Following is the gist of an article originally published in CIC Midwest that I read from the US-based law firm, Hellmuth & Johnson PLLC:
Whether you are a board member or an association executive, you have to understand one very simple but vital concept about your association—it is a “business” and needs to be run like one. It is no mistake that an association is formed as a corporation. (Associations are classified in the Philippine Corporation Code as nonprofit corporations.)
Like any corporation, the association has officers and directors who are responsible for running it in a professional manner and who can be held accountable to the members for failing to do so. Granted that an association is not in the business of making a profit or issuing dividends to members, but it is still responsible for operating a significant budget and maintaining and preserving the value of its assets. The most successful and well-run associations are those that understand and embrace this concept.
So, what does it mean to run an association like a successful business? First, it means that board members and officers must take their positions seriously and act with an eye toward what is best for the association and its members and what will enhance its assets. They act with a view to the future and what will be best in the long run for the association.
Second, this means educating yourself on legal, financial, human resources and other matters that impact your association. This does not mean that your board must be comprised only of lawyers, accountants or business people. What it does mean is that those who volunteer to serve in the board must be willing to educate themselves as to what they need to know to make the association successful.
Third, an association needs to act prudently and in a fiscally responsible manner. This does not mean that you cut corners or always go with the cheapest product or service but rather that you research your options and spend the association’s money wisely to get the best option. It also means protecting your association from risk by carrying adequate insurance, working with your manager or accountant to prepare appropriate and accurate annual budgets, and having appropriate controls in place to protect the association’s money and bank accounts from fraud, unauthorized expenditures or other costly mistakes. It also requires you to maintain an adequate reserve account and wisely invest those funds.
Finally, it requires the board to understand its own limitations and to establish relationships with trusted vendors and advisors to assist the association in situations that the board simply is not competent to manage. Boards or their managers must be able to pick up the phone and readily get information and advice on anything and everything they need to properly manage the corporation and they need to be able to rely on the advice that they receive.
If you operate your association like a business and with the above principles in mind, you will not only enhance its value and make your association easier to manage and keep things running smoothly.
You may wish also to read my column “Association and corporate management” that appeared here on April 26, 2017.
This article was published by the Business Mirror on November 2, 2018, and may not be reproduced without prior consent from the writer and Business Mirror.
Association Man 