Catalysts for democracy.

Fledgling associations are assisting the transition from Communism to capitalism in parts of Europe.

When the Berlin Wall came tumbling down late in 1989, followed rapidly by the "Velvet Revolution" in Czechoslovakia and Poland and the dismantling of the Soviet Union, a way of life crumbled as well. The people in the former Communist states of Central and Eastern Europe began to rebuild their economies with a free-market model in mind. Few transformations in our lifetime have been more dramatic - or have proved so difficult to achieve.

Looking in from the West, we hail the exercise of democracy, human rights, and free elections for the first time in more than 40 years. But the permanence of these changes will depend in large part on whether a free market prevails and allows broad economic participation by all the people. Fledgling though they may be, some associations have already begun to support those changes and lay a foundation for democracy.

That became clear to me last summer when the Eastern European Real Property Foundation (EERPF) requested an ASAE evaluation.

The Washington, D.C.-based foundation, an independent entity originally funded by the National Association of Realtors and founded in 1993, administers a $5 million grant from the United States Agency for International Development (USAID). The ASAE evaluation would review the foundation's work in stimulating support for the emerging real estate industry in newly democratized European countries by helping to establish and work with associations of owners, brokers, and agents. By reviewing the outcomes of the foundation's work - outcomes in the form of new associations - the ASAE team would have a valid basis for evaluating the foundation's efforts.

Setting the stage

In the course of conducting the evaluation, Carole Z. Badger, CAE, and I traveled to Europe for three weeks to meet with officers and members of 13 new associations developed by the foundation in Bulgaria, the Czech Republic, Hungary, Poland, and Slovakia. We quickly realized the important role that real estate plays in supporting democracies in those countries.

In exerting their power in the wake of World War II, the Communists first claimed all the land in the name of the state. Personal property ceased to exist. Conversely, one of the first actions taken by the newly democratic governments entailed returning property to its rightful owners. In fact, some members of the real estate associations got into the business by reclaiming their property and then selling it.

The belief in capitalism has strengthened, gradually but increasingly, as people have learned that anyone can acquire legal title to property, have the opportunity for the property to appreciate, and get a fair price for selling it. Real estate ownership legitimizes capitalism and makes a return to state control much more difficult.

Valuable assistance

Where do associations fit into the equation for democracy? Here's a recap of our observations:

* The concept of sharing can overcome lessons of the past. From a business perspective, much of Central and Eastern Europe is picking up where it left off before World War II. The intervening Communist years embedded the idea that information, kept secret, provided a key advantage over one's competitors. Suspicion persists today, whether among an uninformed public that still views business entrepreneurs as somewhat "shady," small firms afraid that large firms will "freeze" them out, or regional firms that suspect competitors based in the capital city intend to dominate the market.

In contrast, associations thrive on a culture of sharing - not only information but experiences and resources. Imagine how difficult it must be for people who always guarded information to now be encouraged to share it with their competitors. Their first response is likely to be, "You're crazy!" It's not surprising that cooperation among realty firms was largely nonexistent before associations took hold.

EERPF has made inroads. In Poland and the Czech Republic, for example, a small group of real estate practitioners pooled enough money to purchase a Multiple Listing Service (MLS) software program so that they could begin sharing listings and commissions. Four people signed up for the association's voluntary program in Poland the first month; the number had grown to 40 by the second month.

* Associations lend credibility to an emerging profession. Operating in a business climate where property values and valid titles - not to mention sales commissions - are difficult to establish means most real estate practitioners are marginally capitalized entrepreneurs. In addition to living on the edge financially, they don't have the protected status and legal recognition enjoyed by their colleagues in the West.

The foundation's efforts to create associations marked the first time that anyone had addressed such basic questions as what defines a real estate practitioner? What skills are required of one? What standards must one follow? In the United States, associations typically answer these questions across time; in the European countries we visited, associations are tackling them all at once in an effort to gain acceptance both by the people in general and the government in particular.

* The flexibility of American-style associations appeals to the newly democratic. Western European associations tend to be highly structured. Often you must have a degree in the field, at which point you automatically become a member of the organization. After observing rules imposed by others for more than four decades, few in the newly democratized countries find that formality appealing. They feel a sense of urgency and almost instinctively prefer the voluntary nature and do-it-now attitude of American-style associations.

These competing paradigms are evident in Poland, where a national organization of appraisers has adopted the formalized, structured approach to operations, education, and training introduced by its British counterpart. The regional real estate associations, however, are moving more toward the American-style volunteer structure and relying on other practitioners rather than academic or technical experts to handle their programming.

* Many challenges are the same. Even more so than in the United States, the associations we reviewed have learned they must do a lot with few resources. In some cases, that meant borrowing someone else's fax machine. EERPF has encouraged the new associations to hire staff as a means of achieving some permanence and self-sufficiency, but the majority, of activities are still handled by volunteers.

One weakness that surfaced is that these associations, like many in the United States, haven't established a system for staying in close touch with their members. They understand the need to be democratic in terms of board representation, but haven't extended the principles of broad participation to informal processes such as member needs assessments or opinion surveys.

Membership recruitment offers another challenge because the concept of voluntarily paying dues to an organization is somewhat foreign. As in the United States, some people join simply because their competitors have joined and they don't want to miss out on anything. Others see the crossover between their association experience and running a business; they understand that they can learn something, such as business planning, in one area and apply it to another. And many, particularly association officers and staff, strongly believe that participating in associations helps them work effectively with the government and will ultimately help their country.

Behind the scenes in Slovakia

One incident I witnessed underscored not only the role associations can play but also how little group dynamics change from one country to another.

It happened at a joint meeting of the two real estate associations in Slovakia. One, headquartered in the capital city of Bratislava, represents larger firms. Members of the other association are small- and medium-sized firms located throughout the country. Although the groups had a natural suspicion of one another, the leaders of both agreed that they needed to work together, with EERPF's help, if they were to gain legal status and professional recognition.

EERPF agreed to co-sponsor a two-day government relations workshop. The first day would be devoted to learning the basics from an American practitioner and the second to meeting with several government officials. The elected officers and staff of both associations sat on opposite sides of the table. as the consultant explained how, by forming a coalition, they could potentially influence policy in the next day's meeting.

Following the consultant's presentation, the groups agreed on the need for legal recognition and minimal government regulation of the profession - but they disagreed on how to achieve the objective. People on both sides of the table were aggressive and vocal in their dissent.

Finally, as often happens in American board and committee meetings, someone who had not been heard from before asked to speak. He quietly read from an existing law giving licensure and regulating auctioneers and noted that it might cover real estate brokers as well. After a few minutes of reflection, the entire group enthusiastically endorsed the idea.

The next day the associations presented their plan to 18 government officials. If the associations agreed, responded one official, legislation granting their members recognition and legal status under the existing law might be readily approved by parliament. In turn, the associations would have to supply a definition of the profession and offer training and education to entry-level practitioners.

Neither of the associations had existed a year before, but together they had accomplished a major victory for their members in less than an hour.

Success strategies

During the ASAE evaluation visit to Warsaw, one newspaper attacked the idea of forming a national federation of existing regional associations as an American plot to dominate the real estate business in Poland. (Polish practitioners speculated that the story was planted by members of a large Warsaw firm that feared that a federation of regional associations would diminish their influence; formation of the federation continued as planned and the attack was largely ignored.)

Despite this public attack, EERPF's work has clearly succeeded. Traditional hostilities and suspicions, while still evident, country by country, are fading. It's hard to imagine how an industry without a representative association could otherwise define itself so quickly and become effective as judged by the long-established standards and free-market practices of the West.

In EERPF's successes lie lessons for other American associations that wish to assist their counterparts in Central and Eastern Europe. They include the following:

* Freedom to choose a model. EERPF channels USAID grant money to associations that agree to accept American-style bylaws, democratic structures, and codes of ethics. Beyond that, however, the groups could form regionally, nationally, or locally. That option meant associations could avoid being politically and ethnically split like the countries themselves often are.

* An emphasis on self-sufficiency. Modest funding assistance can be a strong incentive for a newly founded association to grow rapidly. But instead of a large, permanent subsidy EERPF awards small grants, usually in the $5,000 to $7,000 range, that will end after 1998. To qualify for funds - to sponsor a conference, for example - the associations must submit a business plan. (Members of most associations had no idea of how to draft such a plan; their only experience had been figuring out how to obtain government funds, not how to generate their own funds through profits.)

* Use of expert practitioners. Unlike some USAID programs, which rely on U.S. academics as consultants, EERPF often sends real estate practitioners to teach the Central and Eastern European associations about the profession. More important, the Europeans have begun to look to one another as examples of putting EERPF's recommendations to work.

Implications for us

The 21st century will be a very different world, one where competition will transcend not only languages and oceans but also attitudes and prejudices. For U.S.-based associations, that means we can no longer afford the arrogance of assuming that others should simply adopt our ideas without improving upon them, which is to our benefit. No longer can we view international activities as an unjustifiable expense or primarily as a potential revenue stream. Nor can we afford to focus solely on national political issues and affairs while ignoring the rapidly increasing economic and social closeness of a new world. To do so would be at the expense of another generation of our members, who will be living in a very different world from ours.

Even on a small scale, your association can assist its counterparts in emerging democracies. Your association may already have an international relations committee; that's a good start, provided its activities transcend hosting the occasional overseas guest or sending past presidents on junkets. Other possible activities include underwriting scholarships, setting up exchanges, or sponsoring educational programs.

Some association boards and members may find it hard to see a direct, tangible benefit to getting involved beyond U.S. borders. But if they don't, they run the risk of missing out on the growing interconnectedness among nations. Particularly in new democracies, the expertise of associations is much needed to help people participate and become self-sufficient. This is a moment not to manage but to lead.

RELATED ARTICLE: HIGHLIGHTS

* In newly emerging democracies, associations are playing a role in establishing the effectiveness and the credibility of professions.

* Generally, the style of American associations - rather than the high structure of Western European associations - appeal to the newly democratic.

RELATED ARTICLE: Nothing Lost in Translation

An ASAE evaluation focuses on an association's performance in about a dozen areas and includes a review of organizational documents as well as interviews with staff members, leaders, and even outside observers. In conducting ASAE's first international evaluation, which included a review of 13 new associations in Central Europe, we retained the same process and applied all but two of the criteria. (Automation and government relations were omitted.)

Although we applied tile criteria to new associations in cultures much different from that of the United States, the essential questions remained intact:

* Is there a mission?

* Are member needs being met, and how does one know?

* Do the members have a sense of "knowing what's going on?"

* Does it have an organizational structure, elected officers from the membership, a competent staff, dependable revenue streams, a high rate of membership renewal, and other attributes of stable associations?

* Does the association lead as well as manage?

Walter A. Schaw, CAE, Beaufort, North Carolina, was ASAE evaluation team leader for the EERPF Central Europe Project, August 1994-December 1994. During their presentation at ASAE's 75th Annual Meeting & Exposition this month, Schaw and Carole Badger; CAE, are discussing the role of associations in emerging Central- and East-European countries.