At a Crossroads

Amid growing criticism, NCIA chief Aaron Smith admits missteps and hopes to move the trade group in a new direction

By Bart Schaneman

The past few months have been rough for the National Cannabis Industry Association and its executive director, Aaron Smith.

Since December, two board members have resigned from NCIA, the largest and longest-running national trade association in the marijuana industry. Another board member – legalization advocate Rob Kampia – was ousted after an ethics investigation into sexual misconduct allegations. Also, NCIA’s chief of staff was fired in December less than six weeks after she was hired.

NCIA and Smith also have faced high-profile criticism.

Kayvan Khalatbari – who formerly owned a medical cannabis dispensary that was an original NCIA member – quit the board in January. He blasted Smith’s leadership and called NCIA ineffective. Khalatbari, who was on the board for three years and considered himself a good friend of Smith, said NCIA had lost the industry’s respect and that the organization could suffer “irreparable damage.”

“There was a point about two years ago when we stopped being as effective as we should have,” Khalatbari, now a Denver cannabis consultant, said in an interview in January. “We’ve been spinning our wheels since then.”

Former NCIA chief of staff Genifer Murray, who became a member in 2011 and at one time was friends with Smith, also blamed the executive director for dysfunction in NCIA. In a letter to the board after being fired at the end of 2017, Murray accused him of favoritism and a lack of leadership, adding that NCIA suffers from low morale and a lack of trust within the organization.

After co-founding NCIA in late 2010, Smith and his organization are at a crossroads. The coming months could prove pivotal.

To be sure, NCIA has racked up many successes along the way and can now boast of having its highest membership total ever. It posted record revenue last year, and the number of MJ businesses joining Denver-based NCIA continues to grow.

But critics of Smith and NCIA – including a growing number of veteran industry leaders – say the organization needs fresh leadership and a new direction. The industry vets charge, for example, that NCIA has lost its focus as a lobbying organization and instead puts too much emphasis on networking rather than trying to change federal banking and tax laws that harm the cannabis industry.

Smith, who says he has no plans to leave NCIA anytime soon, concedes he could have done some things differently. The NCIA board, with 20 members, is too large, he noted. And Smith conceded he should have nurtured better relations with state MJ trade groups – versus the breakdown in communications and lost members that resulted from disagreements over trademarks and operational practices. In fact, Smith clearly learned a lesson from that experience and is taking steps to mend relations with state cannabis associations.

Where Smith stands isn’t uncommon for the marijuana industry in 2018. Many executives, businesses and cannabis organizations – especially those that were founded at the industry’s birth like NCIA was – are in similar positions.

They are attempting to change and grow as the needs of the industry morph and more business-savvy people enter in droves. That’s led a lot of executives like Smith to think about what they could have done differently, chart a new course forward and look in the mirror to determine if they’re the best fit to continue leading the entity they started.

“I am dedicated to continuously working to better the organization and our offerings to members,” Smith said in an interview. “I generally need to prioritize” potential improvements “based on how many members are positively impacted by the change.”

Here are lessons Smith has learned – including those tied to dealing with conflict, responding to criticism, partnering with other groups, balancing friendships with business decisions and structuring a board – and what he hopes to do to position NCIA for long-term success.

Facing the Music

NCIA represents a wide swath of the marijuana sector, boasting roughly 1,530 cannabis-related businesses as members.

Smith co-founded NCIA in December 2010 with Steve Fox, the former director of government relations for the Marijuana Policy Project (MPP) and today the director of a cannabis lobbying and advocacy firm in Washington DC.

Troy Dayton, Steve DeAngelo, Brian Vicente, Jill Lamoureux, Dale Sky Jones, Etienne Fontan, Rob Kampia, Bob Selan and Erich Pearson were all members of NCIA’s founding board.

Over the years, the association has grown and matured, and with it so has the amount of scrutiny and skepticism about the way it’s being led.

Smith’s critics, such as Khalatbari, have targeted his leadership style.

“I consider Aaron Smith a very good friend of mine and would do just about anything for him,” Khalatbari wrote in a letter to the NCIA board when he announced plans to leave. “But, putting on my NCIA director hat, I haven’t been happy with how he’s handled conflict during my time as a director here.”

Khalatbari was specifically disappointed with how Smith and the NCIA board handled Kampia and sexual misconduct allegations lodged against him. Khalatbari and other critics say the board was slow to act in response to the allegations. MPP, for example, severed ties with Kampia more than a month before his removal from the NCIA board.

After he was kicked off the NCIA board, Kampia lambasted the organization as “a broken institution.”

His primary complaint: NCIA should be run more democratically than how Smith operates it, allowing the members to have more of a voice. “Aaron runs it like a dictatorship,” Kampia said in an interview. “Structurally, he’s not respecting the association when he runs it like that.”

Scott Van Rixel, co-founder of Bhang Chocolate, an edibles company in Oakland, California, said his company was a major financial fundraiser for NCIA and one of its original members. But Van Rixel is no longer on the board and no longer a member.

Van Rixel declined to go into specifics about why he cut ties with NCIA, saying he’s disappointed to no longer be involved with the organization. “We really had high hopes for what NCIA was going to accomplish,” Van Rixel said. “We joined NCIA when we did as one of the founding members because we really believed in the goals that NCIA was moving toward: fair banking and fair taxation.”

Smith, for his part, brushes off much of the criticism and defends his tenure at NCIA. “Like most people, I don’t find criticism that isn’t constructive or rooted in facts to be particularly useful,” he said. “But I do welcome critical feedback on how NCIA can improve from anyone.”

Smith said he takes constructive criticism seriously, especially if it’s coming from an NCIA member. “My approach is to attempt to validate any concerns by asking for the advice and feedback of others to ensure that what is being said is not just coming from an outlier,” he added.

In that regard, Smith called Khalatbari a friend but labeled him an outlier on the NCIA board. “The vast majority of the board continues to support the mission of NCIA and the direction we’re taking this organization,” Smith said.

Smith also dismissed Kampia’s criticism, saying at the time that NCIA’s “growth is not dependent on any one individual’s presence on or departure from our board of directors.”

Smith said he tries to handle criticism in a way that best serves his members.

“I do tend to compartmentalize the feedback and find the threads of truth that may exist so that I can work on improvements as needed,” Smith added. “While I can’t please everyone, I do acknowledge opinions and do my best to respond by continuously improving. That is much easier when the criticism lodged is done so in a constructive and rational manner.”

Fresh Direction?

As part of building NCIA into a more mature organization, there are signs Smith is taking steps to move it in a new direction.

Smith and NCIA have been criticized for not working well with state cannabis associations. Relations between the two sides have been highlighted by finger-pointing and legal threats from NCIA. Smith admits he could have done things differently and is taking steps to right the situation.

To improve ties, Smith has decided to build a formal alliance with state and local cannabis associations. In particular, NCIA is launching the Allied Associations Program to create a unified front for the cannabis industry. Smith sees it as a more formal way to keep the state and local groups communicating with each other as well as with NCIA.

He also said state and local organizations can learn from NCIA how to manage members and structure committees. “These associations blew up to the point where I didn’t even know some of them existed,” Smith said of the state groups. “We had to create some kind of formal program to maintain those relationships so we can be stronger and smarter.”

That potentially could go a long way toward improving ties with state groups.

Although 30 states have some type of legal cannabis laws on the books, NCIA has only two official state affiliates, California and Ohio. Smith attributes that to the difficulty of building a nonprofit trade association, particularly in emerging states where the opportunity for revenue from membership dues is limited. “You can’t get investment capital from nothing,” he said.

Over the years, a few state associations with ties to NCIA found out what it was like to get on Smith’s bad side. The Nevada and Illinois cannabis industry associations were disbanded shortly after becoming affiliates.

In 2015, the Nevada association was an NCIA affiliate, but Smith determined the state organization wasn’t meeting the standards of the affiliate agreement. For example, Smith said the group didn’t have a working website several months into the relationship.

Smith said that while his association was growing, a “tidal wave” of state- and local-level organizations began trying to affiliate with NCIA by using elements of its logo or name. Smith took legal action in several cases, further straining relations between NCIA and the smaller groups. He estimates NCIA’s legal counsel sent out about a half-dozen cease-and-desist letters.

“What killed us was that NCIA threatened to sue us. We got into a disagreement,” recalled Joe Brezny, a cannabis consultant with Parallax Strategies in Las Vegas and former director of the Nevada Cannabis Industry Association. “I just don’t think threatening to sue people is a way to grow your business.”

Mending Fences

Looking back, Smith acknowledges he could have been less combative with the state groups. “I handled it a bit more aggressively than I would if it were today,” Smith said. “It infuriated me to see organizations popping up in other states using my logo that never had permission.”

His ire arose out of loyalty to NCIA and the time and effort he spent building it. “While I had every right to protect our intellectual property and the integrity of the organization,” Smith said, “I could have done a better job at shifting that enthusiasm and energy of those small organizations to somewhere else.”

The Allied Associations Program is a way to either repair those relationships or build new ones “without boxing them into an affiliate program that maybe isn’t right for them,” Smith said. This effort could have been made sooner in his tenure, he admitted.

“We could have done that a bit quicker,” he said. “It all happened a bit fast. It seemed like we went a few years where nobody cared about NCIA at all. Then all of a sudden overnight, everybody wanted to be NCIA.”

‘Reinventing the Wheel’

NCIA’s governance structure also has been a target of criticism. Khalatbari, for one, said the group’s board – at 20 members – is too big and unwieldly. It’s difficult to reach a consensus on anything when so many voices are in the conversation, he said.

Smith acknowledges the large board can prove problematic, adding that he’s eyeing an overhaul of NCIA’s governance structure.

When NCIA was getting started, Smith felt like there was no comparable industry to learn from and no similar trade association. Marijuana, for starters, is illegal in the eyes of the federal government. When NCIA was launched in 2010, no states had yet legalized recreational cannabis.

But Smith ultimately concluded he’d been looking at matters the wrong way. NCIA, he realized, was simply a trade association. For example, scores of nonprofit organizations represent a particular industry, be it automobile makers, banks or fashion designers.

“We were reinventing the wheel,” he said. “When we realized that actually there are hundreds of other associations out there, and there’s all this literature, I think I didn’t put as much credence into that. I thought, ‘We’re just doing this for the first time, no one’s ever done this before.’”

Smith realized he could have been learning fundamental association principles from other groups that have been around for a hundred years or longer.

For example: how to structure a board. Smith admitted there aren’t many trade associations with a 20-member board. “There are very few, if any, that do it the way we do it,” he said.

The board was even bigger at NCIA’s inception, with 30 members. Smith and his colleagues made the board that big to unite the industry’s heavy hitters. “We wanted to make sure we had this broad buy-in,” he said. “We kind of strategically picked thought leaders in all the key markets.”

NCIA has been discussing reducing the size of the board or changing the governance structure. Breaking up the board into executive committees is one idea that’s been floated, according to Smith.

“Now that we’ve scaled, it definitely needs to be readjusted and look more like a traditional trade association,” Smith said. “If I could do it again I probably would have thought ahead to now and put some provision in the bylaws where once you hit a certain number of members it triggers the need for an executive committee.”

He’s leaving the decision on how to restructure the board up to its members and expects the changes to be phased in. “There won’t be a radical change overnight,” he said.

In hindsight, Smith also said he should have better anticipated the marijuana industry’s rapid growth. “I’ve learned that change happens exponentially, not incrementally,” he said. “I could have had a little more confidence in ourselves as an organization and the movement in general. Maybe we should have been planning for more victories.”

Ties That Bind

Over the years, and particularly in the early days, Smith became close friends with many of the industry insiders he gathered together to form the NCIA board and build the association. Khalatbari, for one, found problematic the blurring lines between friendship and responsibilities to NCIA.

Board members “have let their relationships and their ego get in the way of doing the right thing for the organization,” he said at the time of his departure from the board in late January. Other people in the industry have long held a similar complaint, he added.

“They feel like it’s a good ol’ boys and girls club,” Khalatbari added.

As an example, Smith kept a time-share studio apartment in Denver with Kampia while NCIA was getting off the ground. Smith doesn’t believe those close relationships had a negative impact on his ability to shepherd NCIA. But he does acknowledge the situation has complicated his job. Smith admits, for example, his close ties with certain board members and industry players made difficult decisions even tougher.

“I have to be a politician of sorts and try to keep as many people happy as possible,” Smith said. “The Rob (Kampia) situation was difficult for all of us on the board. But it was clearly the thing that had to be done for the sake of the membership and the integrity of the organization.”

Smith said he made the decision based on the facts at hand and didn’t let the friendship or his longstanding professional relationship get in the way of his responsibilities to NCIA members.

“The decision to remove an elected board member would never be taken lightly … given Rob’s contributions to the industry over the years,” Smith said. “However, when the board reviewed the situation it became very clear that we needed to take action for the best interests of our members and the industry’s image.”

Most businesspeople know it isn’t possible to be friends with everyone, Smith said. He suggests focusing instead on what’s best for the customer and the greater industry.

Next Steps

Near term, Smith said he will try to bring people together following NCIA’s recent tumultuous period. “If indeed sometimes these personalities are in conflict they do share the same vision and mission that this industry needs to be treated just like any other industry in this country,” he said. “Everybody shares the end goal of normalizing and professionalizing the industry.”

His vision for the coming years goes beyond U.S. borders. “We need to be looking toward what this looks like as not just a state-based industry, and not just a national industry, but an international industry,” Smith said.

He would like to see NCIA remain open to a wide swath of the industry as it develops. “I don’t want to see NCIA only representing the top 500 huge companies and only their interests,” he said.

As for his own future, Smith doesn’t plan on going anywhere in the short term. But he might seek out greener pastures once he feels his work is done.

“I plan on staying with the association for the next few years,” he said. “Once cannabis is legal federally or there’s some version of a state’s rights bill that allows states to flourish, that would probably be the time I would look to move on.”

Time and events will tell whether Smith can stick to that plan.