Over the past few years, some aspects of customary, socially correct behavior has seemed to regress or at times even disappear. From leaders in the highest offices to our most beloved celebrities, we can read about name-calling, blaming, threats, and even outright violence. Is it really surprising when these behaviors trickle into our communities and work spaces? In order to guide our communities in a more positive direction, it helps to identify uncivil behavior and lead by example. With a lot of deliberate, consistent effort, our positive behavior can become contagious.
We’ve all dealt with the outburst from a client or Unit Owner who doesn’t get their way and writes a dramatic email or says something nasty. It’s easy to dismiss them as unhinged, ignore all their future complaints and get defensive in these unpleasant situations. It’s important to be self-aware of these human tendencies, because it can lead to habits that will not serve you well. If you hide from the tough conversations, you might miss out on the opportunity to connect with others, learn from the interactions and grow. Even though it may trigger tough emotions to deal with the challenging client, confronting them can nip problems in the bud. You may even gain an ally! Start by making a conscious effort to put yourself in the strongest mental state so that you are best-equipped to deal with the inevitable challenges that arise.
Self-Reflection: Be cognizant of how much media you’re taking in every day and the influence it might have on you. The trend of constant media and social network notifications may work well for those who benefit from extra views or clicks, but excessive exposure might have an adverse impact on our thoughts, attention and behavior. Sometimes we expend so much emotional energy reading the news that by the time we arrive at work, we’re depleted. Disconnect from the breaking news long enough to focus on what’s most important, both personally and professionally. How is the information you absorb moving you towards your goals and who you aspire to become?
Empathy: Depersonalize the situation whenever possible. In more cases than not, the client isn’t yelling because of you but because of the situation. Think about what they might be going through in their personal life with the challenges in the world and take a deep breath before responding. You may be the only person who listens to them today. If you can, counter their distress with a calming tone and a thoughtful response. Will your undistracted attention for the next ten minutes save you hours over the next month?
Situational Awareness: Some of us have also noticed situations where someone makes a bold political statement to strangers or in the workplace, under the assumption that everyone agrees. I’ve seen it make others in the room very uncomfortable or outright angry. While it’s tempting to share your opinion about the latest piece of legislation in Congress, don’t forget to take note of your environment, your relationship to the listener and the possible repercussions. For example, if you’re getting interviewed for a job, you may not want to risk blaming a person or administration for the current events of the day. Even if the community is in a location where the demographics seem to point to a particular opinion, you don’t want to put your foot in your mouth later. Once you learn about the political or ideological leanings of a person, just remember to keep it professional at work.
Keeping these habits in mind can help us deflect and appropriately respond to uncivil thoughts and behaviors. Some other challenges that you may run into at work can be ameliorated by practical strategies.
Write it down: Some people’s stress shows up as aggressiveness, while others’ stress manifests as anxiety. Anxiety can cause us to start thinking selfishly or otherwise worry about possibilities that may never happen. When others come to you with concerns or hypothetical situations, fight the inclination to dismiss them as unrealistic. Instead, try brainstorming your concerns (or your residents’ concerns) and plan some possible solutions. The anxiety becomes less of an abstract idea to obsess over and more of a concrete problem you can solve. What are the pros and cons of each option? What is the worst thing that can happen and how can you mitigate it?
Set Expectations: In a world where we can get instant groceries, dates and packages with the click of a button, some people expect the same instant gratification of their community manager. Asking to “speak to the manager” has become an internet joke. For managers, it can often translate to copying the entire Board of Directors to an email. Unfortunately, some creative solutions require time to develop, especially if they are to last. If a problem will take some time to resolve, let the resident know the challenges you are considering. Provide an estimated time for completion or resolution and keep them in the loop of any progress.
Acknowledge opposing views: Things aren’t always black and white in community management. Nor can we predict the future. So it’s important to acknowledge counter-arguments even when they don’t fit the narrative we want to create. If you make a mistake, predict something wrong, or there are possible negative consequences of your recommendation, talk openly about it. How might you pivot your plans moving into the future?
It can be instinctual to tune out anything that requires extra time or energy when it feels like you don’t have any to spare. With everything going on in the world, our emotional state and the example we set may be the least of our worries. However, as a leader of your community, you are in a position to be a calming and positive influence. Small, deliberate interactions can accumulate and create real change. You may find that you not only save time in the long run, but you also get a little peace of mind!
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There are seminal moments in our lives and careers. One of mine was circa 1985. I bumped into a board member of a condominium for whom my maintenance company had completed some projects. The question she asked me that lovely spring day on a bustling city sidewalk 35 years or so ago changed the way I approached business and I am certain it led to both my entry and inevitable exit from the community management business… “Tom, how come we can’t find a good management company? Are there any of them out there?” My mind raced as I thought through the three they had fired, all of whom I thought were among the better companies that I had worked with as a contractor. I gave her a tactful answer, but one she did not expect to hear. More on that in a moment.
As a young entrepreneur, I had begun to immerse myself in the study of leadership. I started working with community associations a couple of years before that fateful exchange. I became fascinated by the dynamics of volunteer boards, their communities, and the managers who served them. A few short years later, in a joint venture with a management company, I entered into a contract to provide part-time, on-site management for a small condominium. Eventually, I left my business and dove into management full time for the next 30 years. I had the privilege of working with some great managers and boards. For much of my career, I was also the company’s designated “Fixer.” If it was messed up, my job was to find a way to make it work. Of course, I was not always successful, but it was the best business education I could have received. Along the way, I saw the great, the good, the bad, and yes, the ugly. Stepping away from the management business and working with clients from the community association field in a different capacity and in different markets has reinforced for me how unique communities can be. At the same time, I see common principles, fundamentals, and practices that produce results. So…here are eight characteristics that exist in the most successful and sustainable board/management company relationships.
1. Shared Expectations
The working relationship between a board and management company can be very dynamic and fluid. Times change, technology changes, society changes, people change, volunteers change, and properties age. These factors all may impact expectations. An agreement for management services provides a basis for expectation and accountability. It also needs enough flexibility to address the variables inherent in the relationship. COVID has been a testament to this. Who could have anticipated the workload and process changes that the pandemic would require? Agreement on contract terms and ensuring that these are in harmony with the board’s goals is crucial to a sustainable and successful relationship, which leads directly to our second characteristic.
2. Communication
In my management days, I would receive the occasional phone call from a board member along the lines of: “Would you be interested in sending us a proposal for management? Our company is horrible.” These days, the question is: “Can you help us find a new management company?” My first answer has remained the same. “Have you spoken to company executives?” Astonishingly, 90% of the time, the answer has been no! Changing management companies is a big deal. It can take far less time and effort to repair a damaged relationship than it would to make a change. Talk about it, set clear and reasonable expectations, see if it can be fixed. If not, then it’s time to move on, but not before.
Management companies can bolster the relationship by maintaining periodic executive-level contact with volunteer leaders, especially when the players change. This may be after annual meetings, changes in board liaisons, and any time there is a manager reassignment. Likewise, new boards are wise to get on the same page with the management team as soon as possible during these transitions. Don’t let the relationship fall off the rails!
At their core, business relationships are human relationships. Just like in our personal lives, we get busy, make assumptions, and don’t always get the message right. Communications suffer and issues fester. The electronic age makes this a bigger challenge. Consumer expectations for immediate gratification (the Amazon effect) have challenged all customer service industries. Businesses can rely so heavily on technology to gain efficiencies that they adopt a transactional mindset without realizing the negative long-term impact on the relationship. Zoom meetings are great for efficiency, but we miss the cues that the full human interaction experience provides. Tech and society will continue to change, but some things remain the same. Community management is a relationship business. Relationships require effective communication. And it needs to go both ways.
3. Mutual Benefit
All sustainable business relationships are mutually beneficial. A zero-sum game benefitting the client will inevitably lead to poor management performance. A company that can’t make a profit will fail. Historically of the real estate management niches (commercial, rental, and community associations), community association management is the least profitable. A review of the history of the industry and market pressures helps one to understand how we got here. The full story would be an article all by itself. The net result is that community association management as a professional field has become increasingly commoditized. Profit margins are always tight.
This can lead to the zero-sum game benefitting the company, which is likewise unsustainable. Unintentional service creep can happen slowly over time with managers and boards losing focus on contract specifications. A manager may lose focus of contract out of sheer work volume and when the board is unaware and seems happy with their performance. Regardless of intent, the reality of this situation is that the relationship is being abused and could end badly.
In the end, the old axiom is true. You get what you pay for. The logical corollary should therefore be that you should pay for what you get. Maintaining awareness of and regularly revisiting contract specifications for any adjustments to meet the needs of the community are the keys to ensuring mutual benefit.
4. Flexibility & Reasonableness
Great service companies will go above and beyond from time to time. Community management is such a dynamic field that a manager will inevitably see the need to do something technically outside of their scope. They want to make their clients happy and just take care of it. But there is a danger of an unintentional death spiral.
I’ve seen this play out many times. Management agreements typically include provisions to charge for work outside the scope of defined routine services. Many managers fear a negative reaction from clients and shrink back from noting that a requested service is a billable item. Sometimes, the assignment is completed and that’s that. Everyone is happy. But sometimes, the requests keep coming. The manager becomes overburdened. The task list gets longer and longer. The board grows increasingly dissatisfied, and the manager grows increasingly resentful. All the while, more times than not, the board has no idea that they are making unreasonable requests because the manager never said a thing about the contract terms.
When there is healthy communication about the best way to handle non-routine services, boards can make business decisions to allocate funds that allow the company to bring in the resources necessary to accomplish the task or facilitate service by an outside party. Reasonable boards understand that a set-price contract cannot be a blank check. (See Mutual Benefit and Communication)
5. Get Out of the Box
Fundamentals and time-tested principles apply to every relationship, but every situation is unique. One of the most valuable skills board and management companies can have is the ability to see things as they are and recognize when glue diligence (“that’s the way we’ve always done it!”) needs to be replaced by due diligence, which may involve finding a non-standard solution. This is where my experience noted in the introduction had such a profound impact. The board member who complained about perfectly good management companies didn’t have a performance problem. She had a system problem. She lived in a 27-unit condominium with a seven-person board and half a dozen or so active communities. Most unit owners were retired. I loved that community because it had such a remarkable commitment to volunteerism. If you lived there, you were on the board, a committee, or both. However, the volunteers had no context to see how much management work was being generated by all that activity. They were NEVER going to be satisfied with the level of time and attention a portfolio manager could give them under the terms and price of a standard management agreement. They needed to adjust the system, adjust expectations, or both.
Without analysis, we easily default to assuming that people stink. Just fire them and get somebody new. If you can’t see whether you have a performance problem, a system problem, or some combination thereof (usually the case to some degree), you’ll always be answering the wrong questions. Wise board and management companies invest the time to make the determination and have the creativity and flexibility to change the system if needed.
6. Clarity on Roles
The board’s highest and best role to benefit their communities will always be to lead. It sets the culture, goals, and standards for the community and its management. Everything a professional management company does can be grouped in one of two baskets – supervisory or advisory. Most boards have no problem rightly holding management accountable for the supervisory tasks it performs on behalf of and at the direction of the board. Highly functioning boards allow management to assist and guide as it fulfills its role. This allows the relationship to function at its highest level – as a partnership. This can involve helping volunteer leaders to translate strategies that worked in their professional or personal lives into the context of community associations and the statutory requirements, governing documents, and best industry practices that apply. Both parties may need to check their egos at the door: Board members might have to recognize the realities of an organization slightly outside their area of expertise, while managers who may passionately recommend a particular path have to recognize that the board is the boss and responsible for the decision.
Ideally then, as a leadership body, the board sets the targets (Why, What, and When), taking into consideration feedback and recommendations offered by professional management. Leadership gives management the resources to accomplish the resultant goals and delegates the details (How) to them. In that paradigm, management can focus on getting things done and reporting to the board. The board can focus on gauging results instead of getting bogged down in the process. For the board to stay out of the weeds and maintain a bigger picture focus, management must demonstrate competence and proactivity, and be willing to be accountable.
That said, there may be factors that make a certain level of “co-management” ideal. Communities that are blessed with volunteers who have subject matter expertise and time may allow them to successfully achieve more without having to pay more for management. Also, small associations suffer from the inequity of scale, requiring more time and attention than their management fees can reasonably command and making the co-management model more likely.
7. Get Things Done Without Being Pennywise and Pound Foolish
It is important to remember that a key role of a manager is to facilitate, not necessarily to do. A manager’s area of expertise is the administration of the community, governance, and business aspects of community associations. As such, they may maintain professional designations such as CMCA®, AMS®, PCAM®, and LSM®. If they were also credentialed professional engineers, insurance brokers, architects, or licensed lawyers, associations would never be able to afford them. Yet, some boards expect managers to provide opinions and services outside their area of expertise, usually to save money. Wise boards understand that there are times when bringing in specialists is an investment. Wise managers, especially those with high levels of subject matter experience, know how to leverage that knowledge and put their boards in a position to make good business decisions.
Managers may feel pressure to have all the answers and assume they are expected to have all knowledge at the top of their heads. As a wise man once observed, it’s perfectly acceptable to say, “I don’t know,” if it is followed by a comma and not a period. “Can I get back to you on that?” can be the best answer a manager can give at the moment. Wise boards allow space for a manager to provide accurate information. Wise managers don’t wing it. This leads us to the final, and perhaps the most crucial characteristic of great board/management company relationships.
8. Trust & Respect
I was thrilled to get an “Aha” moment when I was introduced to a principle that was so simple, so profound, and so applicable to community associations. The basic premise of Steven M.R. Covey’s The Speed of Trust is this: When trust is present, things happen quickly and cost-effectively. When it is absent, everything takes longer and becomes more expensive in the long run. Trust is everything. It underpins all the other seven characteristics. Boards need to trust that their managers are advocating for them and acting in their best interest. Managers and management companies need to trust that the board is dealing fairly and reasonably with them. Trust begets respect. Both are essential to any highly-functioning relationship.
Let’s Do This!
There is far too much negative media about community associations. Certainly, there are bad players out there, but I am proud to be part of a field where so many dedicated people are working to get it right. Whenever I hear a negative comment about boards, I always take the opportunity to share that my experience has been that the vast majority of volunteers I’ve worked with serve for all the right reasons. That is particularly impressive considering how many goofed-up situations I’ve been asked to jump into. The same goes for managers and management company executives. Those that stick with the industry tend to be incredibly dedicated professionals with a servant’s heart, qualities that are all too rare these days. When community volunteers and the professionals who serve them choose to fulfill their responsibilities in a collaborative way and to an elevated level, it has a positive impact on the quality of life and investment of every community member. And they put themselves in a position, not only to leave a legacy of success, but to enjoy the satisfaction of a job well done. It is always worth the effort.
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In our overview of culture in community associations, we noted similarities with other organizations, whether professional, non-profit, social, or familial. We highlighted that there are three primary classifications of organizational culture.
Like most other organizations, associations tend to fall into the “Unintentional” category. Time is a critical factor. More in-depth organizational analysis is most rare. Getting a volunteer board to meet for regular business can sometimes be a challenge. How about dedicating even more time to discuss values, vision, and mission? That might feel impossible. Let alone floating a full-blown retreat with team-building exercises.
You Can See Clearly from Higher Ground
And yet, when community association leaders invest the time to elevate the conversation, they find that it pays back in time and energy. Organizations create and perpetuate an effective and sustainable culture in which principled action is cultivated. Once identified, underlying principles lead to fewer ego-driven opinion battles. There is a context to the conversation. Healthy debate replaces unproductive arguments that suck the life out of the participants.
The result of such an elevated time investment sets up a principle hierarchy for decision-making that looks something like this: • Values (The Why – what’s important?) drive Vision • Vision (Where do we want to go?) drives Mission • Mission (This is what we are about) drives Strategy • Strategy (How do we make this happen?) drives Tactics • Tactics (The day-to-day actions we take)
Flow the hierarchy backward, and it looks like this: Our day-to-day decisions make more sense because we judge them in the context of our strategy. Rather than reinventing the wheel or exhausting all parties by going in several directions at once, our strategy is in harmony with our mission. We know what we are about and what we need to focus our energies upon. This is because we have vision. We know where we want to go, and our mission gets us there. At the bedrock of all of this are our shared values. Certain things are essential. We’ve been honest with ourselves and compared our reality with those values.
That all sounds lovely. It might also sound like a pipe dream. It doesn’t have to be. Combine realistic expectations with some practical steps and you’ll get there.
All or Nothing?
Do you need the whole package of values, vision, mission, and strategies to start your intentional culture? No! And that’s where most organizations get stuck. Wise leaders apply the sage words of Arthur Ashe: “Start where you are. Use what you have. Do what you can.” Like many things in life, the journey may be more important than the destination. Developing the habit of a higher level, principled thinking is the first step. From time to time, I will start meetings with a touch of comedy: “So who are we and what are we doing?” It sounds like levity, but it speaks to a bigger picture and sets a tone. Keep at it, and the baby steps will eventually add up.
So How Do We Do It?
There is no one right way. Every group and situation are different. Some need to rise from the ashes of disaster to get the motivation to do it right. Most need to look for opportunities, however brief, when they can poke their heads up out of the weeds to see what’s already there in front of them.
Baby Steps: It doesn’t matter where you start in the hierarchy. Can you agree on a “Statement of Values?” Great! One or two clear elements of mission? Please write it down. A Vision of what everyone would like to see? Awesome! If you have an agreement in one of them, it can lead to more later. If you stick with it, it will gel over time.
Practice Affirmative Inquiry: We’ve always said the Parrado Principle has a slightly different iteration in community associations. The ratio of people and issues that drive the corresponding amount of time and effort probably isn’t 80/20. It/s more like 95/5. Unfortunately, one of the foibles of human nature is that we will dwell on the 5% that divides us instead of the 95% we have in common. But what we have in common provides the most vital foundation for success. Get in the habit of asking, “What’s right?” instead of, “What’s wrong?”
Be Mindful and Seize the Opportunity: Listen carefully. Pay attention to successes. Look for patterns. Shared values are always there, waiting to be recognized. Some clarity on vision or mission may pop up while doing business. When you hear it, call it out. Record it somewhere, no matter how rough.
Here is a good, natural, non-confrontational question to ask at the right moment: “So I think what I am hearing is…. Is that right?” If heads nod, follow with, “I think we just found a (shared value/mission statement point).”
Annual Planning Sessions: This simple practice can make a world of difference. Scheduling a special meeting to discuss what you’d like to accomplish over the next year can be a terrific jumping-off point. The most useful time to hold this meeting is as soon as possible once a new board is formed after an annual meeting. You may start with strategy, but by applying the techniques above, you may find yourselves painting a bigger picture. After all, if you tell me what you want to do, I will understand what’s important to you. Once I know what’s important, values and vision begin to emerge.
Change Happens…Use It!
People change. Times change. Perceptions change. Understandings change. Physical realities change. Adopted governing principles must grow with the organization in order to remain relevant. To prevent these principles from becoming a nice and shiny, yet irrelevant plaque on the wall (a precursor to the dreaded “Actual Culture”, these must be reviewed and challenged regularly.
If you are already following our recommendation to conduct an annual planning meeting, include reviewing your principles. This is especially important as you are going through the baby step process. It may take years to clarify your values, vision, and mission.
Why Wouldn’t You?
The gap between intentional and unintentional culture is the wherewithal and commitment to finding and memorializing what’s already there. Every group has shared values. Vision and mission are waiting to be found. Taking the time and energy to identify them creates a foundation that your association can rely on when it faces everything from day-to-day challenges to major disruptions.
Clarity in culture reminds us who we are and what we believe in. It saves us from situational thinking, conflicting direction, and wasted time. Any action you take to transcend mere tactics adds depth to your association. It builds team trust, commitment, and fulfillment. All upside with no real downside – so get to it!
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The culture of an organization either creates the space for sustainable, defined success or makes it difficult, if not impossible. A healthy culture allows the organization to tap into the knowledge, talents, experience, energy, and intellectual capital of participants. It does not permit ego, politics, or dysfunction to get in the way.
In this context, culture can be defined as the environment that establishes norms of behavior for the people in the organization. It involves the connection between the goals and values of the individual and those of the group. Culture is embodied in author Seth Godin’s statement: “People like us do things like that.”
Organizational culture provides the context in which the stakeholders understand their roles and can concentrate on doing their best. Healthy cultures in community associations put boards in a position to establish desired results and provide the necessary resources to achieve them. Focusing on those results delivers rich payoffs. Building a healthy culture yields exponentially compounded interest in terms of time, energy, progress, and community spirit.
Culture is the difference-maker, and yet, community association managers and volunteers almost never talk about culture directly. It’s about time we did.
Three Cultures
Organizational culture tends to fall into one of three general categories:
Intentional Culture- Values, goals, and norms have been identified, codified in some form, and provide the basis for principled action. People in the organization are clear on “The Why.”
Unintentional Culture- Values, goals and norms are left to chance. Defining them depends on who the influential people are in an organization at a particular time. Frequently, decisions are made and actions taken on an ad hoc basis. Sometimes leaders focus on rules and written procedures without explaining why they matter. Other times, there is no focus at all. Everybody works too hard at reinventing the wheel or making it up as they go. If such a community is fortunate, things will go well riding on the backs of a few good people.
Actual Culture- Values, norms and goals have been identified. There may be mission, values, and vision statements with lofty aspirations printed on glossy marketing materials and plaques on walls. Yet, leaders and members of the organization violate those ideals on a regular basis without correction. The inherent hypocrisy of the organization destroys morale and trust.
Most organizations fall into the unintentional category. Their leaders may have no concept of culture or fail to recognize the benefits of the time investment necessary to build a successful one. They cannot see that the hard work up front will significantly decrease their time and effort in the long run. They are so caught up in the day-to-day operation that they miss the bigger picture.
What About Community Associations?
Why, specifically, do many community associations tend to have an unintentional culture? First, boards can be mired in tactics, too busy putting out fires and stuck in the weeds to elevate their perspective.
Second, exclusive devotion to the standard board meeting model can cause an unintended consequence. Leaders and managers are trained to follow the legal requirements for board meetings. They correctly conduct the association’s business in accordance with open meeting requirements and the standard meeting agenda. Well-planned and executed board meetings are highly effective in handling the day-to-day business of the association. However, regular board meetings are horribly ill-suited to address bigger picture issues, complicated projects, and strategic planning. These discussions will never fit into a standard board meeting agenda in the best of times. Switch it up by scheduling some town hall or special meetings to listen to what members have to say, get ideas flowing, and deal with big picture issues.
Getting to Higher Ground
Getting out of the weeds is not easy. Leaders and managers first need the awareness that business as usual leaves too much to chance. Then, they must recognize that the work to build healthy organizational culture is a time investment that will pay dividends. For some groups we’ve worked with, it took disgust borne from crashing and burning to motivate them to meaningful change. In our next segment, we will offer a roadmap to intentional culture for community associations.
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A recent blog focused on the unique challenges faced by small community associations face. The crux of most of the solutions offered was to provide access to the attention and resources typically available to larger associations.
But First, Let’s Talk About Beginnings
One of the biggest difference-makers in the success of all community associations is how they transition from developer to homeowner control. I had an eye-opening experience taking CAI’s M-370 class , “Managing Developing Communities.” It became clear to me that in many parts of the country, litigation and firing the management company soon after transition are foregone conclusions. I realized how fortunate I was to have come up in the Washington DC area where litigation is not nearly as common. I think there are a few reasons for this; (1) there are more lawyers per square mile in DC than in most areas, (2) those lawyers understand the true cost of litigation, and (3) the transition engineering study procedure has been embraced by boards and developers alike for a couple of decades.
I also found that creating a very transparent, community-specific series of orientation programs leading up to transition was hugely beneficial. When homeowners understood what to expect, understood the fundamentals of the community association concept and best practices, were fully aware of the requirements set forth in their governing documents and prevailing law, and understood the context of the roles and relationships of the developer, association, management, and individual members, things went really well. Another factor was working with developers who were wise enough to invest in set-up fees so that systems and personnel were in place and in concert with the product they were selling so that everything was in place when the first owner settled.
Managing developing communities is a LOT of work. However, doing the hard work up significantly decreased the workload on the back end. For a manager, there is potential for a considerable payback. There are few things more satisfying than being an integral part of successful communities. By the way, the company I worked for very rarely lost contracts after transition.
When these factors are not in place, much is left to chance. I noticed that some of the new clients we took over shortly after transition were working through chaos that could have been avoided had effective orientations and systems been put into place. The same was true for clients of the company I was working with when the programs were not put into place. I heard it from everyone from unit owners to the managers to accounting staff. Failing to prepare and execute upfront impacts everyone adversely in one way or another.
Back to the Little Guys
We saw the impact of inadequate transition practices early in Association Bridge’s history. We would get calls from board members from tiny condominiums two or three years after owner control. The small developers either didn’t know enough or care enough about association operations to set up the owners for success. Owners purchased with no clue, only to realize too late that they would have to deal with issues that in some cases should have been addressed by the developer. It was too late to do anything about that now and the unit owners were faced with significant financial burdens, magnified by the inequity of scale endemic of their situation.
I thought…What if we could find a way to give small associations the tools I had been providing my management company’s clients for over 20 years? Would it work?
An opportunity to test the idea came up in a conversation with Matt Cheney. Matt was the agent selling for a developer of Lanier Station, a 9-unit condominium in Washington DC. I met Matt a decade or so below when he was leading the sales team sat one of my favorite old clients, the award-winning Lionsgate at Woodmont Corner Condominium in Bethesda, Maryland. Matt lit up with the idea of replicating the Lionsgate model at Lanier Station and made the introduction. Sure enough, the developer, Pete Lambis. We truncated the program from three sessions to one and agreed to help facilitate the transition meeting.
We were able to help the owners prepare to assume responsibility for the operation of the condominium. We laid out various operational models for the unit owner board to consider. In the end, they remained self-managed with a full appreciation of their options and the systems they needed to put into place to get things started and maintain them. Their small investment got them off to a great start that will no doubt benefit owners for a long time. The model works!
A Bonus for When It’s Too Late
Some of the condominiums developed in Washington DC over the past 20 years were townhomes converted into condominiums or newly constructed small buildings. Many of them were not blessed with developers as wise as Mr. Lambis. Owners bought in with no concept of how to lead and manage a condominium, much less with an understanding of the association’s rights or developer responsibilities. By the time the fecal matter hit the fan, they were faced with significant financial hardship.
An innovative solution comes courtesy of Don Plank, Assistant Vice President at National Cooperative Bank. As Don and I were kicking around deep concepts one day, we noted that very small condominiums in distress usually do not have the option their big brothers in condoworld have. They will never be able to qualify for a loan. Suddenly, the proverbial light bulb appeared over Don’s head. “You know, the best thing one of those tiny condos could do would be to re-organize as a cooperative.”
There are legal hurdles to terminating a condominium regime, but this may be a rare time when small size presents a large benefit. Getting mortgagee approval could be tricky, so working with a lender who can write both underlying cooperative corporate mortgage and share loans could help. Unit owner approval to dissolve and re-create the legal entity would likely be a nearly insurmountable challenge for most associations. But with fewer owners to corral, reorganization may well be the best option if a small association is facing oppressive and unfunded capital projects. Working with a qualified lawyer, banker, and project manager, creating a new cooperative with an underlying mortgage would help to defray major expenses over 30 years. Legal costs could also be wrapped up in the loan proceeds. It’s just crazy enough to work! Don is a genius!
Creativity and Innovation
Business as usual can be the death of success. Small associations need creative solutions. We can learn from enlightened developers like Mr. Lambis and original thinkers like Mr. Plank. Community members in small associations will benefit. Success and excellence are possible. Let’s make this happen!
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For various reasons, many managers fall short in this area. They are in reactive mode much of the time. Acting without planning quickly creates a vicious cycle of rushed response and crisis triage. Many never learn the secret of slowing down in order to speed up.
It’s no surprise then, that many of the annual calendars (a.k.a. “management plans”) in use tend to be less than complete and not always user-friendly. An effective calendar identifies as many controllable activities as possible. It breaks down those activities to specific deliverables. It creates a mechanism to track activities and proactively plan for upcoming events. It is a tool to analyze the workload and make adjustments. It promotes accountability and communication. Creating and implementing a detailed annual calendar will make you the Coach Wooden of community association management!
Manager par excellence Karen Harris, CMCA, AMS, of the Old Georgetown Village Condominium in North Bethesda, Maryland, began utilizing a detailed annual calendar 16 years ago. She notes:
“The annual calendar system is a comprehensive management tool that enables the manager to “manage.” It initiates the planning and discussion between the Board and Management at the beginning of each year, giving everyone the data and participation necessary to promote buy-in.
With an emphasis on organization and goals throughout the year, it keeps management on track, prompting action instead of inaction. In the field of property management, unexpected emergencies always pop up. If you are on top of everything else, you can minimize overall stress. Sitting in the driver’s seat is the best place to be whenever possible.”
Note: This blog is geared towards managers, but a detailed annual calendar can be hugely valuable for volunteer leaders of small and self-managed community associations. In addition to the benefits noted above, the calendar memorializes processes and supports continuity of services as board members change over time.
Yeah, but…
Buying into the concept can be a challenge. It is a lot of work up front. And it requires accountability.
10 Reasons to Use a Thorough Annual Calendar and Include it with Status of Items Noted in Every Management Report
1. You will save time by being more efficient – no time wasted on fixing errors and communicating embarrassing problems. 2. You will rush less, thereby greatly improving the quality of your work. 3. You will have the confidence that you have more things under control. 4. You will have less stress and worry. 5. Your clients will have more confidence in you. 6. You will reduce the potential for unnecessary expense. 7. Your rear end will feel better. (Since you won’t forget important events and deadlines, those things can’t bite you in the butt!) 8. You will control your time better. 9. You will set yourself apart from the pack. (Most managers in the industry do not do this). 10. You will have a clue why you do what you do – once you embrace the concept and use it as a tool, everything makes more sense and a whole new world opens up to you.
Busting Four Commonly Held Myths
1. Myth: “I don’t have time.” Reality: If you don’t have time to do things well now, when will you have time to do things poorly later? Reality: Planning properly and executing a plan saves time because you are far more focused and efficient than when you wing it and perform tasks randomly. Reality: Successful managers learn to recognize the difference between a time investment and a time expense.
2. Myth: “My clients don’t care – they don’t read my reports as it is.” Reality: Even if they don’t read it after the first time they see it, no client has ever failed to be impressed when first introduced to the concept.
3. Myth: “If I tell the client everything I plan to do and for some reason can’t deliver, they will hold me responsible. What they don’t know won’t hurt them or me.” Reality: Whether the client holds you responsible or not, you ARE responsible. Some think being held responsible is a bad thing. Reality: If you keep winging it, it’s only a matter of time before you will be held responsible for a major error because you failed to plan – better to be held accountable for little things if they don’t go 100% according to plan. Reality: Your client will find your willingness to be accountable and honest refreshing. They will trust and respect you for it.
4. Myth: “If I give them all that data, the Board meetings will take longer and they will nag me about everything.” Reality: The first meeting or two might be longer, but you will find that because they know you have things under control, the meetings are shorter…and they get OFF your back.
OK! I’m a believer… now what?
When is the Best Time to Create or Review a Calendar?
1. When you take over a new client from another company or manager (helps you to learn the property QUICKLY)
2. Right after a budget is adopted and while you are completing your 12 month spread (helps you merge the physical and administrative plan with the financial plan)
What do I Need in Front of Me to Build my Calendar? 1. 12-Month budget spread 2. CC&Rs or bylaws 3. Policies that might impact management activity (ex. ARC) 4. Contracts 5. PM schedule (if it exists…and if it doesn’t, make one!) 6. Annual meeting file 7. Anything from the files that helps you to identify when things are to happen at the community (paid bills, etc)
The 10 Steps to Success
Step 1: Identify the tasks you can control and do routinely, and those tasks and projects that are on the plate this year in the following areas:
Step 2: Identify the steps you need to complete each task
Step 3: Identify deadlines and decide during which months these tasks should be completed – work backward from deadlines (ex: contract award process).
Step 4: Draft the plan on a chart in a format that allows you to see the total picture and how tasks relate to one another
Step 5: Review the plan and adjust the timing of events as possible so that you don’t overload yourself.
Step 6: Roll out the plan in the next management report. Let the Board know their input is appreciated and that the plan will be adjusted if needed as time goes on.
Step 7: Schedule time to review your plan during the month, verifying you are on task in the current month and prepared to handle next month.
Step 8: Mark completed items in the chart to track performance and include in the monthly management report.
Step 9: At the end of the year, analyze performance vs. plan, learn from the past, and adjust the plan or your performance as necessary.
Step 10: Enjoy the benefits of being a truly professional manager!!
Means & Methods
Any plan is better than no plan. Annual calendars or management plans exist in various forms ranging from lists by month to tasks plugged into Outlook or Google Calendars. To achieve all the goals outlined above, it is most helpful to have one master document. To find a sample and template you can use, we’ve placed a link on the Association Bridge website for you. Look for the Samples You Can Use! box.
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Association Bridge was formed in large part due to my experience teaching CAI’s old “Essentials” program for community association volunteer leaders. Ken Ingram of Whiteford, Taylor & Preston and I were tapped to teach the full day program for a few years at Reston Association. RA member associations are typically very small communities known as “clusters.” By the early 2000s, some of these small associations were facing some serious challenges. The class gave them access to resources that board members in larger associations would probably take for granted.
I will never forget hearing a board president proudly explain his excellent system for keeping the books for his cluster.
“I use different color ink in the checkbook.”
“Oh, you mean to help identify different types of expense and income or something?”
“Well yeah, kinda…”
“OK, can you share the system with the class?”
“Sure. You see, everything in green ink is cluster activity, and everything in blue is mine…”
“Yours?”
“Yeah. That’s how I can easily separate the cluster activity from mine in the account.”
“Wait, are you saying you collect your neighbor’s fees, deposit them in your personal bank account… and pay cluster expenses from the same account?”
“Well…yeah.”
Yikes!
Time & Attention
Teaching the class was an instructive experience. Board members were searching for creative ways to get two things all community associations need if they are to be managed effectively – time and attention. I frequently heard the refrain, “Our management company doesn’t do ANYTHING!” Without fail, some follow up questions revealed the boards weren’t paying for very much of anything. Some gave up and went fully self-managed. They were doing a lot of work themselves to make up the difference between what they wanted from management and what they felt they could afford.
It reminded me that small associations have to make tough choices, all borne from the inequity of scale. Certain costs simply do not scale. Managing a 20-unit building will likely require the same number of site visits as would a 150-unit building. The time required to create board packages, produce monthly financial reports and attend meetings will not scale to the unit count. Neither will the costs of independent audits or reserve studies. This can apply to capital projects as well. A 3-story high rise and a 10-story high rise could have the same building footprint, meaning that the cost to replace their respective roofs may be about the same. Bottom line: Inevitably, unit owners in small condominiums are very likely to pay more per unit in total fees than their counterparts in larger condominium associations.
As a result, boards of smaller associations frequently opt for less service, requiring investment in the time and knowledge base of volunteers to make up the difference. That burden can be very difficult for volunteers.
There may be solutions that require some creative thinking. While I applaud the resourcefulness and sense of duty shown by the board member who co-mingled personal and association finances, I pray he never gets in a beef with a fellow unit owner. That association clearly did not have any crime coverage. I doubt they had proper directors & officers liability coverage, either. Not all creative ideas are great ideas.
What Can We Do?
The goal is to identify the needs and wants of the board and membership, and then design a plan that is in harmony with them. It is a mistake to assume that small associations can’t afford “good” service. Such thinking is a variation on the sin of fee targeting. Many a community has found that a cheap price results in a high cost later on. Whether it comes in the form of making up for deferred maintenance, the bottom dropping out of resale values, disengaged unit owners, or dissatisfied residents, sooner or later everyone bears the cost of short-term thinking.
Analyzing the Operation
A Responsibility Grid is an excellent tool to help see where you are and where you have gaps. First, list the tasks involved in operating the association along the left margin to create rows. Then, along the top of the page, create columns by listing the volunteers and paid personnel or contracted parties who have roles in the operation. A sample grid you can use can be found HERE.
Once the tasks and responsible parties have been listed, fill in the grid boxes, describing each party’s current role in each task. Soon, you will have a snapshot of the operation, seeing the interrelation of the parties involved. This frequently leads to Aha! moments. We’ve noticed that many Boards have a tendency to assume most issues are performance problems. The Grid helps to reveal weaknesses in the system, allowing everyone to differentiate system problems from performance problems. The Grid may point out that someone else in the organization is better suited to take on a certain responsibility. Or you may find that some tasks aren’t being performed at all under the current system. Once clarified, performance issues can be more effectively addressed.
The trick is to use the Grid to address system problems by making adjustments. The context of seeing the operation in totality helps the board to identify areas where more support is needed. You can redline the grid until it makes sense. It takes the guesswork out of the picture, communicates responsibilities with clarity, and increases the likelihood of finding successful solutions. The final grid can then be a tool to adjust contracted specifications and position descriptions as needed.
What Are The Options?
Many contracts are designed to be “competitive” without regard to the actual workload required for the job. Standard “full service” management may not provide the required attention needed to support volunteers in your specific case. Some approaches to bridge the gaps include:
Customizing the management agreement to provide more attention in specific areas. Quantify time and attention where possible. If a minimum weekly site visit and monthly or quarterly property inspection with written report will address many of the issues a community is experiencing, include those as specifications in the management contract. Set the expectation and create a system that takes some of the burden off the shoulders of volunteer leaders. It may be that some specifications can be decreased to help compensate for additional cost, such as decreasing the number of board meetings attended.
Decrease the management contract to “financial-only” or “financial-plus” service levels to free up assets and redirect them to on-site management. This is where it gets creative. I cut my management teeth as a part-time on-site manager for five different associations over the span of ten years. Two of them had fewer than 50 units. All of them had something in common. They were all too small to justify full-time, on-site management, but too busy to be well-served by off-site management.
Adjust the scope of the management contract to dedicate a specific allowance of time. If the management company is willing to consider an out-of-the-box option, they could provide more attention by defining a number of hours per week for dedicated attention, including on-site time. Some management companies in the northwest use this model.
It takes a village. Depending on the configuration and condition of the property, a combination of services might make sense. Perhaps the volunteer base is strong, and you can engage management on an a la carte basis to provide only the services needed when you need them. Perhaps you just need a management company or consultant to set up the annual calendar and preventive maintenance programs and come back to audit the system periodically. Perhaps a maintenance position can be beefed up with a system to provide valuable eyes, ears, arms and legs for Management and the Board. Perhaps strategically scheduling a contracted annual architectural and engineering inspection to coincide with the annual budget process combined with “financial-only” professional management gives the association the best bang for the buck. The possibilities are endless.
In the End
The quality of volunteer leadership will always be vital to the success of any condominium association. The smaller the association, the more important this is. Smaller associations have special challenges. Even volunteer leaders who have the time and talent to assume certain management roles are wise to seek resources to set up systems and find best practices. National organizations like the Community Associations Institute and the National Association of Housing Cooperatives can be very valuable resources. Associations in the Washington Metro area can tap into additional resources such as the DC Cooperative Housing Coalition, the Montgomery County Office of Common Ownership Communities, and the Office of the Virginia Common Interest Commission Ombudsman Small associations may have special challenges. But they don’t have to give up, and they don’t have to settle. There are resources and options for volunteer leaders to provide quality service to their members. It may take some creativity and a realistic view of the expenses related to inequity of scale, but it can be done.
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In Management Insider #4, we encouraged management companies to provide their managers with tools and support to help them communicate with their clients. This is especially important for newer managers who may not have had the opportunity to grow their emotional intelligence or general business acumen at this point in their careers.
Getting challenged by a client about your company’s practices or business model can be source of considerable anxiety, even for the most seasoned managers. A knowledge of contract specifications, the company’s business model, and business fundamentals can help a manager address challenging situations successfully. These interchanges can either go a long way in building and maintaining confidence and trust, or they can sow the seeds of distrust and discontent. Preparation is everything. And a little practical strategy doesn’t hurt, either!
Don’t Assume They Know
Clients want stuff done. The details are less important, like whether the work being requested is included in the scope of the management contract. Managers must be aware of their contractual responsibilities. But don’t assume the client is aware of them. Nine times out of ten, there’s no evil intent, just a lack of awareness.
The manager’s job is to communicate reality tactfully, yet clearly. The first answer should not be “no.” It is much better to agree that this task needs to be done, and then communicate the options to accomplish the task, even if that means additional billable hours.
Managers must also be aware of their limitations. They are not licensed to practice law. They are not trained as professional engineers, nor are they CPAs. True, managers may have high levels of expertise in certain areas, but they still cannot assume the liability that comes along with accepting responsibility for every task. Yet, clients may not be aware of this these distinctions. Our favorite line: “I would love to take care of this for you, but I don’t think you could afford me if I had a J.D, a P.E., or a CPA.”
Remember, the manager’s key competency is finding a way to get things done, not necessarily doing everything. Clients may forget that from time to time.
Be Prepared to Explain the Model
Helping managers to explain basic business concepts as applied to the management agreements can be useful to help everyone to get on the same page. Clients may raise an eyebrow about reimbursable and extra charges over and above the base management contract. The reality is, there are a few ways to approach pricing to get the compensation needed to run a company.
Imagine a contract for a repair where every condition cannot be known, such as façade renovation for a high rise building. The contractor has two basic options. He can provide a price based on specific quantities, plus line item pricing for specific repairs in the event the final quantity is greater than the base contract. From the client’s perspective, there is a risk the final cost will be more than the base contract. At the same time, they will only pay for the services that are provided.
On the other hand, if a client demanded a set price contract with no possibility for extra charges, the contractor will have no choice but to bid high to account for worst-case scenarios in order to provide a set price. While the client will know what their exposure is, they may well be paying for services not received.
Management contracts are similar. There can be many variables in the operation of an association. Long meetings, extra meetings, major project administration, and insurance claims can require significant time and effort. And yet, they may not happen. Special assessments, bylaw revisions and the like will require much more copying and postage expense than would more typical operations. Asking a management company to eat these costs is as short-sighted as asking a contractor to do work for free. Neither will be in business very long.
Under pressure, managers may respond defensively to questions about so-called “extra charges.” This is a natural reaction. Unfortunately, it also undermines both their and the client’s confidence and may begin to erode trust. Helping a manager to prepare for the question and to explain the business model can avoid unnecessary conflict and maintain the relationship.
The Zero Invoice
My mentor taught me about the power and utility of the “Zero Invoice.” The strategy is simple. When the manager performs a task outside the scope of the base management contract, an invoice is generated in accordance with the terms of the agreement. Let’s say a board meeting lasted four hours, and the contract allows for a maximum of two. Let’s say the contract calls for an hourly rate of $75 per hour. The invoice would clearly show the billable hours, but also include a notation of a courtesy discount of $150, resulting in a net due of $0. It could be either emailed to the board or included in the next board package as an informational item.
This is brilliant for a few reasons. First, it establishes or reinforces the value of the manager’s time. Second, it informs or reminds the board of the contract terms. As such, it can be issued after the manager provides advance notice, or as a tool to be that notice. Finally, it creates space for a healthy discussion to plan moving forward.
It’s About Trust
When trust is present, relationships thrive. It takes time to build but is all too easy to lose. Fair or unfair, perception is always a major factor. Little interactions make or break trust, and eventually, relationships.
Training portfolio managers on the technical competencies of the job is critical. Preparing them for real-world business questions can be just as important. Get both right and build trust. Fail to do one of them, and trust may be eroded. Build up your people, build trust, and strong client relationships will follow.
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Taking the human factor out of business can cause problems. Big problems.
What’s Going On?
There’s been an interesting trend in recent years in the Washington Metropolitan area. DC has a significant and growing number of community associations with on-site managers. Often, boards of directors have control over their compensation. The manager may be an employee of the association or of the management company as a pass-through expense.
On-site manager salaries, on the whole, have risen fairly significantly. Many boards seem happy to increase their budgets for salary increases. They may award year-end bonuses to recognize excellent service. Historically, community association managers have been generally undercompensated as compared to commercial and “residential” (rental) managers. So this direction is welcome and will help to attract and keep talent.
Interestingly, those same boards may be considerably less inclined to negotiate meaningful increases in management company fees, even when they are pleased with the performance of their portfolio manager. They know that the market is very competitive. Cheaper services are almost always available. This is a major factor in the commoditization in the management industry. The race to the bottom of low price can easily result in the failure cycle described in a recent blog on the subject.
So What?
There is a disconnect here. How can a company adequately compensate their managers and other personnel when they are unable to collect fees sufficient to do so? Clients set themselves up for portfolio manager and support staff turnover and never see their role in the problem.
Another result of all this over time has been that that portfolio managers are often supervising on-site managers who are frequently better compensated than they are. Things are upside down.
I saw this play out first hand. While working for my last management company, I served a portfolio of clients. As memory serves, when I left last year, my shortest client relationship was a little over 10 years. During contract renewal negotiations, two of them required that I be named specifically in the management contract. Yet, in one of those cases, they successfully negotiated a three-year contract with no increase in year one, and minimal increases in years two and three. With another client, we had an annual ritual every budget season. The Budget Committee Chair would semi-humorously express shock and horror at the thought of any proposed increase in management fees. Then he would say it was the management company’s problem to find a way to give me a raise. Fortunately, my other clients did not follow suit and were happy to pay reasonable increases for quality work.
Make It Personal
The lesson is this: When a person gets paid, there’s a direct correlation to value. When a company gets paid, the correlation gets lost. It gets corporate and theoretical. It stops being personal.
This is why some associations and wise management companies migrate management on-site where possible. With enough brains on-site, an association may not need redundant services or additional supervision (a.k.a. “full service management”). In this business model, management companies may sometimes generate less gross income, but their exposure to uncontrollable workload is mitigated. So while gross income may be less, the percentage of net profit increases. Done well, these contractual relationships can last longer than stressful, low profit, full service arrangements. The clients have more resources to compensate great on-site personnel who can best serve them. The key word here? Relationships.
But What if Full-Time On-Site Management Isn’t an Option?
There are other ways to establish healthy relationships, make it personal, and reinforce the cost/value connection. It might take a paradigm change and some creative thinking.
Option 1 – Dedicated Single Site: If a community does not have the facilities for an on-site office but the workload justifies the attention of a full-time or near full-time manager, assign a single manager to the property. Establish an office at the management company or nearby location. Don’t let logistics get in the way. Mobile apps and laptops make it possible to do a decent amount of work without formal office space.
Option 2 – Hybrid Approach: If an association has the logistical capability for an on-site office but not the workload to require a full-time, on-site, consider a hybrid approach. This was the model I created when I managed my first clients. I had either three part-time, on-site arrangements. I worked out of either two or three on-site offices on a standard schedule, subject to change in cases of emergency. I had to track my time and activity so that the clients knew they were getting what was promised. Time dedicated to each client at a base of operation on-site created a relationship of trust and accountability that I could not have achieved as a portfolio manager operating from offsite office. That was 1991. Cloud computing and other technology should make this option more viable now.
Option 3 – Quantify Portfolio Work: There is a solution for smaller associations that do not justify exclusive personnel or an on-site office. In some areas of the country, there is a management contract model that helps to quantify the work and foster a respect for it. In this model, fees are split into two components. Base financial and administrative services are one component. The other component is based on an estimate of management and administrative time dedicated to the service of that client each month. Quantifying the workload creates dialogue and opportunity for adjustments as needed. Of course, this requires that affected management company personnel track their time accurately and communicate the results with the client. An annual review creates the groundwork for a healthy, working partnership.
Sometimes It’s Simple
There may be missed opportunities to help clients appreciate the value of a manager’s time within the typical, set price management contract model. All set price contracts are based on an estimate of workload and contain a set of specifications to match. A client would never hire a contractor to paint their house and expect them to throw in the garage for free after the deal was done. Yet, frequently managers do not charge for extra services outside the terms of a base management contract. Failing to recognize and charge for billable services will ensure a manager’s time and value are neither fully appreciated nor respected.
There are typically two reasons for this: (1) They are unaware of the terms of the contract, and (2) they fear they will anger the client if they charge. First, management companies need to make sure their managers are aware of contract terms and communicate them in advance with clients. Then, they may need to give managers the magic words and support to help the clients understand the rationale behind the contract model. Help them communicate that they are not trying to “nickel and dime” the client. They are simply charging for time and effort not anticipated in the base contract. The service has value.
Remember the Goal
Whatever the solution, the ultimate concept is simple: A client should get what they pay for and pay for what they get. That means they must have an understanding and appreciation for the value of services provided. There must be a connection between cost and value.
All enduring business relationships must be mutually beneficial. Zero sum games have a short half life. If the status quo isn’t working, blow it up and find a better solution. In the end, everyone wins.
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Excel is a useful format for budgeting. It provides flexibility in formatting, line items, and data. When the formulas are set up for you (like they are in the template), it can also help to maintain some of the disciplines we discussed in the blog series. For instance, the “Proposed” column in the comparative worksheet is set to maintain a balanced budget. The fee income line item will automatically change anytime you change an expense or other income line item. This helps you to maintain discipline and resist the urge to fee target.
Use What You Need, Chuck the Rest
The template may include more than you need. It is a workbook of two linked worksheets. Don’t worry if you are not an Excel whiz. If you don’t want to use the narrative worksheets, don’t use it. The comparative worksheet can stand on its own in conjunction with any narrative or other supporting materials you already use.
If a line item or expense category doesn’t apply to your association, leave it at zero or delete the row(s). If you do delete or add rows, just make sure you adjust the formulas in the subtotals or totals as needed.
How to Use the Template & Write Your Budget, Step by Step
1. Preparation – A Few Tips
Gather everything you need in advance. This may include the latest adopted budget and narrative/line item explanations, contracts, proposals, most recent financial statements, most recent audit, reserve study, utility usage information, and wage and benefit information.
This is a good time to collaborate with those who serve the association. Think through and discuss potential projects for the next year with your business partners and professional service providers to get realistic data to plug in.
Try to schedule uninterrupted time blocks to complete the work.
2. Populate The Comparative Worksheet
Take your financial statements and edit line items in the template to match the format of your financials. We’ve included some typical line items and spaces to add others. All the total and subtotal cells have formulas plugged in for you already. Hint: Don’t plug data into the cells shaded in yellow – that’s where formulas have been plugged in for you. If you add or delete categories or line items, you may need to edit the formulas in the affected totals and subtotal cells. It may take a little while to set up, but it makes everything easier when you start plugging in the data. We’ve even created a column where you can also include general ledger numbers for each line item if you like.
2019 Adopted Budget Column: Plug in the data from the budget.
Audit Column(s): Plug in the data from your last audit or audits if you choose to include multiple years. Hint: The audit may not have all the line item detail included in your financial statements. If that’s the case, get the Adjusted Trial Balance from the auditors. That will have all the line items.
Year-to-Date Column: Plug in the data form your financial statements.
Projected Column: Take the year to date figure and add what you think will happen for the rest of the year.
Woo hoo! You just helped to take a snapshot of the past and present. This will help you budget for the future.
If you are NOT using the narrative worksheet, populate the Proposed Column, taking into consideration the historical information and all current information. We strongly recommend the use of a detailed narrative, but you don’t have to use the template. If you would like to use it, go to Step 3.
3. Populate the Narrative
Format the line items and categories to match the comparative worksheet.
Time for brain work. Describe each line item as best you can. The worksheet includes some samples you can use if you wish, including a calculation of the percentage fee increase.
Review the description and the history for the line item shown in the comparative worksheet, and input a dollar figure considering everything you know. Hint: The narrative line item values are already linked to the comparative worksheet. If you plug values in here, the Proposed column on the comparative worksheet will populate automatically.
The template includes space for calculations you can plug in to make sure you are calculating things like contract escalations correctly. You can just cut and paste the sample provided into as many line items as makes sense.
5. Take a Step Back: Take a break, and take a look at the draft with fresh eyes. Edit as needed.
6. Roll It Out: Presentation and communications will be important from here on out. A few tips for doing so are available here.
7. Final Tip: Once the budget is adopted one of the last steps will be completing the 12-month spread that will find its way into next years; monthly financials statements. Make sure the spread is in line with the plan described in the budget. If you’ve done a solid job writing your narrative, calling out notable expenses and detailing contract escalations, this will be easy.
Congratulations! You are now a certified budgeteer! Welcome to the club and best wishes for a successful budget season.
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