Small Board: Bigger Isn’t Always Better

Pooling resources can be cost-effective and joint events can be convenient, but even in today’s weak economy, many small-association AEs cite a wide variety of reasons not to merge.

REALTOR® associations of all sizes have had to rethink their goals and identity in the face of challenging economic times. For many associations with fewer than 500 members, this has resulted in a reaffirmation of the importance of their small-board characteristics.

When RAE polled small-association AEs in December with the single question, “Why not merge?” responses fell into two categories: “we don’t want to” and “we don’t need to.” Here’s why.

Personal service

Members of small associations, who typically live in small communities, are accustomed to working with people they know personally. So perhaps it’s not surprising that AEs cited personal service as the number-one reason they did not want to merge.

“A small local association offers a sense of community,” says one small-association AE in Florida. “Small associations are typically a place where phone calls are answered by a live person, even the AE, who knows many members by the sound of their voice. Small associations are a place where problems can be solved quickly and personally, a place where ethics complaints and arbitrations between members are rare because the parties know each other and are able to work out differences.”

According to Jim Haisler, RCE, CIPS, e-PRO, CEO of the McHenry County Association of REALTORS® in Illinois, “One consequence of any merger is that the individual becomes less important. Many large associations are impersonal.” While McHenry County is a 724-member association, it’s surrounded by much larger associations, “so I certainly feel small often,” says Haisler.

Many small associations feel that they can’t afford to lose this valuable “where everybody knows your name” asset. “We know our members and they know us,” explains Amanda Ornelas, AE of the 291-member Sawtooth Board of REALTORS® in Idaho. “They know that they can come by anytime and we will give them our full attention and address any needs that they have. Our members expect this level of personal service.”

Financial independence

Size is not necessarily a risk factor for financial -distress in the current market, small-association AEs report. To the contrary, their size allows them to be more nimble—adapting and making changes quickly. One small association in Florida that lost half its membership in the past two years told RAE it still hasn’t had to raise dues or cut services because of savvy financial planning.

“We are financially healthy due to some very good people serving as our directors over the years,” says Ann Ritchie, CEO of the 274-member Tuolumne County Association of REALTORS®, Calif. “Our building is paid off and we have ample reserves, which we will dip into for the first time in 2011. We have pulled back on services a little (mostly free food) but at this point we have not cut staff.”

Often members of small associations pay higher dues for the services and programs they receive, but this has always been the price of staying small.

“The trade-off for maybe a few more services is not worth it for [our members] if they lose their oversight of and involvement in their board’s activities and plans,” said one small-board AE in Washington.

Some small associations with low dues do not -anticipate any cost savings by merging. In fact, there is speculation that dues could actually go up because small associations not only would lose the low overhead of a single-staff small office, but there would no longer be any competition for members.

Opportunity, involvement, and geography

Some associations have reported members thwarting merger initiatives because of fears that leadership positions in a larger association will be beyond their reach because they lack connections or a high enough profile. Other associations have passed on the idea of a merger because of member concerns about input and involvement.

Tere Blackwood, EO of the 122-member Cleveland County Association of REALTORS®, N.C., says although the subject of mergers has come up several times in the past few years, her members believe a merger would leave them with little or no input regarding how things should be run and that overall involvement would decrease.

There are also concerns among many small associations who enjoy active member participation, that attendance at meetings and involvement in association events would drop off substantially if members had to drive longer distances to the board office.

Geography is, in fact, the second most cited reason for not merging. Despite the proliferation of online classes, online customer service support, and the like, members still travel to their association office for a variety of reasons, ranging from board meetings and continuing education classes to picking up lockboxes and making photocopies.

“The central office for our neighboring association is about 70 miles away and most of that distance is on two-lane roads,” says Ritchie. “In essence it would mean that members could not avail themselves of the services that that association has to offer.”

All real estate is local

In addition to being remote, small-association AEs often say their area—its housing stock and its home buyers and sellers—are so unique, outsiders from neighboring areas wouldn’t understand local practices, ordinances, issues, and challenges.

As Lynda Anthony, AE of the Florida Keys Board of REALTORS®, explains, “The main reason our association would not want to merge with a larger association is that our agents are the subject matter experts here. Our classes are geared toward very specific area issues, such as den-sity ordinances, FEMA, endangered species list, and flood zones.”

Identity and pride

Throughout the comments submitted to RAE, pride was a recurring theme. Small-association AEs pride themselves on their ability to offer the same cutting-edge, business-building services as larger neighboring associations. Many of them tout the fact that they are stable, active, thriving associations.

“Small-association members value their local identity, which is usually displayed in their association name. It is valuable to them for community service, public relations, and political reasons,” explains Cindy Butts, CEO of the Maine Association of REALTORS® and administrator of three small boards in Maine.

“Over the years our small association has produced four state presidents, seven REALTOR® of the Year recipients at the state level, and many state committee chairs, vice chairs and committee members,” says one small-association AE in Missouri. “We have 20 functioning committees, we always exceed our state RPAC goal (at times by as much as 400 percent), plus we own our facility and have carried approximately $200,000 in cash reserves consistently for a number of years.”

There are those small-association AEs who believe that becoming a larger association would only invite larger problems. “Bigger can bring a lot of political issues within the membership; bigger can mean a lot of red tape before decisions can be made; more committees and more issues; less -personal communication with each other,” says one small-association AE in Pennsylvania. “By National’s standards, we are considered a small -association; by our standards, we’re a success.”

Tere Blackwood of Cleveland County also worries about the cost of getting bigger. “The uniqueness and identity of our market would be swallowed up in a larger, more general vision. [Our members] fear this and will fight this.”

Although there are certainly economies of scale gained through mergers, not everything boils down to dollars and cents, notes Haisler. “Per-sonal recognition and acknowledgment is incredibly valuable. Bigger isn’t always better.”Author’s note: Many small-association AEs quoted in this article preferred to remain anonymous.

Top reasons small-association members reject merging

Ultimately, every merger comes down to a membership vote. Small-association AEs say their members consistently cite these reasons most for voting no to merging:

• Loss of personalized (“where everybody knows your name”) service. Members would become “a number” and be more “on their own.”
• Loss of the well-known and -liked AE and staff who take the time to meet with members personally.
• Longer distances to travel to attend meetings, education, events, etc., which would lead to less involvement in the association in general.
• Local issues and challenges would no longer be addressed because issues of the larger board would take precedence.
• Loss of some unique local services, education, and programs.
• Loss of involvement in the local community (e.g., influence on local political issues and candidates, participation in local fund raisers and beautification projects, and so on).
• Increase in dues or fees because there would no longer be area competition, or the larger association may need money for programs not used in the local area.
• Disputes and conflicts between REALTORS® could increase (small boards have fewer disputes because members all know one another and work out their differences).
• Loss of local identity and affiliation with the local area because the new association name is intended to identify with a larger region.
• Loss of the ability to rise to a position of leadership in the association because of increased competition.

Economy’s effect on merger vote

Often size is the only attribute small associations have in common. Each is unique, and, like the markets they cover, some are affected more by the economy than others. For some, the shifting real estate market is taking its toll on members’ resolve to maintain their small associations.

In many areas, small-association AEs report that not only has the economy led them to cut services and staff, but what’s worse, AEs say, members in financial distress are becoming more demanding, questioning, and dissatisfied.

“Where merging with another board has been out of the question in past years, it certainly is resurfacing at this time,” says one small-board AE in Missouri. “Our staff is being challenged, our services are being challenged, and the level of dues is being challenged. It appears that the reasons for existing as a highly respected and appreciated small association are not so significant in a difficult market.”