The impact of NAR's Core Standards and Organizational Alignment has taken hold. All Associations are now facing the requirement of meeting all of the Core Standards as well as creating a Strategic Plan. From reports around the country, it has now become real, especially to smaller Associations.
Associations realizing they cannot meet the Core Standards alone must make decisions on their future. Consolidation with another Association, or Associations, is one solution. However, there are challenges to consolidation if a smaller Association is going to confer with a much stronger organization. Negotiating power in such a situation is nonexistent.
The merger of two or more Associations is normally a lengthy and involved process that must navigate business and structural changes in the midst of sensitive egos. The process, at a minimum, includes a new governance structure, a new name, decisions on staff and CEOs, buildings, assets, financial review, legal review, MLS, and new bylaws. Resolution of these items – and more – is a detailed negotiation spanning several meetings, months of time, and costs. For smaller Associations there is an easier path.
A simple and quick process is for the Association to just dissolve. All Association bylaws allow for that decision to be made by the members. Any asset remaining must be distributed to another not-for-profit Association, or to the state Association. The jurisdictional territory of the Association is then "unassigned." Members of the dissolved Association can join any other Association they desire. (Of course, that has always been the case.)
Any Association can request unassigned territory by filling out the appropriate NAR form and following the process. One step is the notification of interest in the unassigned territory by the Association to all Associations contiguous to the territory, as well as the Designated REALTORS® therein. There are other process requirements, but they are fairly easy and normally handled at the administrative level of NAR.
It is been my experience in scores of mergers that there is always interest in consolidation from surrounding Associations of various sizes and capabilities. It is the grueling process of merger that dampens such interest. And any significant size disparity of the parties to the negotiation virtually guarantees an unsatisfactory result.
A simple way to affect consolidation is to negotiate an "understanding" between a dissolving Association and an Association interested in servicing the members of the soon-to-be unassigned territory. The interested Association would request the unassigned territory after communicating with the other contiguous Associations and DRs to ensure there would be no objection. The dissolving Association would assign its assets to the interested Association and encourage its members to join there.
This efficient process involves fewer forms, procedures and negotiations. The costs are much lower since professional fees such as financial, legal, and facilitator are usually not needed. If minor legal advice is required perhaps the State Association could offer legal assistance.
Only if necessary, as an incentive to the arrangement the interested Association could offer to create a Chapter within their structure, recognizing the dissolving Association. Although Chapters in a regular merger undermine loyalty to a new entity by keeping alive the concept of a prior organization, in the case of a dissolving Association that has not negotiated the design of a new organization, this could be a plus.
Easy, quick, harmonious, and inexpensive. While not a merger per se, the same result is achieved. This approach could be the best solution in many situations.
Jerry Matthews is a strategic consultant who has facilitated scores of mergers. He has been engaged by NAR to train and support the approved NAR facilitators for Strategic Planning and Mergers in the Organizational Alignment Program.