Category Archives: Best Practices

Best Practices, Budgeting, community associations, Management

Building the Association Budget: Fundamentals, Hard Work & Guts – Part 3 (Components of a Great Budget)

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We’ve established the purpose of a community association budget. We’ve learned the benefits of applying sound methodology  Now we are ready to dive into the nitty gritty.

Budget formats can vary significantly. Their contents depend on the complexity of the property. A 300-unit condominium association with a central HVAC plant and staff will have a more intense budget than a 30-home HOA. But the best budgets tend to have a few things in common, regardless of their scope and complexity.

How Do We Get There from Here? Essential Budget Components

There are two basic components that can help support the budgeting disciplines outlined in the first two parts of this series.

First, a comparative spreadsheet helps to see patterns and context. At a minimum, it includes columns for:
• next year’s proposed budget
• current year’s adopted budget
• projected current year-end results
• last year’s audit results

To gain longer range perspective, prior year budget and audit figures can be added. For smaller communities that may not engage an independent auditor each year, unaudited figures are better than nothing. The goal is to see the reality of past performance in order to help plan for the future. To provide context for the current year’s projected column, a year-to-date column may be helpful.

The next component requires the most work. It is also essential to understanding what’s behind the cold, hard numbers in the budget. A detailed narrative, in which each line item and the assumptions behind them are expressed in detail, can make a huge difference. The process of creating, reviewing and editing the narrative is where each line item is challenged. Exactly what is included in “miscellaneous administrative” or “landscaping non-contract?” How was the total annual figure calculated? Memorialize it. If “meeting expense” includes recording secretarial services at $175 per meeting times 12 meetings, plus an allowance for light refreshments at the annual meeting of $300 and room rental for the annual meeting at $250, put it in writing. Include contract details. If the terms of a two-year janitorial service contract include a $2,000 per month fee with an escalation of 1.5% at the May anniversary, show the math: ($2,000/mo. x 4 mos.) + ($2,000/mo. x 8 mos. x 1.015 increase) = $24,240. It’s kind of like 3rd grade arithmetic – show your work!

Other Useful Components

Line items that require significant funding can be carefully budgeted and communicated by supplemental worksheets. A high rise with large utility usage can benefit from the compilation of utility logs. Several years of utility use can provide valuable data to make the 12-month spread more accurate, track energy conservation efforts, and mitigate some of the guesswork involved in developing the budget. If the association is in a locality where it can buy natural gas and electricity on the futures market in bulk, the gross rate can be very accurately estimated. (Accurate usage) x (accurate rate) + contingency for unusually hot or cold weather will result in a nice, tight budget.

Associations with large staff may benefit from a detailed personnel worksheet to capture the potential cost of coverage for full-timers while on leave, allowance for pay increases, overtime, and state and federal unemployment tax costs. The methodology used by health insurers in determining premiums can also create budgeting headaches. A detailed worksheet can help in estimating costs.

A statement of capital expense cash flow and reserve contributions can help demystify the calculation for replacement reserve contributions. We will cover this in greater detail in Part 4 of this series.

Finally, some people are visual learners. If charts and graphs help community members to grasp the data in the budget, use them.

It’s Good for You…and Everybody Else

There are many benefits to fully utilizing these components. The discipline to analyze and prioritize wants, needs, and realities with the financial plan is maintained. There will be a clear understanding of the plan for the upcoming year. And the final document helps to ensure continuity from year to year in the event of volunteer or management turnover. These two components, if well-crafted, show the results of the combined trend and zero-based approach and give community members confidence in the plan, their leadership, and their management. The transparency built into the discipline builds trust. And trust is everything. 

Next…

In the next segment, we will offer tips for communities facing the challenge of change. There are additional components that can be included in the budget package. Additionally, leaders and managers of communities facing challenges can be filled with anxiety. We will share communication strategies to help.

Best Practices, Budgeting, community associations, Management

Building the Association Budget: Fundamentals, Hard Work & Guts – Part 2 (The Method)

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In the first blog in this series, we covered the basics. A focal point of that piece was clarifying the real goal of a budget. It’s worth repeating:

The purpose of the budget is to create a reasonable plan to finance the operation of a community association in accordance with the realities of property condition and in accordance with the vision and values of the community.

Focusing on the purpose helps stakeholders gain clarity and provides context. It also gives them some tools to make tough decisions when needed.

The Past, the Present & the Future

The inability to predict the future is a common human weakness. We really stink at it. And yet, predicting the future is what budgeting is all about. While, we will never get it exactly right, we can hedge our bets with sound methodology.

This methodology will also help to avoid other all too human foibles. Ignoring the past is always a fantastic way to ensure disaster. Seeing past our biases to recognize current realities can also be a challenge.

Trend or Zero-Based?  Both!

There are two basic budgeting methods – “trend” and “zero-based.” Trend budgeting uses the current year’s budget as a baseline and assumes an incremental increase each year thereafter. For example, if the landscape non-contract line item is $10,000 and the annual inflation assumption is 2%, the budget for the following year will be $10,200. Frequently, the same multiplier applies to all line items. There may be some variations from line item to line item in the actual expenses during the year. However, the hope is that the overall bottom line will come out about right. Do communities apply the same percentage to all line items?

Zero-based budgeting is far more robust. It is commonly utilized when drafting a budget for a community that has not been built yet. Those writing these budgets use all available information about the planned project. They attempt to visualize what it will take to operate the property when built. Finally, they proof each operating line item for accuracy against similar properties and industry knowledge.   The reserve contribution line item is calculated by creating a reserve schedule, compiled using RS Means data and construction figures provided by the developer.

The best budgets for existing community associations use elements of both methods. Every single line item should be scrutinized and challenged with a fresh set of eyes each year. The analysis may result in some cost savings, or it may result in creating new line items to reflect expenses not previously required. At the same time, history and current conditions help predict the future, like it or not. Uncontrollable trends cannot be ignored. They must be reflected in the affected line items. Assembling the information necessary to analyze data from the past and seeing the present clearly will go a long way towards creating a viable plan for the future.

Why All the Work?

One benefit to this approach is that it helps to build trust. Members, who are reasonably concerned about how their money is spent, are more likely to recognize the scholarship woven into the process. The budget document will provide some level of comfort that money is not being spent needlessly. It isn’t something conjured up to make the numbers look good, or to achieve some political purpose. The figures represented in each line item mean something. They’ve been vetted thoroughly. They are grounded in reality and reason.

The discipline inherent in the methodology can also help to explain reality to homeowners. It is simply not realistic to imagine that HOA fees can remain flat when rising costs impact every other facet of life. Any architectural, mechanical, electrical, landscaping, or plumbing component becomes more expensive as it ages until it is finally replaced. I like to share an automotive analogy to help make it real. I can make a classic ’57 Chevy Belair my daily driver. But my running costs are going to be much higher than if I bought a brand new Honda Accord. If I fail to recognize that reality, I won’t have the money to keep the Chevy on the road.

What’s Next?

With the basics and methodology covered, we are ready to explore the components of a great association budget. That will be Part 3 of this series. Stay tuned!

Best Practices, Budgeting, community associations, Management

Building the Association Budget: Fundamentals, Hard Work & Guts – Part 1 (The Basics)

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Budget season for community associations with calendar year-ends are upon us. Even though I’m no longer responsible for writing several budgets each year any longer, I could feel it coming. Thirty years in the management business re-wires your brain, I suppose.

It might sound odd to some, but I always looked forward to budget season. It found it was an opportunity to establish and build upon the partnerships I enjoyed with my clients. I found that once I wrote a budget for a client for the first time, the exercise put me in a position to have full command of the operation. I noticed that by upgrading the budget document and process, I earned immediate credibility with my clients. The boards understood the numbers and had confidence in sharing the information with their communities. I also got the opportunity to collaborate with on-site personnel, which was a great way to help them to have input, for me to better understand their day-to-day challenges, and to build our team from the mutual respect the process required. It was a LOT of work. We took no shortcuts. But it was worth it. The community members were well served, everybody learned a lot, and it as a blast, even when the results were difficult to communicate! I will never forget standing in front of a large group of owners explaining why their developer’s budget created the need for a 24% condo fee increase the first year after transition. 25 years later, that condominium still stands, thanks in part to the tough work we did together those first couple of years.

Thanks to great training and a boss who gave me his torch to carry and the freedom to expand on the fundamentals he taught, after a few years I became the semi-official Budget Guy. I taught the process to new managers and helped other managers out when they got stuck, or were nervous about sharing a difficult message with their clients. I got to present an annual budget workshop for the management company for a few years. In 2011, I was asked to co-present on the topic for the Montgomery County (Maryland) Commission on Common Ownership Communities. We had so much fun, the crowd gave us an ovation at the end. Attendees from the concurrent sessions were shocked to hear people’s enthusiastic response to a budget program! That was followed by a lengthy recap in the COC’s newsletter.

I dusted off that old article and realized that a multi-part blog format allows us to share the best practices and tips picked up through the years without the constrictions of print space or seminar time constraints. As with everything else we share on this blog, we hope the series saves you some time, gives you a tool or two you can use, and helps you to avoid some of the quadrazillion mistakes I’ve made through the years. Maybe, just maybe, you will come to enjoy budgeting as much as I do and find the same benefits I was able to reap. So here we go!

Let us start at the very beginning…

BACK TO THE BASICS

The story goes that famed football coach Vince Lombardi opened every Green Bay Packer preseason camp with the same introductory sentence. Raising the pigskin high enough to be seen by the 50 or so professional players in front of him, he intoned, “Gentlemen, this is a FOOTBALL…” He understood the importance of reinforcing fundamentals.

So what is a budget? It is an essential part of association operations as the first of the three interrelated financial phases – planning, operations, and review. Deficient planning in the budget process leads to poor performance in the operating phase as reflected in monthly financial statements. Inevitably, this leads to poor results in the review phase, the annual audit. Conversely, excellent budgets lead to solid operational results and contribute to nice, clean audits. Creating a budget is not an isolated exercise or theoretical effort. It has real impact.

Done properly, budgeting lays a foundation for financial and community success. Done poorly, serious short and long term difficulties are sure to be created or perpetuated. We’ve been helping a number of clients dig out of financial trouble. Sometimes replacement reserves were underfunded directly with the “transfer to reserves” line item being set too low. Other times, reserves are underfunded indirectly. Unrealistic operating budgets lead to deficits. After paying the bills, there was not enough money left to fund the reserves from month to month.

Regardless of the reason for insufficient reserve funding, there’s always telltale signs of chronic under budgeting: A belief in the myth of saving money and deferred maintenance. Budgeting low out of fear of increasing fees has a vicious and compounded boomerang effect. Deferred maintenance results in exponentially higher fees for the members in the long run. Maintaining components past their useful lives is very costly, and can include the collateral damage from water leaks and emergency remediation. Higher fees are also required to help fund capital expenditures made more expensive by emergency replacements, exponential deterioration, or interest costs for debt service. Look at the exhibitor list from any CAI conference. You’ll see plenty of bankers there. There’s a reason that market niche is growing. Many associations have under budgeted for years and are now forced to pay the price…a very high one.

So let’s get back to the basics and get this right.

WHAT’S THE GOAL?

What is the purpose of the budgeting process? I ask this question when I teach financials to community association volunteer leaders. Sometime I get some pretty good answers. But I always find myself compelled to say, “I guarantee that a percentage of you don’t want to say out loud what you believe – that the purpose of the budget process is to keep fees as low as possible.” True, it is the board’s responsibility to the community to use funds wisely and avoid waste. But read any governing document and you will find the primary responsibility of leadership is to maintain the common elements and collect fees sufficient to do so. Of course there is more to a budget than accounting for the sticks and bricks. Quality of life is largely determined by the service levels provided for in the budget.

So then, the purpose of the budget is to create a reasonable plan to finance the operation of a community association in accordance with the realities of property condition and in accordance with the vision and values of the community.

GUTS, PART ONE

Too many managers are either nervous about proposing budgets with increases, or intentionally propose budgets with low or no fee increases as way to stay in the good graces of their clients. Don’t get me wrong, in rare cases, no increase can be possible. I even had one client who reasonably decreased their fees after paying off a loan. But when it’s done for political reasons, it’s a slippery slope. For the nervous, we’ll offer some perspectives and strategies in the following segments to help. For the political animals, please stop. Sucking up is not customer service. You aren’t helping anyone in the long run, including yourself.

Boards and Finance Committee Members get nervous, too. It’s completely understandable. They must answer to their neighbors. The nervousness means you take your responsibility seriously. You are to be commended! We hope this series of blogs helps.

It takes guts to take the long view. But that’s what leaders do. Outstanding professional managers and community volunteers know they are leaders first and foremost.

COMING SOON…

In the coming segments, we will continue to outline fundamentals of budgeting. First, we will review budget methods to help analyze the past, see the present, and plan for the future. Then we will identify critical budget components and tips for assembling and presenting them. With the fundamentals covered, we then get to the really fun stuff. We will cover strategies for communicating difficult news…like a 24% fee increase. Then, we’ll finish up with how to avoid common mistakes and a final exhortation to stay the course.

I know I’ve been a bit of a deadbeat lately in the blogging department. Sorry about that! Chantu’s been doing her part, but I haven’t been shipping. Business has been great, but that’s no excuse. I’ll try to make it up to you by delivering upcoming blogs more quickly so you can have them at your disposal as you dive into your budgets.

Best Practices, community associations, Culture, Customer Service, HOAs, Management, Professionalism

Sucking Up is Not Customer Service

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I had a conversation once with a young manager. She was learning to navigate the sometimes challenging terrain of management-board relationships. At the time she was working for a management firm that had, in my opinion, lost their way. At one of their company functions, a more experienced manager had shared an anecdote about golfing, drinking, and intense schmoozing with his board president. She concluded, “I guess it’s true – the best strategy for job security is being buddies with the board president.”

NO, NO, NO!

Our young manager had a misguided understanding of what customer service is all about on a deeper level in the specific field of community association management. How can managers and other professionals truly serve their community association clients?

What Are We Really Doing Here?

Miriam-Webster says a contract is “a binding agreement between two or more persons or parties.” I think there is a fundamental element missing from that definition. In order for the performance of a contract to meet the expectation of the parties, the definition should finish with the words, “…that provides mutual benefit to both parties.” A zero-sum gain approach to a contractual relationship is short-sighted. If the party performing the service is forced into a low-price box, or is otherwise constricted in the performance of their duties, the relationship often proves unsatisfactory and tends to be short in duration.

When the agreement is some form of service contract, one of the benefits to the client is they receive services that they do not have time and/or expertise to perform themselves. Digging deeper, that means a client is forming a partnership of sorts with a party who brings value to the table. The more mutual the benefit and the deeper the partnership, the more successful the relationship can prove to be.

Supervisory + Advisory = Partnership

Management contracts and position descriptions describe the work that will be performed on behalf of the client. This is proper and important, because it establishes expectations for service. It is describing supervisory functions. Yet, a contract or position description does not always describe the expertise with which those tasks may be performed. Furthermore, the greatest potential value of the relationship may be largely unstated, except perhaps in the fluffy marketing material provided in a proposal. Excellent management companies and professional managers are able to provide recommendations and guidance that can change the status quo and set the table for progress and improvements in the community. It is these services of an advisory nature that make the relationship most beneficial to the client. Yet, while most boards are happy to take management to task for deficiencies in their supervisory duties (and reasonably so), they may never get to the level of receiving or accepting advisory services. In the end, no one wins.

The Challenge? Fear & Schmooze

Some managers are afraid of getting fired. Some may be inexperienced. Some may lack confidence in their abilities. Boards may micromanage for any number of reasons. An “on-the-cheap” mentality may have led to a vicious cycle of mediocre service. Mediocre service invites micromanagement. A manager who never passes the test of capability in supervisory duties will never earn the trust necessary to be an advisor.

Some management companies are afraid of being fired. They fear telling clients anything that they think will put the contract at risk. This sometimes plays out in a blame game. Companies throw their own managers under the bus to appease an angry client and never deal with core issues. Saving the client by skewering your own people creates a cancerous organizational culture and impedes true partnership. It’s based on personality or politics, not leadership, values and vision.

All of these factors are unhealthy. They easily lead down the slippery slope of schmooze. Trading professionalism and respect for a shallow relationship based on low standards may keep the relationship going for a while. But no one is well-served, especially not the community members.
That is why I see this as so insidious. Community Association 101: Board members and the managers who serve them have a duty to care for the best interests of community members as a whole. Anything that works against that violates this fundamental principle of leadership and stewardship.

It’s Not Always Evil

Sometimes people just don’t know. A dedicated volunteer leader may not realize what is available. To illustrate: While performing an operational audit for a client, it became clear to me that volunteers had been performing management duties for a long time because they did not have a clear picture of what a professional could do. During that engagement, there was a need to find an interim on site manager. I was able to connect them with two PCAM-credentialed managers for short periods of time. Both of them blew the board away. A new world opened up to them over the course of a few short weeks.

When the Customer is Right

“The customer is always right.” 

– Chicago Retailer Marshall Field, 1905

There are times when our clients are always right. Like when expressing how they feel about something. Or when they communicate an expectation. Whether or not a feeling is justified or an expectation is reasonable is a different matter. In the moment, it’s irrelevant. That IS how they feel, that IS their expectation. We spend too much time judging the feelings and opinions of others. It’s a damaging, waste of time. Just listen. Acknowledge. Identify.

When the Customer is Wrong…or Perhaps Uninformed…

Sometimes a manager’s conundrum raises its ugly head when a client has difficulty accepting reality. There could be different reasons for this. Fear, ego, or simply a lack of understanding can be powerful obstacles. In this critical moment, a manager may feel she has a choice – tell the client the truth, or tell them what they want to hear. The truth is, a professional manager has a duty to provide their best advice, whether it will be accepted or not. The art is in the telling. Managers with high will discern whether their challenge is in the timing of the message, its presentation, or both.

Rolf Crocker, CEO/Principle of OMNI Community Management, LLC, in Fair Oaks, California, is one of my favorite thought leaders in the community association business. He has a unique perspective and a knack for helping others reach clarity. He taught me a rhetorical device to guide clients to what should be an obvious answer. A version he usually uses is as follows:

“This is the point in the conversation where I ask you if you want to hear what you want to hear, or do you want to hear what you need to hear? If it’s what you want to hear, we can talk about the weather, the market or your favorite sports team.”

This approach is genius. He’s making his point while allowing his listener the room to make light of it – for a moment.

Getting to Mutual Benefit

Boards and managers need to be deeply rooted in the fundamentals of business, ethics, and leadership. Management has to suck it up and prove value, sometimes without being paid for it at first. It’s a tough row to hoe, but “trust me and pay me” won’t always work. Once the opportunity for value is proven, boards need to see that value, respect it and pay for it. We must be responsible for ourselves, remember who we serve, and stay true to that, no matter the short term cost. Tell truth to power, tactfully but unfailingly. Forging and maintaining successful partnerships is one of the most fulfilling human experiences we can have. Please don’t blow it by throwing away principles and relying on a relationship based on influence. Those come and go. Partnerships based on respect, trust, and shared values are those that last. Done right, everyone wins.

Is this a pipe dream in the commoditized and occasionally political world of community association management? Nope. I’m proud of the relationships I forged with the communities I served. I am also comfortable with the few relationships ended by one party or the other. Those partnerships were fatally flawed and needed to end. My principles remained intact and there are no regrets. I’m not alone. There are some great managers, companies, and boards out there who get it. They are profitable in every way. Just ask Rolf.

Best Practices, Risk Management

Proactive Risk Management – An Investment

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An in-unit inspection and maintenance program can bring tremendous benefits to community associations. A careful analysis of each situation is needed to determine if and how a program should be undertaken.

Condensation drain line back-ups can result in thousands of dollars in damage. Leaky valves left unattended may result in the need for mold remediation. Burst washer hoses and rusted out water heaters could easily result in a significant master policy claim. One faulty smoke detector can result in injury or, worse yet, loss of life.

Can associations prevent such things from happening? Of course not. But a systematic in-unit inspection and maintenance program can go a long way to avoid or mitigate them. This may be an opportunity to prevent damage and control expenses. In-unit programs can also contribute to energy conservation, quality of life, and value to association membership.

Why Not A “Risk Management Inspection Program?”

Many high rise buildings have a seasonal filter change program. Why stop there? Why not use this as an opportunity to address other conditions and provide value to the members? Take the opportunity to raise awareness of potentially problematic conditions and assist unit owners to fulfill their duty to maintain? The list should include everything from tub grout to smoke detectors.

4-Point Analysis

1. Risk Management Analysis – Property Configuration: What kind of community is it? Will conditions in one home create problems for other homes or the Association as a whole? This kind of program would not apply to single-family home HOAs. High rise condominiums and cooperatives would undoubtedly benefit. Mid-rise and garden communities might also benefit.

2. Risk Management Analysis – Component Exposure: What are the elements in units? What damage could those elements cause? What are the potential soft and hard costs of that damage?

3. Resources: Is there on-site staff? If so, what are their capabilities and time constraints? Are contracted services an option?

4. Legal Considerations: A careful reading of the governing documents is required gain clarity on the ownership and maintenance responsibility for unit components. What is the Association’s authority per its governing documents and prevailing law? What liability considerations exist? These factors will play a part in how a resolution establishing the program is worded. Review with Association Counsel.

Implementing the Program

1. Using the 4-Point Analysis, decide on the intensity of the program. The scope could be as simple as an inspection followed by a report of findings to owners. This could also be an opportunity to check the condition of balconies and for early evidence of water damage from exterior sources a resident may not have noticed. Or it could be more extensive to include the performance of maintenance tasks such as filter changes, toilet flapper replacement, smoke detector replacement, or water alarm sensors.

2. Document the program as a policy (legal assistance is strongly recommended), and include inspections list and procedures.

3. Communicate, communicate, communicate the plan and its implementation. Highlight the reasons for, and benefits of, the program. Please do NOT send the message that this as a rule that must be followed. That would blow the opportunity for a very positive message.

4. A plan for following up is vital. The Board should decide in advance how to handle non-compliance.

Bonus Points

Some Community Associations have mitigated risk by implementing a policy to clarify and define unit owner maintenance responsibilities. The Association may be able to require the use of components that control loss. A braided ice-maker line is far less likely to fail than a plastic one. Heavy duty clothes washer hoses are less likely to burst than standard hoses. The Association may be able to require proactive replacement of high-risk components based on age of the component, such as for water heaters. Once you’ve identified the components in units at your community, consult with Association Counsel to craft the resolution. There may be pushback from some owners. Here again, communicating from the perspective of benefit to the owners and highlighting the benefit to all makes all the difference.

Too Much Work?

It may seem like adopting a comprehensive in-unit risk management program is too much work. But think about this – what can happen if you don’t do it? How much administrative and maintenance staff time is sucked up when emergencies happen? What happens to master insurance premiums when the loss history is littered with water or other damage? How many unit owners or their tenants have an awareness of how the components of their units work or should be maintained? Thinking about these factors when conducting your 4-Point Analysis may help you to see this as an opportunity to benefit members, the Association, and staff. If so, it’s not an expense. It’s an investment.

Best Practices, Communications, community associations, Customer Service, Professionalism

Nobody Trusts Herb Tarlek – Advice for Professionals Serving Community Associations

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How We Got Here

If you were to read governing documents for community associations written in the days of old (OK…the 70s), you might well get the idea there was a vision that volunteer homeowners would gladly offer themselves up to lead and manage their communities. The assumption seemed to be that communities would be full of willing, qualified and able owners ready to handle all the business of running the not-for-profit organization. Little did anyone envision the legal and technical challenges that would become part of the effort, much less the time that would be required.

Nearly half a century later, reality has set in. Volunteer leaders need professionals to some extent if they are to serve and protect the interests of their members. Regulation, emerging and ever-changing law, technical expertise, and available time are all factors. Yet, it is well known in the business community that serving community associations can be tough. It is a specialty niche, and professionals working in the space understand that. They know that, as compared to working in other forms of real estate such as residential, rental and commercial, it takes more time to get things done, usually at a lower profit margin.

But community members don’t always recognize this. It’s money out of their pockets, so of course, they want to watch their costs. A DIY, price-only, bottom line mentality can significantly influence financial decisions. The true cost isn’t always recognized….until after the lawsuit…or the third time something has to be fixed….or community spirit goes south….or the special assessment hits…Suddenly the cost of quality professional service and advice doesn’t seem so high after all.

It is very easy to chalk this thought pattern up to the prototypical penny-pinching board. But the issue may be deeper. Boards of directors may fail to discern the difference between up-front price and long-term cost, between investment and expense. It may be a lack of vision and the inability to perceive value.

The Issue is TRUST

Typically, there are many missed opportunities to build trust and provide value to association members. Vision, communication, and leadership are the keys to the perception of value. And a key component of recognizing value is trust.

A challenge for professionals serving community associations is your clients might not fully trust you. Consciously or subconsciously, you might be Herb Tarlek to them.

Yes, Herb Tarlek, the occasionally abrasive, egotistical & self-absorbed salesman from the old sitcom WKRP in Cincinnati. He isn’t trusted, not only for his godawful sports jackets but because it is crystal clear he’s in it for himself. His approach is selfish and transactional. Sadly, attorneys and consultants are sometimes perceived in a similar way. Some clients feel your primary goal is creating opportunities for billable hours. The research you do in providing opinions can look like billable busywork to them. When management companies highlight the value of their services it might seem like manipulative self-promotion.

Some community association lawyers and management companies have a knack for building trust and proving value. As a consultant, I am viewed similarly, so I’ve been happy to apply the following concepts I’ve learned from these exceptional community association professionals.

  • Ask More Questions: Lawyers who listen build partnerships. Those who ask questions get buy-in. Socratic training has benefits that transcend depositions and courtrooms.
  • Simplify the Message: Ego will not permit many clients from admitting they do not understand what their lawyers are communicating. Many lawyers don’t help themselves by communicating strictly from their training and perspective, forgetting that communication is supposed to benefit the client. The old W.C. Fields quote works against you: “If you can’t dazzle them with brilliance, baffle them with [BS].” The more words you use, the more likely you’ll be perceived as the self-absorbed, egotistical Herb, trying to sell them a justification for the fees you are charging. Using plain English summaries, FAQ format and other tools can help to make the communication palatable and trustworthy.
  • Use Humor: A little levity at the right time can build rapport and show clients there is a human behind the suit. So long as it’s genuine and you actually HAVE a sense of humor.
  • Give a Little Away: There is great power in the zero invoice. Choosing a moment where you can give a client a break can make a significant impression. An $800 invoice detailing all the time and activity followed by an $800 courtesy discount shows value. It shows the client it’s not all about fees, and that the relationship is appreciated. I’ve also heard clients recount with appreciation conversations with attorneys noting, “He was nice enough to tell me he was turning the clock off during our conversation.”
  • Give a Little Away (Part 2): Some law firms and management companies offer board training as part of their agreement. As soon as one is perceived as a consultant providing value, they are less likely to be perceived as a self-promoting salesman.
THE TAKEAWAYS …

  • Value begets trust, trust creates value.
  • Think relational, not transactional.
  • If you focus on billable hours or self-promotion, you may have an average client for a while. If you focus on giving value, you are more likely to have a great client for a long time.
  • Think and communicate from the client’s perspective. Always.
Best Practices, community associations, Governance, leadership, Meeting Tips

Meeting Tips #5 – Little Things Set a Tone & Help You Get Stuff Done (Part Deux)

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“Excellence is doing ordinary things extraordinarily well.” – John W. Gardner

Nip It in the Bud

One negative person can dominate the tone of a whole room. A proactive approach can be an effective strategy to keep things positive and productive. Arrive early. Before the meeting starts, read body language and other non-verbal cues. Look for members who may have expressed negativity in the past, or those you know have a complaint they want to bring up. It might feel natural to duck and cover, waiting for the meeting to start. To defeat fear of conflict, try approaching the person with a friendly greeting. You might be amazed. Short, personal, respectful and positive interchanges can be a game changer. The person might just tell you what’s on their mind and you will be able to have a productive interchange even before the meeting starts. Taking the initiative in showing respect and civility makes it easier for people, even the unhappy ones, to be at their best and respond in kind. It won’t always work. But if you don’t try it, it definitely won’t work.

Bob’s Got a Point

Some people chafe at the thought of using Robert’s Rules. It might seem overly formal. Some chairpersons seem to use it as a sledgehammer to control people, further giving Ol’ Bob a bad name.

While it makes no sense to employ every detail and nuance included in Robert’s to a small group, there is one process that can make a world of difference. When a board sticks with the basic discipline of making motions, it can save a ton of time and make sure the discussion stays civil and on point. It also emphasizes two key principles that are essential for group decision-making. The will of the majority is done and the minority is heard and has the opportunity to impact the final decision. Too many boards talk their way into a motion and try to get everybody on the same page. I remember one board president, who was a professional grant writer and part-time poet, who wordsmithed every motion on the spot. Approving minutes with an edit could take 20 minutes! Here’s the process that negates talking your way into a motion and the endless and inefficient chatter that goes with it:

  1. Make a specific motion. A board member would like to approve an action.
  2. Second the motion. Another board member agrees the thing is worth considering. If there is no second, there is nothing to talk about. The motion dies. That’s it. Stop talking.
  3. Chair calls for discussion. Only now is discussion initiated, and it is focused on the merits of the motion. Questions are asked and answered. MAYBE a better idea comes up – and if so, the original motion can be amended. If it’s clear the motion seems fatally flawed, it can be withdrawn and replaced by a completely new motion – or not.
  4. Call the question. Once it becomes clear to the chair or other board members that the points have been made, it’s time to vote. If someone objects to calling the question, they should have a brand new point to make.
  5. Vote. A 5-0 vote has the same effect of a 3-2 vote. If board members are respectful and gracious…i.e. good fiduciaries and leaders… the minority will support the decision and set a tone for the community.
  6. Next!

If your meetings are chaotic and directions unclear, give it a try. You might be surprised.

And Finally…

I’ve had a mentor for over 30 years. One of the reasons I’ve stuck with him all these years is “Best Idea Wins” has always been his motto. He stays faithful to the principle, no matter how challenging the people and circumstances have been.

Think about it… a good idea is a good idea. It doesn’t matter who comes up with it. It doesn’t matter how well or poorly the idea might be communicated. Ideas have no ego. Ideas lead to solutions. Committing to Best Idea Wins demonstrates principled leadership, especially when things get complicated and contentious. It creates a space where people can resolve conflicts and be at their best. Try it. You will inspire the same respect that I have for my mentor.

To all the board members and professionals who serve them, I offer this encouragement. Please never forget that when you choose to carry out your responsibilities in an excellent way, you absolutely make a difference in the quality of life of everyone in the communities you serve, sometimes in large ways, sometimes in small ways, whether or not members realize it or not, and whether or not they ever say “thank you.” The only person who can take that truth away from you is you. Please don’t let that happen

So there you have it. Thirty years of meetings boiled down to twenty-six tips over five blogs. Have you found any that work for you that we missed? Let us know!

Best Practices, community associations, Meeting Tips

Meeting Tips #4 – Little Things Set a Tone & Help You Get Stuff Done

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“Great things are not done by impulse, but by a series of small things brought together.” – George Eliot

Excellence does not come about by accident. Nor is it typically the result of heroic leaps and bounds. It is usually the accumulation of incremental actions, the compounded interest earned from habits applied to what might seem to be insignificant details. Exceptionally productive meetings are no different. They don’t happen by accident. And there are several little things that can make a big difference.

Association board members are fiduciaries. The principle applies equally to large associations with multi-million dollar budgets and a 20-home HOA. Board members are taking care of other people’s stuff. That’s serious. It’s important to do good business at meetings.

Room Logistics Make a Difference

It can be a challenge to stay sharp when you are meeting in someone’s living room. This can be a challenge for communities without appropriate meeting space on site, or without easy distance of a local school, library, fire hall, or other suitable locations. The manager of one upscale condominium association told me of a client who had to aggressively recommend that they cease serving wine before meetings in the board president’s unit. The indecipherable minutes helped to make the case for her. I doubt the wine would have been an issue if the meeting wasn’t held in someone’s living room!

Once a suitable space has been identified, room setup helps to set a tone. Tables set in a “V” or “U” configuration help board members to communicate effectively. It also helps attendees to understand that it’s the board’s business meeting, not a community chat. Consider the audience. In the case of one client who holds their meetings in a very pleasant community room, I realized the location of the couches and chairs led to attendees sitting at the back of the room. Some had to turn their heads to see the board. After the first meeting, we re-arranged the furniture to bring the audience closer to the front of the room, which made it easier to follow the meeting. It looked less like a living room and more like a meeting hall, with as much of the seating faced towards the board. They still got to sit in comfy furniture, but left the meeting without cricks in their necks! This, along with adjusting the board’s seating arrangements, helped to completely change the tone of the meetings.

Members Are Important!

While the room configuration helps to establish a businesslike tone, it doesn’t need to be inhospitable for the members who have dedicated their valuable time to get involved in the community – an effort that should not go unappreciated.

One exceptional client from my management days makes a habit of asking if the meeting is the first for any attendees, whether they are new move-ins or not. They are invited to introduce themselves, and the board welcomes them warmly and introduces themselves and the management team in the front of the room. It’s an excellent way to set a tone for the meeting.

Taking the time to explain the Why to members during meetings is a small thing that helps everyone. This is where situational awareness  becomes very useful. If the chair is aware of the audience and can read the room, she may pick up on disconnects and side comments. Other board members should stay engaged as well to assist and support the chair.

If someone doesn’t know why the board doesn’t allow comments from the floor throughout the meeting, find an opportune time to explain why in positive terms. Avoid emphasizing what they can’t do – help them to see how they can provide input and ask questions. Is there a hot topic on the agenda and an unusually large crowd chomping at the bit to participate in the open forum portion of the meeting? Remember some of them may be first time attendees who don’t understand the structure of the meeting. It pays to walk the group through the process up front, highlighting that time limits or other meeting management systems are in place to make sure everyone can be heard. Avoid the natural tendency for defensiveness. Embrace the dialogue. Look for opportunities to educate and communicate shared values.

Goals

All these little things can help create a space where the board can do the business of the association more effectively. It won’t always work. These days, civility and respect seem to be in increasingly short supply. In a world that seems determined to create Us vs. Them paradigms, leaders have a challenge. In reality, there is no Them. There is only Us. It is vitally important for board members to embody and promote these values. The last blog in this series will explore some final tips to help. Stay tuned!

Best Practices, Communications, community associations, Emotional Intelligence, Governance, leadership, Meeting Tips

Meeting Tips #3 – O Say Can You Hear?

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Community association boards do the bulk of their business at board meetings (or at least, they SHOULD). It can be tough for community members to observe the proceedings and resist the urge to chime in from the audience, especially on hot topics. This happens often with residents who do not understand that community associations are based on the representative democracy model. Yes, the board is ultimately responsible for picking the community center wallpaper…it’s not a community vote…

Wise boards do everything they can to avoid operating in a vacuum. They know they are responsible for making decisions that benefit the membership as a whole. They also learn that group leadership is a messy business. The odds are less than great that everyone will be happy with every decision. Convincing a vocal minority that they have been heard can be tough.

Meetings are an opportunity to build community through listening. Sometimes the format of board meetings can create unintentional landmines in this regard. Here are a few ways to flip the script and make opportunity.

Owner Comment Period

Many state statutes require a period of time be set aside for owners to ask questions and make comments. Even if it might not be required in your location, it’s a terrific provision. There are a few nuances to how a board administrates the comment period that will take full advantage of listening opportunities.

  • Timing: Some communities choose to have a comment period on the agenda before action items to allow for input. Others find that most of the comments and questions are on topics unrelated to the action items and find it more beneficial to put comment periods later in the agenda. I had one client that found it most effective to have two short open forums: the first for input before the board discussed action items, and the second one after, to allow members to bring up items unrelated to action items.

The key is to thoughtfully consider how members can best contribute to the discussion and be heard. Remember – you never know where the next great idea might come from! Be ready to hear it.

  • Following up: A typical refrain from some community association members is that things are discussed at meetings but nothing ever happens. Sometimes the culprit is how the owner comment period is conducted. Some matters are simple management issues that can be addressed on the spot. However, boards are wise not to make decisions on new issues brought up in open forum when they are unprepared. Some boards use the stock phrase, “We will take that under advisement,” but they don’t actually have a system to close the loop. Here are a few tips to help boards listen, which will also give their community members the confidence they actually are:

  1. Take notes while the member is talking to capture the main points.
  2. Ask questions for clarification as needed,
  3. Restate. A great phrase I’ve used is, “So I think I heard…”
  4. Embrace passion. If an owner is upset, they care. There’s energy there. Perhaps there’s an ad hoc committee lurking, just waiting to be formed, that will help the board turn a problem into a solution.
  5. If a matter is worth discussion, add it to new business in the meeting agenda.
  6. Make it clear if a matter is delegated to management, a committee, or a board member.  Who has the ball?
  7. If a matter would require an unbudgeted expense, you can indicate that it might be included in next year’s budget discussion and direct that it be added to the budget file. Just make sure it’s included in the first draft, (a.k.a. “the kitchen sink version” – for more on that concept, CLICK HERE) of the budget, no matter how wacky the idea might seem.
  8. Make sure the manager or another party is responsible for producing a meeting task list. The list should include not only the follow-up items from motions, but also all the little details noted above that would get lost otherwise.

Hint: If owners are using valuable meeting time to bring up day-to-day management issues, it may be a sign your processes are not clear. Asking a member if they have reported the matter to management is an appropriate response. If they have, but believe the response was inadequate, you can let them know you appreciate the report and will help to connect the dots between the owner and management. If they have not, it’s a golden opportunity. Listen to the report, then let them know management will take care of it. Then remind them that in the future, they need not wait for board meetings to make requests. That message reinforces the association’s service procedures and helps all participants understand the best way to be heard in such matters.

Recognition

Don’t forget to thank volunteers and managers for their efforts. Thank members for their comments. Recognize good questions. If a member discussed a problem, show empathy for the member even if they were a part of the problem. Practicing recognition promotes active listening and demonstrates the emotional intelligence that helps members know they have been heard.

Hot Topics

Some disagree with me, but I’ve always recommended that those chairing meetings open the floor for specific comments on particularly contentious issues to allow members to express themselves. This uncommon action of adding impromptu comment periods proves the board is serious about member input. You can still set a time limit to keep things going. You can also request that if someone else had already made a point a member wishes to make, that they make a simple statement of agreement and do not make repetitive points.

Is This the Right Meeting?

Board meetings are designed to conduct business. If the member comment period is taking over the meeting, the community is telling you something. You have bigger issues to address. When board meetings become free-for-alls, it has become a de facto “town hall” meeting. It also may be telling you the community is deep in the weeds and needs to take a step back and do some serious planning. Board meetings are great for doing the basic business of the community. But they are lousy for town hall meetings and for strategic planning.

Town hall meetings are great for either collecting or disseminating information. No business is done, just communication. It amazes me that most community associations never have a yearly planning session soon after annual meetings to discuss the goals for the upcoming board year. If the community needs to hire an outside facilitator to help plan and conduct town hall or strategic planning meetings, it can be well worth the investment.

Carpe Momentum

Meetings are opportunities to lead, to connect, and to build community. Listening is at the heart of all three. Why not seize the moment?

Best Practices, community associations, Governance, Meeting Tips

Meeting Tips #2 – Prepare TO Die? Or is it Prepare OR Die? Same thing!

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Classic line from “The Princess Bride”

The Five Ps

Proper preparation prevents poor performance. Think about meetings of any type you’ve attended where the participants were well prepared. Quality discussion, good decisions, the right balance of thorough and efficient, right?

Board members are fiduciaries. They have been entrusted with taking care of association members’ assets. Their decisions can make a difference in the quality of life for everyone who lives in the community. Meetings are where decisions are made. Good performance is important. Preparation is crucial.

Are You Prepared?

Signs your board may need to focus on meeting preparation:
• “That’s covered in your Board package”
• “I’m not ready to make a decision”
• The sound of a board member ripping open his board package upon sitting down at the table.
• “Did we get that (report, proposal, memo, etc.)?”
• Endless discussion on details, possibly involving eye rolls, facepalms, and other frustrated non-verbal communication
• Pattern of last-minute additions to the meeting agenda
• Asking the same questions that were answered last month

End result: Death by meeting.

Two Sides of Preparation

Like so many other situations in community associations this can be a system issue, a performance issue, or a combination of the two. Be clear on the real problem.

System: Are those responsible for providing information in advance of the board meeting (managers, board members, committees) providing adequate data for the board to make informed decisions? Does the packaging of the information work for the participants (electronic or hard copy, visuals, analysis, the organization of data, etc.)? Does the established schedule for board package delivery give participants sufficient time to thoroughly review it?

Performance: Do participants read the board package? Are the packages delivered on time? Do the packages answer questions or raise them?

Preparation Tips

Board Members: One of the primary duties of board members is to read. If you need more time, make sure the expectation is clear. If the data does not speak to you, share how you’d like it to be presented. If you have questions about a subject, ask about it before the meeting. Make sure committee members and others who contribute to the board package are aware of the schedule for meetings and package delivery.

Managers: Board packages are your opportunity to help the board do its job and to gain respect as a professional. A bunch of proposals and memos attached to an agenda is not how a professional prepares a board package. Never throw data at your client. Review, analyze, frame, and explain. Review information with a critical eye with your client in mind, anticipate the questions they will ask and provide the answers in the package. Present information in a way that speaks to your specific client. Ask if the board needs their packages sooner.

Don’t Be Inigo’s Victim

You didn’t kill his dad. You don’t have to prepare to die.   But you do need to prepare.  Remember the “Five Ps” and escape death by meeting.  Together, managers, committee members, and boards can create and execute a system that helps everyone to efficiently and sufficiently prepare and do great work in the service of their communities.