Making Boards Obsolete: Decentralised Autonomous Organisations and the Trade Bodies of the Future
Would your association function more efficiently without a traditional command structure? Simon Forrester and Miles Hoare investigate.
Over the last ten years, Big Data and other major technology trends such as social networking, cloud computing, mobile comms, new analytical applications and algorithms have created significant opportunities for associations and their members, to improve their decision making capabilities. They offer speedier and better conclusions, instant access to financial and other key performance data, prompt opinion on issues affecting the industry they serve, and even virtual policymaking through online forums.
Our apologies to those of you yet to engage with these innovations; that's yesterday's news; the association of tomorrow may not have any formalised decision-making structure of volunteers.
"This won’t just be an insurrection for associations, but for the way the world operates"
Rather than the traditional association role of attempting to lead the masses, why not let the masses lead us? Some organisations are embracing decentralisation, and the writing may be on the wall for the traditional association decision-making model of volunteer-led committees. As a traditional association manager, you may either be rubbing your hands or alternatively, clutching your pearls at the very thought.
It’s a long-held notion that things decided and dissected by groups can often “become a camel” (the proverbial horse designed by committee) – and much can be said for this when it comes to trade association boards. Whilst association leaders do their best to sense the prevailing winds in the trade and take quick pro-active decisions to best serve their members in ever-changing markets, they’re often let down by ego-driven or unqualified individuals, tedious and burdensome decision-making processes that slow progress, and the dearth of market intelligence caused by limited networks.
For those of us who are lucky enough to work within sleek and efficient governance models (and ad hoc research shows that is a low percentage), the nagging doubt that we are heavily engaged with a vocal minority of members (i.e. those who choose to join a committee) still weighs heavily. What if our volunteers are unrepresentative? What if we are dominated by a few large voices with egos to match? The danger lies in taking decisions based on a small and unrepresentative (or downright biased) sample. And while tools exist to gather the views of the wider membership, this is currently cumbersome - and can in fact annoy and alienate members through 'survey fatigue'.
To members of the association, or those tendering deals with them, this can sometimes be a small frustration; but when it comes to getting the best out of your business and being able to rely on a trade association to be at the cutting edge, it can mean the difference between beating the competition or losing out to other businesses, or entirely different industries, altogether.
So how can trade associations and professional bodies be more nimble and adaptive to changing climates? How can they act in the best interests of their members and with the prevailing wisdom? Well until very recently, this was a difficult task – that was until the concept of the Decentralised Autonomous Organisation (DAO) was born.
What is a DAO?
It is essentially as it sounds – an organisation that has no central power, and is run autonomously without governance. The concept of 'networks that run themselves' uses a complex set of what are called “smart contracts” and allows the autonomous exchange of contracts, information, payments and settlements through a decentralised network of computer systems. Decisions on how the organisation is run are taken by participants in the network, known as “voting nodes”, who are stakeholders that can steer changes in the network in a democratic fashion.
The most popular use of this democratic, trust-less form of organisational structure is Bitcoin. Bitcoin proved you can run a basic organisation through a decentralisatised system without the need for trusted third parties. This means individuals need not know or trust the other individuals in the network, but simply agree to the rules baked into the system to be able to exchange contracts. As the rules cannot be altered without a majority decision of voting nodes, no one need trust the other parties, as they cannot act outside the rules of the network.
Being 'trust-less', the network can work even if each individual actor operates in their own interests. In fact, this dynamic actually makes the network possible and can align incentives with positive actions, without resorting to centralisation and third parties such as boards or committees. Thus rather than putting power and trust into a few individual board seats that can make decisions in the interest of the association (or, in all too many cases, themselves) it means no one individual can stifle progress or loot from the kitty if everyone else doesn’t agree to these rules and decisions of the organisation.
How does this work in practice?
For a membership organisation, each participant in the network would have to agree on terms of contract before becoming a member of the network. Payment for say, a membership subscription would go into the DAO – a centralised pot, on which the organisation can then vote to spend in certain areas, can give back to members as digital assets or “shareholdings” (thus overcoming the whole 'company limited by guarantee' issue), or be used as an in-platform currency that acts like a share exchange for additional products and services.
The network develops based on proposals that can be signalled by the network for approval or disapproval. In terms of a DAO, proposals can be from a centralised body – the CEO and admin staff who run the day to day ‘services’ of the organisation – if an organisation requires or decides to have these staff - or they can be proposed by participants in the network, the members themselves.
These are then voted on by the network using the same blockchain ledger technology that makes Bitcoin a secure and trusted payment network. Voting in this way can be based on a percentage majority vote and a quorum of votes; it is secure and immutable.
Payments in and out of the DAO could then be traced through a private (member-only) or public ledger so that DAO funds can be tracked, assuming any third party such as employees are given access to funds. Reporting for purposes of auditing or final accounts would require submission of the ledger state for one accounting period, and any member data collected by the system could be prepared into a statistical yearly report.
Through smart contracts these processes can be automated, in theory ridding the organisation of the need for boards and patronage, allowing trust-based systems to hard code the agreed consensus of the majority into the governance of an organisation.
And if the thought of members being bothered to respond to every question about the future direction of the organisation fills you with dread, that's been considered too. Instead of voting for each and every action, members can simply relay their broad preferences to an artificial intelligence (AI) agent. These thousands of micro-decisions can then be addressed autonomously by the network’s AI actors.
What does this mean for Associations?
This won’t just be an insurrection for associations, but for the way the world operates. You only have to look at Johann Gevers' “decentralised society” project or the Japanese city of Tsukuba to see how entire voting and legal systems, currencies, production, and services can be baked into decentralised contracting frameworks – powered and decided on by people voting on trust-based systems.
What this means is that people will again have control over how knowledge, services and products will be sold and traded – rather than those with positions of power. It will be through the will of the voting participants in a system, exchanging value and contracts by consensus – agreed by the democratic majority and enforced by the rules of the code. Perhaps the perfect model for an association - an engaged and wholly democratic organisation, free to spend all assets on projects of sole benefit to the majority of the membership.
If there is a revolution coming in the next ten years – it won’t be from the streets. It will be from the bedrooms of computer geeks with libertarian ideals, creating a new form of capitalism without third-party interference, cronyism, fraud and corruption. A society powered by direct democratic means, where the people can truly decide their own rules and trade freely without the old middlemen. Perhaps the writing is on the wall not just for boards and committees, but for association CEOs too.
Simon Forrester MBA MIAM Simon began his career in the NHS, and in the mid-1990s moved to a senior management role in a professional body. An association manager by profession, Simon has worked in a variety of industry sectors including healthcare, construction, business tourism and most recently public health pest control. He joined the National Association of Jewellers as CEO in January 2018 and in his spare time has NED roles with the Institute of Association Managers and an educational institution. Simon has an MBA from Birmingham City University, and in 2016 was voted Chief Executive of the Year by the Association of Association Executives. When not predicting the demise of his entire community, Simon enjoys making associations better.
Miles Hoare Miles has over 10 years of experience in IT and web development working on design and development projects within third-sector organisations, associations and professional bodies in the luxury goods, waste management, renewable energy and education sectors. He has expert knowledge of digital marketing, campaign strategy and development of web applications with particular expertise in various PHP frameworks and an interest in blockchain technologies. Miles also has a love for digital design, media and web animation – as well as an MA in Screenwriting from the Edinburgh Screen Academy.