents the political interests of the U.S. business community on national issues regarding the economy. For example, in 1996, the Chamber of Commerce successfully lobbied in the House of Representatives for passage of the Working Families Flexibility Act (H.R.1), which dealt with compensatory time for workers. The Chamber also informed and trained its members to participate in policymaking at the state and local levels and in legislative and political action at the national level.

The Chamber produced Nation's Business Today, a daily business-oriented newscast; Ask Washington, a daily national television program; and It's Your Business, a weekly televised debate program. This business association also published an annual analysis of workers' compensation laws; the Congressional Handbook; Nation's Business, a magazine covering national issues that especially affect small business; and numerous newsletters.

The National Retail Federation (NRF) was formed in 1990 with the merger of the American Retail Federation and the National Retail Merchants Association. The largest retail trade association, the NRF had 55,000 corporate members, including department, chain, mass merchandise, and specialty stores that sell men's, women's, and children's apparel, and home furnishings. Also included were the 32 national and 50 state affiliated associations. The NRF conducted conferences and workshops and provided an extensive collection of manuals, bulletins, and promotional materials. This business association offered advisory services regarding all aspects of retailing, such as financial planning, shortage control, electronic data processing, telecommunications, merchandise management, traffic, security, store planning and construction, personnel administration, recruitment and training, and advertising.

The NRF published Retail Control, a journal providing retail management and financial information. It also produced Stores Magazine, a publication covering current trends, concepts, and promotional activities of the retail industry, as well as association news. The NRF maintained a 1,000-volume library on retail management and fashion merchandising. Headquartered in New York, the National Retail Federation had a staff of about 100 and held its annual meeting every January in New York City.

The National Restaurant Association (NRA) is a trade association for restaurants, cafeterias, clubs, contract foodservice management, drive-ins, caterers, institutional food services, and other members of the foodservice industry. The group's annual convention has become the largest association gathering in the United States. The NRA supported foodservice education and research in several educational institutions and conducted traveling management courses and seminars for restaurant personnel. This trade association also sponsored the Educational Foundation of the NRA, which provides training and education for food and equipment operators, manufacturers, and distributors.

The NRA published the bi-weekly Foodservice Information Abstracts; National Restaurant Association-Washington Weekly, a report of legislative and regulatory issues; and Restaurants USA, a monthly magazine covering the trends and developments in the foodservice industry. Founded in 1919, the NRA had a staff of 115, membership of 30,000, and a $16 million budget. The association's headquarters were located in Washington, D.C., with 175,000 food service group affiliations worldwide.

The National Association of Manufacturers (NAM), also headquartered in Washington, D.C., represents manufacturers and non-manufacturers and voices the industry's political views on national and international problems. Founded in 1895, this trade also maintained the NAM National Division in Maryland, a field headquarters in Chicago, and eight regional offices throughout the United States. The NAM reviews current and proposed legislation, administrative rulings and interpretations, judicial decisions, and legal matters affecting the manufacturing industry. The organization maintained numerous policy groups including Government Regulation and Competition; Industrial Relations; International Economic Affairs; Resources and Technology; and Taxation and Fiscal Policy. The NAM was affiliated with 150 local and state trade associations of manufacturers through the National Industrial Council and 110 manufacturing associations.

The Council of Better Business Bureaus (CBBB), located in Arlington, Virginia, consisted of 250,000 businesses and professional firms from all industries and 130 local Better Business Bureaus operating autonomously in the United States, Canada, and Israel. The CBBB acted as a mouthpiece for business to consumers, assisted in expanding and upgrading local bureau capabilities, helped establish voluntary self-regulation of national advertising, provided pre-purchase information to consumers, strengthened consumer education programs, and settled consumer complaints through arbitration. Although its inception dates back to the Better Business Bureau system (founded in 1912), the CBBB was created in 1970 with the merger of the National Better Business Bureau and the Association of Better Business Bureaus. In 1997, the CBBB reported net assets and total liabilities of almost $6 million.

Workforce

More than 500,000 people were employed in different associations throughout the United States. Staff size and responsibilities largely reflect the membership size and budget of each association. Employment positions within associations generally have been divided evenly between executive and staff positions. As associations continued to grow in size and strength, so did the possibilities for employment within these organizations. Because staff members are exposed to a wide variety of functions and responsibilities, association employment can offer tremendous advancement potential.

Entry-level employment at associations generally can be found in the positions of conference planning, public relations, or membership services. Most jobs required that employees have a liberal arts degree and strong interpersonal and communication skills. Additional education, such as an MBA, legal training, or fund-raising experience, was sometimes necessary for financial services or legislative positions. An association executive could be designated a Certified Association Executive (CAE) upon the successful completion of a daylong written test.

Although associations were located across the United States, many were found in metropolitan areas. Boasting 2,500 organizations, Washington, D.C., served as headquarters for more associations than any other city, with Chicago in second place, and New York in third. Many trade associations also were located in or near state capitals.

America and the World

The exchange of technology and the ability to generate business in new markets led many trade associations to venture into the international arena by developing new kinds of relationships. For example, some associations engaged in international networking by creating an umbrella organization incorporating trade associations of various countries. Other international formats include foreign partnerships and working with U.S. embassies overseas.

Some business organizations have been developed for the sole purpose of fostering international trade relations. For example, the U.S. Chamber of Commerce was probably one of the world's largest business federations. At the close of the century its represented membership included not only domestic (U.S.) chapters, but 850 business associations and 87 American Chambers of Commerce (AmChams) abroad. In addition to promoting business interests within the United States (through the auspices of AmChams), the chamber helped its members learn about the business environment and the general culture of a particular country. Membership services included supplying tax and credit information; arranging informal gatherings for foreign executives and their American counterparts; briefing U.S. employees new to the region; and counseling relocated families about schooling, housing, and health care.

In a message prepared for the general membership of AmCham Egypt, President Mohamed Hosni Mubarak opined that the beneficial function of "Private sector organizations like AmCham … (had) consistently shown that economic growth is a result of a partnership between business and government." Such organizations facilitated international correspondence through a range of services, such as providing access to staff members who handle international relations issues. Such individuals usually possessed specialized expertise in overcoming language barriers, finding alternative delivery systems, and forming allied private sector organizations outside the United States.

The international aspect of trade associations was expected to grow along with the continued globalization of industry, trade, and technology. Associations view internationalism as a way of thinking and doing business. Carol Kinsey Goman noted in her book Managing in a Global Organization, "Markets no longer stop at national boundaries, neither do corporations…. For organizations to flourish, let alone survive, their perspective must be global."

Research and Technology

Effective information management has become a vital function for the successful business association and was the driving force for the computerization of their office operations. On an annual basis, associations spent millions of dollars on computer technology. The average association dedicated as much as $28,500 annually to computer hardware and/or software purchases.

Most large business associations purchased mainframe systems in the 1970s to automate their record keeping. They added personal computers during the 1980s, and by the 1990s, they had amassed a collection of computers unable to communicate or interact with one another. Therefore, many associations started using local area networks (LANs) in order to share information among their departments. According to Association Management, "By distributing programs and processing power among microcomputers, or PCs, no one unit needs the kind of power provided by a mainframe. Executives on networked PCs can communicate electronically using work group software applications, such as group editing, computer conferencing, project management, document design, electronic mail, and scheduling." With the use of LANs, many associations have begun to operate database management systems and experiment with a variety of software packages and hardware products. Some of these items include legislative affairs and grassroots software; relational database software and text-based information retrieval programs; and bar coding and document scanners.

Many business organizations also ventured into the CD-ROM arena. For example, the American Hotel and Motel Association (AHMA) has stored volumes of information in its Hospitality Index database on CD-ROM. Time required to perform research was reduced to one-fifth the amount of time that was needed previously.

Associations also used new technologies in educational programs that aided in expanding their audience and delivered information in a timely and cost-efficient way. Communication throughout the world was made easier through the Internet using the World Wide Web and e-mail. Some technologies being used by the turn of the twenty-first century included online database services for up-to-date information; satellite down-links for conferencing; video recordings for standardized training; and portable computers, or laptops, for convenience when working at home or traveling. Many associations have a web page so that members and others can receive important information. As Renata Webb, ASAE executive, remarked, "Ultimately, technology adds options and alternatives."

Further Reading

American Chamber of Commerce in Egypt. "AmCham Highlights," 2000. Available from http://www.amcham.org.eg/ .

"American Society of Association Executives." Available from http://www.asaenet.org/

Arnold, Pam. "Getting Members to Go Online." Association Management, August 1996.

The Better Business Bureau. "About the BBB," 2000. Available from http://www.bbb.org/ .

Boyers, Carla. "Reach Out and Teach Someone." Association Management, June 1996.

Cook, Elizabeth Graham. "Associations Can Be Catalysts for Change." Boston Business Journal, 18 August 1995.

NAM — National Association of Manufacturers. "About the NAM," 2000. Available from http://www.uschamber.org/ .

Svevo-Cianci, Kimberly A. Associations and the Global Marketplace. Washington: American Society of Association Executives, 1995.

U.S. Chamber of Commerce. "About Us,". 2000. Available from http://www.uschamber.org/ .



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