Difference between organization and association

You may think there is no difference between organization and association. But one of the things that separate an association from other organizations is its nature, scope, and purpose. An organization is made up of individuals who are united by a common goal or interest whereas associations can be thought to represent groups or societies which have been created for specific purposes like PETA (People for Ethical Treatment in Animals), sports-related clubs, blind associations – the list goes on!

Before we explore the differences between organizations and associations, let’s establish a clear definition of each term.

What is Organization?

The organization is a collection of people who work together for the achievement of specific objectives. It can be understood as one type of social system, which also includes all formal human relationships and divisions within it that align with its ultimate goal.

It also may be considered as the second most important managerial function. Organizations rely on the principle of division of work and set up authority-responsibility relationships. Proper planning is crucial for success in an organization because it relies on this to achieve goals through coordination between activities. Organizations are goal-oriented processes that aim at making them come true by being planned well and distributed among members appropriately.

What is Association?

An association is a group of people who come together to achieve specific goals for their organization and members. They have an open-door policy, but all meetings are held informal spaces such as conference rooms or office buildings rather than informal places like homes or parks.

People need to work together and be organized in order for associations to come about. Associations are like music clubs or trade unions where people take part in a group activity that is shared by everyone involved, making it successful as they all have the same goal of achieving something great.

Key Difference between Organization and Association

Organization refers to an entity that has been deliberately formed for achieving some particular purpose or goalAssociation represents any group of people who have joined together in order to achieve common goals.
An organization typically does not allow everyone to join.Association has an open membership and individuals can become members by paying a fee or making some other contribution.
Members have the right to vote in determining how profits are distributedMembers have the right to vote in determining how profits are distributed
In the organization, members are directly affected by any lossesthey do not share liability for any losses
The leadership structure is more formalizedThe leadership structure is informal.
An example can be your school.An example would be the PTA at your school, which gathers parents to organize things such as fundraisers and other events

Organization or Association: Detailed Explanation

Legal Structure

One of the fundamental distinctions between organizations and associations is their legal structure.

Organization Legal Structures

Organizations can have various legal structures, including sole proprietorships, partnerships, corporations, limited liability companies (LLCs), and more. Each of these legal structures comes with its own governance and liability considerations. For instance, corporations have a board of directors responsible for decision-making, and shareholders who may or may not be directly involved in the organization’s operations.

Association Legal Structures

Associations, especially non-profit associations, have specific legal structures. In the United States, many associations seek 501(c)(3) or 501(c)(6) tax-exempt status. These designations allow associations to operate as tax-exempt organizations while serving either charitable or industry-related purposes. Associations often have boards of trustees or directors, with members holding voting rights to influence the association’s direction.

Purpose and Activities

Organization’s Purpose

Organizations are typically profit-driven entities. They engage in activities that are directly related to their primary purpose, which is often generating revenue. For example, a manufacturing company’s core purpose is to produce and sell goods, and its activities revolve around production, sales, and marketing.

Association’s Purpose

Associations, as non-profit entities, are oriented towards serving a community or industry. Their primary purpose is not to make a profit but to provide services, advocacy, or support to their members. For instance, a professional association for teachers aims to enhance the teaching profession and support educators. Its activities might include organizing conferences, providing educational resources, and advocating for teachers’ rights.

Membership and Stakeholders

Another significant difference lies in the makeup of their stakeholders.

Organization’s Stakeholders

In organizations, stakeholders typically include shareholders, investors, customers, employees, suppliers, and other parties who have a vested interest in the organization’s performance. These stakeholders often have varying degrees of influence on the organization’s decisions.

Association’s Membership

Associations rely heavily on membership. Members often pay dues to join the association and participate in its activities. These members can actively shape the association’s policies and goals through voting, participation in committees, and contributing to the association’s mission.

Funding and Revenue

The way organizations and associations generate income also differs.

Organization’s Funding Sources

Organizations can be funded through a variety of sources, including:

  • Sales: For-profit organizations generate revenue from sales of products or services.
  • Investments: Organizations may also invest in assets such as stocks, bonds, and real estate to generate income.
  • Loans: Organizations may borrow money from banks and other lenders to finance their operations.
  • Grants: Non-profit organizations may receive grants from government agencies, foundations, and other organizations.
  • Donations: Non-profit organizations may also receive donations from individuals, businesses, and other organizations.

Association’s Revenue Sources

Associations typically generate revenue from the following sources:

  • Membership dues: Most associations charge their members dues. Dues are typically used to cover the costs of the association’s activities, such as events, publications, and advocacy work.
  • Grants: Associations may also receive grants from government agencies, foundations, and other organizations.
  • Donations: Associations may also receive donations from individuals, businesses, and other organizations.
  • Events: Associations may generate revenue from events such as conferences, trade shows, and golf tournaments.
  • Publications: Associations may generate revenue from the sale of publications such as magazines, newsletters, and directories.

Decision-making and Governance

How decisions are made and who is responsible for them varies between organizations and associations.

Organizational Decision-Making

In organizations, decision-making is often centralized and may involve a board of directors or executives who are responsible for strategic choices. These decisions aim to maximize profit and shareholder value.

Association Governance

Associations typically have a more democratic governance structure. Members have the ability to influence decision-making through voting and participation in committees. Boards of trustees or directors oversee the association’s operations and are accountable to the membership.

Examples and Case Studies

To further illustrate these differences, let’s consider some real-world examples.

Organization Examples

  • Apple Inc.: A multinational technology company, Apple is a for-profit organization known for producing and selling consumer electronics.
  • Coca-Cola Company: A global beverage company, Coca-Cola operates as a for-profit organization, with shareholders and a board of directors.

Association Examples

  • American Medical Association (AMA): The AMA is a professional association for physicians and medical students, working to advocate for doctors and advance public health.
  • American Red Cross: This humanitarian association focuses on providing disaster relief and support to those in need.

Differences in Terminology and Language

Both organizations and associations have their unique terminology and language specific to their domains. Organizations may use terms like “shareholders,” “revenue,” and “profit,” while associations may use terms like “members,” “dues,” and “advocacy.”

Common Misconceptions

Misunderstandings about the differences

One common misconception is that organizations are always for-profit and associations are always non-profit. This is not the case. There are many for-profit associations, such as trade associations. And there are some non-profit organizations that have a more formal structure and hierarchy, such as universities and hospitals.

Clarifying common myths

Another common misconception is that organizations are always more successful than associations. This is also not the case. There are many successful associations, such as the American Red Cross and the Sierra Club.

Summary: Organization vs Association

  • Organizations are established for a specific purpose and exist with the aim of creating some form of change in the world. Associations, on the other hand, can be started from scratch or come into being by chance depending upon their members’ goals; but they all share one thing – no set mission statement to fulfill
  • An organization is created with an intent to provide goods or services that benefit society at large, whereas associations may not have such lofty aspirations as organizations do.
  • Organizations often create value through partnerships which help them achieve this goal while associations might occasionally engage in collaborations when it suits their needs without any long-term intentions

Frequently Asked Questions

Q: Can organizations also have members?

Yes, organizations can have members, but the primary difference lies in their focus. In organizations, members do not typically drive decision-making, and the organization’s primary goal is profit generation. In associations, members are central to the entity’s mission and activities, and they may have a more direct role in decision-making.

Q: How are organizations and associations funded differently?

Organizations primarily generate revenue through sales, investments, and loans. Associations, on the other hand, rely on revenue sources like membership dues, grants, donations, and event fees to support their non-profit initiatives.

Q: Are there specific legal structures for organizations and associations?

Yes, organizations can take various legal structures, such as sole proprietorships, partnerships, corporations, or LLCs. Associations, especially non-profit ones, often seek 501(c)(3) or 501(c)(6) tax-exempt status in the United States.

Q: Who holds decision-making power in organizations and associations?

In organizations, decision-making is often centralized in a board of directors or executives. In associations, decision-making is more democratic, with members actively influencing policies and goals through voting and committee participation.

Q: Do associations ever make a profit?

While associations are primarily non-profit, they may generate a surplus, which is reinvested into their mission and activities. However, this surplus is not distributed to members, as it would be in a for-profit organization.

Q: Can an entity be both an organization and an association simultaneously?

It is possible for an entity to have characteristics of both, but it typically leans more toward one category. For example, a professional association may have a subsidiary business that operates for profit.

Q: What are some real-world examples of organizations and associations?

Examples of organizations include companies like Apple Inc. and Coca-Cola. Associations include entities like the American Medical Association (AMA) and the American Red Cross.

Q: Do organizations have a responsibility to a specific community or group like associations do?

Organizations may have social responsibilities, but their primary focus is generating profit. Associations are dedicated to serving their members or a specific community, making community support a core part of their mission.

Q: Are organizations more concerned with public welfare than associations?

Not necessarily. Organizations may engage in corporate social responsibility activities, but their primary goal is profit generation. Associations are often more explicitly oriented towards community welfare or industry-specific advocacy.

Q: Can an organization transition into an association, or vice versa?

While it is possible for entities to change their legal structure or mission, such transitions are typically complex and may require legal and regulatory considerations. It’s not a straightforward process.