Last week, Tesla and Polstar quit their membership to their industry association, the Federal Chamber of Automotive Industries (FCAI). According to this ABC article, Tesla considered that FCAI was misleading and deceiving the industry position on electric vehicle standards and have now referred the FCAI to the ACCC over concerns in coordinating how competitor brands implement price changes.
I thought I would share with you some thoughts on the role of industry associations.
It is very rare for organisations like Tesla to exit from industry bodies.
But it's not uncommon for to hear from executives — whether they be large or small organisations, ASX listed or NFPs — who are frustrated with their industry body, often threatening to walk away because their association wasn't effectively advocating their interests. At the height of the GFC, I recall advising the CEO of Commbank not to withdraw from it's key industry association for some of the reasons below.
As an executive, you might be asking yourself, in the words of 1980s English rock band The Clash, "Should I stay or should I go?"
If an organisation leaves an industry association:
It signals to all stakeholders (policy makers, customers, employees) that you operate outside of the industry which could affect your brand and reputation;
You lose deeper insights on regulations and technical content provided by industry committees — remember, regulations apply to an industry not to a single player!
You're not 'shielded' from contentious issues in the media or public domain that industry bodies protect you against;
You miss out on understanding how your competitors are thinking about industry developments.
Yet, industry bodies are not faultless — larger and/or established members often have 'greater share of voice' in determining industry positions, particularly if their CEO is the Chairman/President of the association.
If you are going to exit, make sure that you go 'with guns blazing' i.e. match your position with differentiated products/services for customers similar to NAB's "Break Up" campaign from 2011.
Tips to ensure your organisation is heard within the industry body
1. Have a direct line of engagement with government – A CEO we worked with expected government 'should know' their position given their industry body's representation, only to discover that this was not the case following discussions with government.
2. Ensure your executives are directly involved so that they have their 'finger on the pulse' in industry forums. This includes exposing your 'rising star' leaders to industry forums to develop their policy and political acumen.
3. Build relationships with 'fellow travellers' who have similar concerns so that your issues carry more weight. For example, we worked with a collective group of regional banks during the Banking Royal Commission to elevate their voice to policy makers.
Industry associations also have a responsibility to ensure that they:
1. Regularly evaluate the effectiveness of their stakeholder governance — this needs to be a strategic priority for your board that is undertaken on an annual basis.
2. Establish bold ways to engage with members to bring smaller and new entrant voices to the table. Check your committee charters to see what is expected and update it with contemporary approaches.
3. Avoid the laundry list of issues; prioritise key issues for advocacy; diplomatically step aside from commercially sensitive matters, such as pricing.
Overall, being a member of an industry association is a low-cost and very effective approach to understanding the raft of issues and regulations taking place in your industry. Associations can play a critical role in 'spear-throwing' thought leadership and policy advocacy.
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