Category Archives: Cooperatives

Best Practices, Budgeting, condo associations, Cooperatives, HOAs, long range planning, Reserve Studies, Strategic Planning

14 Things Your Reserve Analysts Might Not Tell You – And It’s Not Their Fault (Part 3)

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Two weeks ago,,  we shared five focus points to help you analyze property components. Last week, we offered another five, which were practical considerations to discuss with your reserve analysts in order to estimate project expenses as accurately as possible. To recap, we’ve covered:

1. Engineering Study for Stuff You Can’t See
2. Elements Impacted by Code Compliance
3. Piping Systems
4. New Construction Technology
5. Underground Piping and Wiring
6. Project Design & Management Expense
7. Logistics for Limited Access Projects
8. Collateral Damage
9. Items Outside Study Period
10. Strategic Improvements

We close out the series with the last four nuggets. These cover areas where the Board has a level of discretion and help you deal with some thorny cash flow issues.

11. Interior Renovation Upgrades: Interior renovations can take many forms. If you don’t tell your analysts what you have in mind, they are left to guess. For instance, I helped one client to plan for wallcovering, painting and lighting that would last through two cycles of carpet. In another case, the whole lighting plan was to be revised. That specific data had to be plugged into the reserve study.

12. Alternative Funding Options: If the community is behind the ball financially, debt service, special assessments, or a combination of the two might be options to consider. Clarifying the Board’s authority to do either and strategically planning to communicate options to members are absolutely crucial. This will no doubt be the subject of a future blog. Your reserve analysts should be able to help you to run “what if” scenarios, but you are going to have to tell them what those options might be.

13. Big Trees, Drainage & Other Landscaping: I’ve heard arguments that greenspace does not belong in reserve studies. However, mature trees and landscaping can be really expensive to remove, not to mention replace. Over time, surface drainage can become ineffective and might even lead to flooding. A review by an arborist, landscape designer or architect can be a real eye-opener. You can consult with your reserve analyst and auditor to confirm the appropriateness of including such items in the replacement reserve. If it gives either of them heartburn, you have an option. See #14 below.

14. Major Periodic Maintenance: I regularly see five-year electrical panel and switchgear maintenance in reserve studies. I even see the cost for future reserve studies in some reserve schedules. Even though these expenses may not pass the test as a reservable component, it makes sense to flow the funding evenly from year to year. Including such expenses in the operating budget could have significant impacts on fees. The fact that it’s on a schedule and in the financial plan helps Boards to maintain the discipline to actually tackle these vital projects. Depending on the property there might be other major periodic maintenance that is just as vital and has a similar financial impact. Hydro-jetting of plumbing stacks and laterals, dryer duct/vent cleaning, HVAC duct cleaning, and chimney inspections and cleaning can add up. There may be a couple of approaches to consider. If the property can be divided up with a portion of the work done each year, it would flatten out the expense. But if that’s not feasible, you might ask the reserve analyst to include such projects in the study. If the analyst (or the auditor as noted in #13) or the Board is uncomfortable with that approach, there is an option. You can create an operating reserve, set up a schedule of expenses, and calculate a monthly contribution to that reserve in the same manner as the replacement reserve. This will make sure the money is in the bank, keep you from deferring critical preventive maintenance, and even out the financial impact on association members.

Who & When?

We’ve identified a number of capital projects that may require additional professional support to properly plan and estimate replacement costs. Investing funds up front to work with a qualified, structural engineer, mechanical engineer, construction manager, construction estimator, project manager, elevator expert, fire protection system engineer, architect, or contractor can significantly mitigate the possibility of unhappy surprises and create a realistic funding plan. We’ve identified a few areas where legal and audit advice is advisable. Making this a point of discussion with your reserve analyst will help. Some firms that provide reserve studies are multi-disciplinary and may have some of these resources in-house.

The optimal time and depth of study will depend on the projects themselves. Hopefully this series has helped you to take a hard look at the components in your reserve schedule, do a risk analysis and take the holistic approach described in last week’s blog. Once you’ve identified elements that may benefit from further analysis, check the timing. Early on, perhaps you can get some inexpensive thumbnail estimates (hint – plan for the worst, guess high). If you are getting to within about five years of a large project, it might be time to make a more significant investment and hire specialists to take a deeper look. The more complicated the project, the more important this is.

Bottom Line

A truly comprehensive reserve plan can make all the difference in the financial health of a community association and the quality of life of its members. The reserve study is a tool. Your reserve analysts are your partners. See the bigger picture. The better the data, the better the study. The better the study, the better the plan. The better the plan, the better the execution of the plan. The better the execution of the plan, the better the community.

Best Practices, Budgeting, condo associations, Cooperatives, HOAs, Reserve Studies, Strategic Planning

14 Things Your Reserve Analysts Might Not Tell You – And It’s Not Their Fault (Part 2)

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Last week’s blog offered five focus points to improve the accuracy of your reserve plan. Nuggets 1 through 5 help you analyze property components. This week, we share nuggets 6 through 10. These are practical considerations to discuss with your reserve analysts in order to estimate project expenses as accurately as possible.

These all come from my experience working with clients through the years. In some cases, I noticed a disconnect between plan and execution. In their planning process they dutifully used the expense listed in their reserve study. However, once the project got going, additional necessary expenses that were not anticipated in the study were funded from replacement reserves. This made it appear that the projects were over budget, resulting in weeping and gnashing of teeth, not to mention death glares in the direction of their reserve analysts. The truth was that these projects were not over budget, rather they were under planned. In other cases, under planning occurred when clients failed to take a bigger picture or strategic approach to planning projects. The lesson is clear: The more accurately you can see the future, the better the odds you can get there.

Clients who implemented this week’s nuggets planned more realistically and utilized reserve funds to the maximum benefit.

6.  Project Design & Management Expenses: Wise associations elect to engage professional engineers, architects, and/or project management firms to develop specifications, facilitate the bidding process, and provide quality control for major capital projects. Depending on the nature and size of project, the investment can be in the neighborhood of allowing 10% to 15% of the total project costs.

Lately I’ve been encouraged to work with boards that understand the impact of major projects on their management team. Projects that impact residents in an intense way take human resources to make sure they run smoothly. Hiring additional staff or a professional project manager can make all the difference between a great project and one that sucks the life out of every resident, board member, and team member. Too many associations ignore the fact that without that support, something will give – the quality of the project, the quality of day-to-day operations, or both.

Reserve studies may not anticipate any of these expenses. You may need to direct that they be included.

7.  Logistics for Limited Access Projects: If something is hard to access, it’s going to be more expensive to replace or maintain. Sometimes A LOT more expensive. Getting a handle on those costs can be crucial to estimating the total price tag of a project. A cooling tower on top of a 27-story high rise is going to cost exponentially more than one on the ground floor. If a building elevation presents challenges in accessing a roof, the costs of roof or gutter replacement and periodic major maintenance on components like soffits and trim go way up. Contractors and construction estimators can be lifesavers in helping to avoid some gnarly surprises.

8.  Collateral Damage: This can be a tricky one. Technically, the association may have limited or no responsibility for replacing unit components. But what if they are altered to access common element replacements like pipe risers? My favorite example to illustrate the point: Let’s say the only way to replace a piping system is to go through 1950’s era ceramic tile. You’ll never match the old tile. Will the Board repair the plaster only? Tile one mismatching wall? Or replace all the tile in the unit? Multiply the expense by all the units in that tier. The answer might make a significant impact on project costs. Here, your first call may be to association counsel to be clear on your responsibilities and options. Then you’ll have to make a business judgment. Just don’t wait until you start the project to decide. Get clarity in the planning process and plug the info into the reserve study. That is not your reserve analyst’s responsibility, it’s the Board’s.

9.  Items Outside Study Period: Many studies include only those components that have useful lives within the period of the study (usually 30 years). The rationale is that if you conduct studies every three to five years, the component will eventually make its way into the study. But some major components such as electrical switchgear, transformers, or piping systems may have useful lives of 50 years or more and they may be major expenses. Waiting to fund those expenses over only 30 years could create a big bump in required funding levels when they magically appear in the study. Plug them in now.

10.  Strategic Improvements: Instead of replacing components in kind, it might make sense to rethink and plan. For instance, a property may have high-maintenance components such as wooden exterior soffits, fascia, and rake boards. These require repainting every few years and eventually sectional or full replacement. It might make sense to replace them with low-maintenance materials. More expensive up front, but much less expensive in the long run. Original gutters might have been undersized and should be replaced with larger ones. If gutters and downspouts are being replaced, it might be the golden opportunity to replace wood trim with low-maintenance material. The Association could pay only once for mobilization for two projects and save money in the long run. Better yet – think strategically and tie these projects in with the next roof replacement to get to best bang for the buck. Take a step back and see property components in a broader context. Adjust the plan accordingly and make sure the data gets plugged into the reserve study.

Perspective

No one wants to increase fees. It can be tempting to ignore the potential for additional expense, even if it means losing out on savings in the long run. Making the best use of members’ assets is a key element of the board’s fiduciary duty. Think strategically, plan wisely.

“Leaders keep their eyes on the horizon, not just on the bottom line” –Warren Bennis

Next…

Next week we close out this series with the last 4 nuggets. These will help you to recognize areas where the board has a great deal of discretion in the planning process. Many community associations are facing the tough realities of under funding and have to include options such as loans and special assessments in their funding plan. We will help you to partner with your reserve analysts and other professionals to develop scenarios and choose the best plan for your community.

Budgeting, community associations, condo associations, Cooperatives, HOAs, long range planning, Reserve Studies

14 Things Your Reserve Analysts Might Not Tell You – And It’s Not Their Fault (Part 1)

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Reserve studies are invaluable tools for condominiums, cooperatives, and homeowners associations. Used properly, they assist boards and managers to make good decisions for reserve funding with long range planning in view. They also help to plan for near term capital projects. The reserve study provides a basis for a systematic and disciplined approach to reserve funding and capital project planning.

At the same time, I’ve heard too many complaints from clients through the years about accuracy of the data included in their reserve studies. This tends to occur when unpleasant and unplanned realities throw a monkey wrench into the best laid plans. I’ve found that either an unrealistic expectation or a poor understanding of the study process are typically at the root of the issue. This series of 3 blogs helps to address the first issue. I’ll provide tips on how to work with your reserve analyst in another blog soon.

What a Reserve Study Is…And Isn’t

Professional reserve studies have two components – a physical analysis and a financial analysis of major property components. The physical analysis helps to estimate the remaining useful life. The financial analysis turns it all into an actionable plan to recommend a funding level that ensures the Association will have enough money in the bank to replace components when needed. For more details, you can review CAI’s National Reserve Study Standards, and the Association of Professional Reserve Analysts Standards of Practice.

Reserve studies are relatively inexpensive as compared to other engineering analyses. There are reasons for that.

  • Reserve analysts are by definition generalists engaged for the specific purpose of creating an overall financial plan. They do not undertake the detailed condition reports, basis for design, or specifications that a specialty engineer may create in preparation for a particular capital project.
  • Reserve studies do not include destructive testing. No walls will be opened, ground dug up, or other means to get into the details of conditions unseen.
  • Reserve analysts are neither omniscient nor clairvoyant, nor do they possess X-ray vision. You’d have to pay a lot more for that!

Throw Me A Bone, Man!

The good news is reserve analysts LOVE data. The more valuable information you can give them, the more they will plug into the study. The better the study, the better your plan.

Here are a few nuggets you should consider feeding to your reserve analyst. Complicated condominiums and cooperatives, especially high rises, are more likely than HOAs to benefit from the additional data points listed in this blog series. Regardless, it’s worth taking the time to consider whether each of the 14 nuggets factor into your association’s reserve plan. I can tell you they’ve either saved my clients a lot of heartburn, or I learned about them because of my clients’ heartburn!

These first 5 nuggets deal largely with building components. The next 2 blogs will address discretional expenses, practical project planning, and approaches to thorny cash flow issues.

  1. Engineering Study for Stuff You Can’t See: This could apply to components like waterproofing systems under patios, parking lots, green space, fountains, etc. Without doing destructive testing and taking a look at what is underneath, you may have no idea how much it will cost to design and replace a system you can’t see. You will likely pay far more for this engineering study than you will for the reserve study, but it will be well worth it. One client’s reserve study had estimated system replacement for four garages to be $500K. When it was all said and done they paid about $1.1M…. per garage! The information gleaned from their engineer’s work helped them to prioritize and pay for the project. If they had that information up front and included in their reserve study they could have avoided sticker shock.
  2. Elements Impacted by Code Compliance: The typical reserve study assumes like-for-like replacement. However, local code may require a building to upgrade an old system to meet current codes, exponentially increasing the cost of some projects. This is particularly true of fire protection systems and elevators. Getting cost projections from sources familiar with local codes can save you from ugly surprises.
  3. Piping Systems: No pipe will live forever. Yet, I have seen common piping systems omitted from reserve studies for whatever reason. Also, determining the remaining useful life of copper piping is easier than ever before thanks to non-invasive technology. Obtaining a pipe condition study for domestic, HVAC and waste piping can provide invaluable data.
  4. New Construction Technology: Sometimes new building products or construction techniques can post a challenge until there is a track record of periodic major maintenance, rehabilitation or replacement. Installing contractors, architects or engineers involved in the new construction can sometimes provide some insights to help plan for future projects.
  5. Underground Piping and Wiring: This can be a big one for garden communities, especially those built in the 1960s as apartments, and particularly those with central HVAC plants. I don’t always see underground electrical feeds, HVAC piping, or domestic water piping in reserve studies for communities that have these components. Tracing a break or a leak, digging up between buildings to replace a section of wiring or piping and restoring the grounds on an emergency basis is an expensive proposition. It is surprising how much electrical wiring has been laid in the ground without being run through conduit. This can even impact the planning for replacement of light poles. Identify the risk and make a plan to include in the reserve study as needed.

Hard Reality

In some cases, the engineering and design costs outlined in the 5 nuggets above might exceed the cost of your reserve study. But that’s irrelevant. Think about the impact of not having the data. Underfunding by any means is a bad strategy.

When & Who?

In the third and final blog in this series, we’ll identify potential resources and factors that will help the Board to decide when to reach out.

Next…

In next week’s blog, we will discuss data points related to practical considerations when planning for projects. I will again reach back into my bag of experience to find the things that made a huge difference for my clients through the years.

Communications, community associations, condo associations, Cooperatives, Customer Service, Emotional Intelligence, HOAs, Magic Beans

So You Think You Are a Good Listener and Other Delusions

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In his outstanding book The Excellence Dividend, Tom Peters states that listening is, among other things, “the heart and soul of engagement and thoughtfulness,” “the basis for collaboration and partnership and community,” “the linchpin of memorable service” and “the bedrock that underpins a commitment to EXCELLENCE.”

We know listening is important. Yet, studies show that we are not as good at it as we think we are. Fortunately, it is a learnable skill. It is an area in which we can always improve. There are lots of resources available to help us focus on the art of “active listening.” Strategies include:

  • Pay Attention: Use your eyes along with your ears. Look at someone intently enough long enough to determine eye color. What do their body language and facial expressions tell you? What are they NOT saying?
  • Acknowledge: People with problems typically want two things in this order: (1) To be heard (2) To get a solution. Until someone is confident you hear them, you have zero basis for dialogue. Give them all the cues you can to show you are engaged. Open your stance, nod, smile. Use verbal cues like my favorite, “Oh wow!” Let ‘em talk. Empathize.
  • Clarify: Ask questions. Then ask more questions. Get the whole picture. Repeat statements back and summarize. I am partial to the phrase “I think what I heard was…” This gives the other person permission to correct you if your understanding requires adjustment.
  • Ignore Your Biases: We are all biased. We all make assumptions. We all listen through the filters of our experience. You might think you are completely objective, but you’re not. Nobody is. Recognize your biases and assumptions and do your best to get past them.
  • Suspend Judgment: It’s easy to impute motives, especially if you have a history with someone. But even if you are correct, there is no value in thinking about them. Acknowledging others’ emotions does not mean judging the validity or even the appropriateness of those emotions. Do your best to focus on facts.
  • Take Notes: Careful note taking keeps you tuned in. It dignifies the other person. It’s a great tool for the open forum part of Board meetings.

Why Are We Lousy Listeners?

You might think you are a good listener. More than likely you are deluded. Even if you ARE right, you’ll still need to work on it. There are many obstacles to being a good listener. Be aware of them and work to overcome them.

  • Did I mention we are all biased and make assumptions? Imperfect humans are subjective by nature.
  • We focus on us, not the other person. Instead of fully listening, we are formulating our brilliant response, thinking about how wrong or annoying the other person is, or feeling rushed or stressed.
  • We may be “18 second interrupters”.  Peters cites research that indicates an average doctor will interrupt the patient presenting her symptoms after 18 seconds. The habit is not unique to doctors. Yikes.
  • Distractions…Oooo look – a squirrel!
  • Electronics: A disproportionate number of the problems people have asked me to fix in recent years originated with electronic communication issues. Some conversations need to be offline. Listening with only your eyes has its limitations. If a conversation starts to go sideways, pick up the phone. Or better, go face to face. If you’ve grown up communicating mostly through an electronic device, you’ll need to learn to use the full range of human abilities to be a good listener.
  • The big one… missing the bigger picture. Employing active listening strategies does not guarantee success.

It’s More Than Listening

Listening is part of something bigger. You can employ all the active listening strategies and still be ineffective. Your IQ can help you to learn the techniques, but your EQ, or emotional intelligence, will be the key to being a good listener and effective communicator.

If you are not genuinely interested in other people, in solving problems, and in making a difference, you are likely not listening well and people can smell it. It really does start with you. And people don’t always make it easy! I’ve often thought that a key to success is the ability to be respectful of others when their attitudes, words or actions are not what we would classify as respectable. Just remember, being empathetic with others doesn’t mean you have to agree with them. It does mean you have to listen hard enough to imagine what it might be like to be in their shoes. That can require a very high level of emotional intelligence.

Final Words

“The best way to persuade someone is with your ears, by listening to them.” – Dean Rusk

More gems from The Excellence Dividend – some of the “Good Listener Rules.”  (Buy the book. Seriously.):
• A good listener does not EVER take a call, even from her or his boss.
• A good listener takes EXTENSIVE notes.
• A good listener CALLS (better than e-mails d%#n it) a couple of hours later to thank the other for his or her time.
• A good listener the next day with a couple of follow-up queries.
• A good listener does NOT pontificate!

“Never miss a good chance to shut up.” – Will Rogers

change management, Communications, condo associations, Cooperatives, HOAs, leadership, Management

We Are All Geniuses…or Insane. Your Call!

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I’ve heard this quote, widely attributed to Albert Einstein, for a long time. As it turns out, he may or may not have ever said it. Thing is, it resonates so well that it’s easy to attach genius to the observation. So why not Einstein?

We silly humans tend to choose familiarity over change, even if it makes us miserable. I’ve noticed it in my world of community association boards and managers. Instead of taking an honest look at our results and trying to figure out how we got there, we’ll practice what Canadian brand transformation specialist Alan Quarry calls “glue diligence.” We do it because we’ve always done it that way, and dang it, we’ll never change!

…And then we blame everybody and everything else for our frustrations and failures…

One of the most important changes we can make is to see ourselves differently. For the longest time, the thought of being a salesperson made me cringe, just a little bit. But a few years ago, I realized sales and marketing were weak areas in my business skillset. It was time to hit the books. Funny thing is, a few of the writers I learned from in my study of leadership through the years started off as sales guys.

THE ART OF LEADERSHIP AND SALES

I didn’t fully connect the dots until I read Daniel Pink’s brilliant book To Sell is Human. It finally hit me. I gave myself permission to see myself and my role a little differently. The art of leadership is the process of helping people move from one place to another. Outstanding leaders share a vision so compellingly, people buy in because they see the benefit. Yes…BUY IN. Therefore, leaders sell and it’s a good thing.

Sales done right has never been ugly. Great salespeople believe they have something of value to sell, provide service and value first, and create a space where people can see themselves taking advantage of the value proposition. They are not selfishly manipulative. They are connecting dots. In essence, they don’t sell anything but an idea, creating a space for others to buy. They understand the wisdom of Jeffery Gitomer’s words, “Nobody likes to be sold, but everybody likes to buy.”

THE SUPERPOWER

The process of sales is the process of leadership. If we are to lead, we must sell. And to be truly effective, we need the superpower all great leaders and salespeople have – the ability to be an agent of change. This is leadership at its highest level – the ability to lead change, sensing when and how to initiate, support or facilitate it so that the stakeholders in an organization make it their own.

And yet, how many board members and community managers see themselves as leaders, salespeople and change agents?

WHAT WE HAVE HERE IS….A FAILURE TO COMMUNICATE

So many times it comes down to communications skills. We all have a tendency to communicate from our standpoint. Managers are trained to be technically proficient. Board members may be trained in governance. Unfortunately, as a result both are frequently ineffective. They are “doing their jobs” while missing the point. It has led to community association members disconnecting from their communities. Quoting from memory a comment from the Wall Street Journal, “People tend to have the same emotional connection to their HOAs as they do the Internal Revenue Service.” Ouch. It doesn’t have to be that way.

Think about how the message is received and you might realize you are coming off like Moses descending the mountain with stone tablets from God. Our message may be important, but it’s not THAT important. Worse, we may be accidently sending the message that people exist for the governing documents, when the truth is that those documents exist for the people. Or you may be coming off like a mean nun with a ruler, ready to whack all those disobedient children.

It doesn’t matter what you say. It only matters what is heard. And while you can never control what’s heard, you really need to think about the message and work your brains out to communicate from the receiver’s perspective, not your own. That’s what great leaders, salespeople, and change agents do. Make it real. Show the value. Explain the Why. And be patient. Because until you do these things, you’re just part of the increasing noise in your members’ lives.

INSANITY OR GENIUS?

If you are not connecting with your community or your client, if you are frustrated, it may be time to stop the insanity. Make a change. Start with how you see your role. Be leaders. Be sales people. Be change agents. Communicate like the best leaders and salespeople with the change agent superpowers.

Change the message and the delivery so it actually reaches your audience. It’s about them, not you. Make it real. Show value. Be a genius!

Thanks to Ed Loonam, PCAM, of Property Management Associates in Virginia Beach, Virginia, who gave me the inspiration to turn my SEVA-CAI CA Day sparks talk into a blog post!

change management, community associations, condo associations, Cooperatives, Emotional Intelligence, HOAs, leadership, Management

CONTEXT!

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I’ve noticed the word keeps popping into my head more and more. Frequently, my job is to fix stuff. I walk into a lot of situations where people aren’t on the same page or worse. I try to dissect all the factors, and it seems more often than not, lack of context is at the root of the problem in one way or another. As soon as I have all the pieces and can see how they fit together, the rest is easy. Context issues can rear their ugly heads in all kinds of scenarios.

GROUP DYNAMICS

Ever been in Board meetings where certain agenda items go on forever? I remember one client who debated the merits of adding a walkway to a portion of their community for months. It wasn’t budgeted, but it could have improved safety. It could have benefitted many residents, but in theory it might have created a nuisance for those who lived close to the proposed walkway. Discussion and debate started in the weeds and got deeper as time went on. Emotions ran high. In the end, the idea was squashed and the process left a bad taste in everyone’s mouth. The Board is hoping nobody brings it up again. Lack of context ran amok.

If your group is considering a new idea, or a recurring one that never seems to get settled, listen very closely. You may well find that there is a bi-level dialogue going on. The overt conversation is on the merits of the idea in play. But sometimes the reason the subject takes forever to flesh out is because people are struggling to figure out if the thing is really important, timely, or how it fits in to a bigger picture. That subtext can be a sign the group lacks clarity on shared values and vision. If that’s the case, context can be gained by taking the time to achieve consensus on those deeper points. (No, not at a Board meeting – it’s a separate exercise .) With the underpinnings of values and vision in place, things go a lot smoother and quicker.

CHANGING THE MESSAGE

Context also comes up in day to day conflicts. Association members may chafe in matters of covenants enforcement. It’s understandable. After all, who likes to be told they are in the wrong, or feel controlled? All too often, when the nastygram from Big Brother arrives in the mailbox, the missing link is context. Unless the reason for a community standard is understood, that standard, whether enumerated in CC&Rs, rules, policies or procedures, feels irrelevant and maybe even arbitrary. Context can sometimes be achieved by taking the time to explain the reason for the standard, and why those standards benefit everyone in the long run, ESPECIALLY the individual. I’ll never forget my boss telling me that an owner from a former client had called him to complain about a manager who had followed me at my last on-site management job. When he mentioned her name, I had an immediate emotional and physical reaction – I thought she hated my guts. But her comment provided a golden lesson: “I didn’t always agree with Tom, but he always told us what he was going to do in advance, and we always knew why he was doing what he was doing.” Changing the message can help to establish the context.

ASSUME NOTHING

Sometimes confusion and conflict are the result of missing data. It’s really easy to jump to conclusions and muck up the works. I get reminded of that when I get a call or text from one of my favorite managers, who reaches out for assistance on thorny issues from time to time. I listen to a scenario, offer some potential solutions only to hear ,“I don’t think that will work, because (followed by a new factor not previously revealed).” Note to self…slow down, gather all facts, get full context. I think part of the challenge may be that we are encouraged to think quickly and get to the bottom line as fast as possible. But we aren’t necessarily thinking deeply. In the end, conflicts and confusion can get worse, not better, and we accidentally (and ironically) take more time to resolve matters by tying to save time by being fast. One strategy to get full context is to assume nothing and keep asking questions until the root of a matter is clear. Once the context is understood, then move toward potential solutions.

So, the next time you find yourself feeling conflicted and confused, make sure you see the full context of whatever you are dealing with. In the end, it will save you and the people around you time and heartburn. And you might just get something done!

Budgeting, community associations, condo associations, Cooperatives, HOAs, leadership, long range planning, values

The Vision Thing

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The words keep falling out of my mouth. I see it again and again. So many boards think their mission is to keep fees low, period. Ironically, the mindset that this engenders pretty much guarantees that in the end, everyone will pay more.

Never forget that the budget is a tool. It is part of the plan that provides the means by which the community’s needs are met. At a higher level, it can be part of the plan that provides the means by which the aspirations of the community are met. It is the tail, not the dog.

Don’t get me wrong – a fiduciary has a duty to make sure that members’ assets are well utilized. But there’s a huge difference between price and cost. A low price up front can mean tremendous cost later on. A myopic focus on trying to make sure expenses do not exceed the budget plan (key word PLAN) leads to a vicious cycle of failure that goes something like this:

A “we can’t afford it” mindset begets a budget that ignores the reality of the facilities, operations and shared values of community, which begets a budget filled with artificially low line item values, which begets cheap, shortsighted financial decisions during the year, which begets poor quality repairs, supplies, and low reserve funding, which beget Band-Aids and deferred maintenance, which beget emergency response repairs, poor curb appeal, and increasingly unsatisfactory service, which beget negative community spirit and higher accumulated expenses, which beget fear of conflict and board exhaustion, which beget more shortsighted decisions making until….

The bottom drops out. Special assessments, huge fee hikes, and/or debt service (unless the financial condition of the association has been flushed so far down the toilet it’s no longer an option). Ironically, in the end everybody pays more because the board managed down to the budget instead of leading up to a vision.

Vision doesn’t have to be a pie-in-the-sky, magical thing. It can be pragmatic. In working with community association clients, I’ve learned to start with a simple annual planning session. Tell me what you want to do and I’ll tell you what’s important to you. Which means you’ve identified your values. Which leads you to your vision.

So start with planning.  Establish a disciplined, robust budget preparation process. Lead.  And truly serve your members. That is your duty. It’s hard at first, but ask those who have tried to lead associations out of the ashes. It’s much worse.

Going cheap at all costs may be a value, but it does not lead to a sustainable vision. Walk around without your glasses and eventually you will stumble and fall. Don’t be afraid to open your eyes and get the help you need to see clearly.

Communications, community associations, condo associations, Cooperatives, Governance, leadership, Management

It’s Time to Change the Message (Part 2)

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Let’s say you did everything recommended in last week’s blog. You have great rules and have done a masterful job communicating them to your members. Bravo! Yet, despite best intentions and practice, someone’s gonna blow it. Reflecting back to last week’s Catholic imagery, whether it be an innocent sin of omission or a more brazen sin of commission, sooner or later a covenant will be violated or a rule broken.

Now what?

The knee jerk reaction might be to write the dreaded violation letter. Please stop and think first. In many locations, the law requires a full disclosure of all the bad things that can happen in the event of non-compliance, meaning there’s a slew of impersonal, aggressive-sounding legalese. Here comes the mean nun again….How can you achieve the goal of building community in this difficult circumstance?

Here are a few tips employed by successful volunteers and managers:

1. Walk softly before carrying a big stick: Perhaps an informal communication is best, even (perhaps especially) a verbal one. You can still make a note to file to have a business record of the conversation. A friendly email follow up to a conversation can be invaluable. When people know they are getting a little slack, many tend to appreciate it and the problem is gone. Even if they turn out to be bad players, you have a record of being very reasonable.

2. Never assume the person is even aware of the rule (even if you are sure): Starting off with “You might not realize this, but….” softens the blow. People have a lot going on in their lives. Their reality is that it doesn’t matter that they have an obligation to comply with provisions buried in the 4,536 papers they signed at settlement. It’s irrelevant until it impacts them personally.

3. EXPLAIN THE WHY:   Super important.  Try to weave it in to every communication if possible. People are thinking of themselves first (and so are you if you are not following these tips…). Helping them to see the broader wisdom of a rule, or the impact it could have on them if a neighbor were to violate the rule, could help. If nothing else, it establishes you as a reasonable player and provides context.

4. Give them the graceful exit: Assume a good result, thank them in advance for their consideration, be their partner in helping them to do the right thing. EVEN IN THE FORMAL VIOLATION LETTER WITH THE SCARY LEGALESE (which, by the way can be set off with a friendly disclaimer about hoping none of this will occur). The more you assume you’ll have to fight, the more it will seep out in your wording and the more likely it will become a self-fulfilling prophecy.

5. Consider your words carefully: Just some crazy talk here… Why not a “Due Process” Policy instead of an “Enforcement” Policy…. or maybe better… a “Community Values Administration” Policy? Or “Quality of Life Maintenance” Policy? Clearly, I’m struggling here. But anything is better than the Mean Nun “Enforcement” Policy.

6. Let someone else proofread your work: Make sure negative emotions aren’t creeping out… If you don’t have a good proofreader, set difficult correspondence and email aside long enough to pick it back up with fresh eyes.

7. Tom Tip Bonus – what to do when a member is angry about a neighbor’s actions and wants you to write a violation letter:  First, ask the member if he or she has spoken to the neighbor. Usually, the answer in “no.” I then say “I can certainly write the letter based of your written complaint. But may I ask you a question? If you were bothering your neighbor and didn’t realize it, which would you rather get; a visit from that neighbor with a plate of cookies and a smile with the message ‘you probably don’t realize it, but…’ or a nastygram from Big Brother?” If they agree, ask the member to let you know how it goes and let them know you’ll write the letter if necessary. Give it a try. It works!

We know that tone is as important, if not more important that content. Yes, you should check with association counsel to make sure your formal communications are fully compliant with legal requirements. Don’t give away the high ground, even when you are left with no choice but to brandish the big stick. The mean nun does not hold the high ground. If she did, the ruler would not be her first option.

community associations, condo associations, Cooperatives, HOAs, leadership, Management

It’s Time to Change the Message (Part 1)

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I learned some valuable life lessons from 4 years of parochial high school. I had no particular religious training coming into the situation, so I suppose I was probably more in tune to behavioral and societal issues than most guys as I was trying to figure things out. One gem I picked up was that, when it comes to people, control is an illusion. The more you try to control people, the more they find clever ways (and some of the fellas were REALLY clever…) to push against it. And the more they are likely to disrespect, even resent, your authority. The key for long-term buy-in for anything is always motivation. People need to understand The Why. It’s not about actions, it’s about the purpose for the actions. Huge difference. It takes a lot more work up front to engage hearts and minds, but it’s the only way to achieve long term success.

I’ve seen this reality play out big time in community associations. In the early years of the Community Associations Institute, the emphasis seemed to be on covenants compliance. Boards and managers alike fell into the trap of proficiency and efficiency in enforcing covenants and rules without going deeper. They acted more like technocrats following procedures instead of leaders seeking to help stakeholders appreciate the reasons for, and values of, the framework of governance. It was as if the people existed for the rules instead of the rules existing to benefit the people. The result? I think we see the impact in ego-based interactions, poor practices, unnecessary stress on association volunteers and managers disaffected community members, and a general feeling in some quarters that community associations are inherently evil.

Leadership becomes easily lost in the practice of governance. It’s expeditious to be autocratic and cold. Unfortunately, the practice of rule enforcement smells way too much like command and control, which we learned years ago is poor leadership. And that’s why it doesn’t work.

It…doesn’t…have…to…be…this…way!

Fortunately, in the late 90’s we started to see an awareness that the goal was building community. That it was about creating a space where willing compliance was the norm, not the negative and vicious cycle of rule enforcement. Successful community association volunteers and managers have found that effective leadership was the key. Great leaders see the bigger picture and help others to put themselves into it. Their communications reflect the values and vision of the community.
So how can we change the message to begin to turn negative cycles around?

Let’s talk about rules
I’m using the term ”rules” here, but the principle applies to any process, regulation, or bylaw amendment.

Common Mistake #1: The knee-jerk reaction to problems is to try and control the people involved. STOP! Remember, control is an illusion. If motivation is the goal, you’ll need to take the time to see what’s really going on. If a problem can be nipped in the bud with a one-on-one conversation, do it! If it turns out the condition could have an impact on the community as a whole and a rule might need to be created, there are tests you can apply to determine if a rule is good or not. Ask yourself, is the rule

1. Needed? Less is more. Really. The goal is building community. A rule may not be the answer.

2. Legal? If it violates your governing documents or prevailing law, you’re doomed.

3. Reasonable? You might be ticked off about bad behavior, but you can’t be punitive, AND you need to check your assumptions. Does the rule treat people unequally? Not only is that not reasonable, it may also be illegal.

4. Enforceable? Another Catholic school lesson: If a provision is unenforceable, it’s of zero value. In fact it erodes respect for authority as a whole.

5. Supported? If the membership doesn’t buy in, it’s just not going to work. This is where community can be broken down by rules.

I taught those standard 5 tests in leadership training for years. And then one day, a participant said “I think there’s a 6th one.” He was right.

6. Effective? Will the rule actually address the condition it was designed to tackle? It’s easy to get lost in the weeds in the rule creation process and end up with a result that makes no sense.

Tip #1: Be crystal clear on what the end result needs to look like and reverse engineer it. Don’t go from “A” to “B”, go from “B” to “A”.

 

Tip #2: Here’s a problem solving strategy that I’ve shared that seems to help a lot. Before the process begins and minds are still clear, list the conditions that must be satisfied for the proposed solution to work. Then you can test a draft rule against your list. If it doesn’t satisfy everything on the list, edit as needed until it does.

CAI has some great resources you can use, such as Kenneth Budd’s 1998 book Be Reasonable

Common Mistake #2: The second common mistake has to do with how a new rule is rolled out. If I read one more notice that starts off “As you are aware, we’ve had a problem with…” Click. I’m out. The nun just came at me with a ruler & I’m bolting. If you just came up with a good rule, it will enhance quality of life for the membership as a whole. Why not lead with that and help members to see why they should care and want to help?  How about, “The board of directors is pleased to announce a new feature that we believe will enhance the beauty of our community.” Then you explain how. The Why may be explicit or implicit, just make sure it’s in there. The fact that it’s a rule becomes far more palatable at the very least, and broadly supported at best.

Now what? Despite all best intentions, at some point a rule will be broken or a covenant violated. This will be covered in next week’s blog.

community associations, condo associations, Cooperatives, HOAs, leadership, Management

Property Manager ++

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What’s in a name?

The mouth, the mind and the figurative heart have a most curious relationship. The ancient psalmist observed that “out of the heart’s abundance, the mouth speaks.” And at the same time, the data indicates that what we talk about impacts our cognitive abilities and mood. The words we use are important. The information we allow into our minds impact us as well. Sooner or later much of the data, ideas and impressions we absorb impact the way we feel. In turn, the words that fall out of our mouths reflect those thoughts and feelings, occasionally revealing truths about ourselves that may surprise us for better or worse. And on the cycle goes… It pays to think about the words we use and be purposeful with them.

Here’s a word choice that’s still way too common in the community association management industry – “property manager.” It makes me cringe when I see and hear managers and management companies – even “leaders” in our industry – refer to what we do as “property management” performed by “property managers.” When I see that I can’t help but wonder if they fully appreciate…or maybe even respect…what we really do.

Don’t get me wrong – property management is an important PART of what we do. The term is derived from commercial and rental real estate management. In those niches, “property management” is very appropriate. Property is an asset financially and in “sticks and bricks.” Profitability must be the major focus of those disciplines to maintain viability. So, commercial and rental managers are, to a large extent, asset managers. It’s only fairly recently that on site apartment management positions began to use a “community manager” title in recognition that people actually live there.

However, as managers of homeowner associations, condominiums and cooperatives, we support and serve elected volunteer leaders and all the stakeholders in the community, some of whom are more than happy to remind us that they are our boss. It’s far more than asset management. The metrics are different. Community associations have 3 distinct characteristics; they are businesses, governments, and communities with stakeholders. Managers and volunteer leaders who fail to recognize the importance of all three elements do so at their own (and their community association’s) peril. I would also suggest that anytime human stakeholders are living in close quarters with one another there is an inevitable parallel with family, with all its risks, benefits, and emotional entanglements. This is a significantly human experience. Like families, community associations build successful legacies when they identify shared values, work towards common goals, and resolve the inevitable rough patches with compromise and reasonableness.

Therefore, we cannot be successful without managing community. Fortunately, awareness in this regard has been increasing steadily over the years. More in the industry are seeing the wisdom of a shift of focus from enforcement to the bigger context of building and promoting community. Back in the day, a heavy focus on covenants enforcement in the industry drove me nuts. It was as if people existed for the rules instead of the other way around. I believe that this lack of vision is at the core of negative impressions some have about community associations. The more community volunteers and managers act like leaders and less like bureaucrats and politicians, the better everything works. This is a major fundamental challenge facing all of us.

Of course, there’s a danger. Feel-good, fluffy, “We’re building great communities!” marketing messages without a dedication to excellence in taking care of the asset management part of our jobs doesn’t serve anybody in the long run. It saddens me when I find evidence of community managers who don’t see the importance of developing expertise in financials and property maintenance, either by lack of training or by choice. To be an effective community manager, you still have to be a property manager. So while I will always advocate for continuing to promote excellence in leadership and community-building, it is clear we must, as an industry, invest in educating managers and boards in the necessary work that goes on under the hood and out of sight. Only then can communities lay claim to being great.

So yes, community associations need managers solidly rooted in the fundamentals of property management. But they need more….they need broad perspective and leadership from truly professional Community Managers!