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Attitude, Best Practices, business life, community associations, Culture, Emotional Intelligence, HOAs, Professionalism

Civility in an Uncivil World

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by Chantu Chea CMCA, AMS

Over the past few years, some aspects of customary, socially correct behavior has seemed to regress or at times even disappear.  From leaders in the highest offices to our most beloved celebrities, we can read about name-calling, blaming, threats, and even outright violence.  Is it really surprising when these behaviors trickle into our communities and work spaces?  In order to guide our communities in a more positive direction, it helps to identify uncivil behavior and lead by example.  With a lot of deliberate, consistent effort, our positive behavior can become contagious.   

We’ve all dealt with the outburst from a client or Unit Owner who doesn’t get their way and writes a dramatic email or says something nasty.  It’s easy to dismiss them as unhinged, ignore all their future complaints and get defensive in these unpleasant situations. It’s important to be self-aware of these human tendencies, because it can lead to habits that will not serve you well.  If you hide from the tough conversations, you might miss out on the opportunity to connect with others, learn from the interactions and grow.  Even though it may trigger tough emotions to deal with the challenging client, confronting them can nip problems in the bud.  You may even gain an ally!  Start by making a conscious effort to put yourself in the strongest mental state so that you are best-equipped to deal with the inevitable challenges that arise.

  1. Self-Reflection: Be cognizant of how much media you’re taking in every day and the influence it might have on you.  The trend of constant media and social network notifications may work well for those who benefit from extra views or clicks, but excessive exposure might have an adverse impact on our thoughts, attention and behavior.  Sometimes we expend so much emotional energy reading the news that by the time we arrive at work, we’re depleted.  Disconnect from the breaking news long enough to focus on what’s most important, both personally and professionally.  How is the information you absorb moving you towards your goals and who you aspire to become? 
  2. Empathy: Depersonalize the situation whenever possible.  In more cases than not, the client isn’t yelling because of you but because of the situation.  Think about what they might be going through in their personal life with the challenges in the world and take a deep breath before responding.  You may be the only person who listens to them today.  If you can, counter their distress with a calming tone and a thoughtful response.  Will your undistracted attention for the next ten minutes save you hours over the next month? 
  3. Situational Awareness: Some of us have also noticed situations where someone makes a bold political statement to strangers or in the workplace, under the assumption that everyone agrees.  I’ve seen it make others in the room very uncomfortable or outright angry.  While it’s tempting to share your opinion about the latest piece of legislation in Congress, don’t forget to take note of your environment, your relationship to the listener and the possible repercussions.  For example, if you’re getting interviewed for a job, you may not want to risk blaming a person or administration for the current events of the day.  Even if the community is in a location where the demographics seem to point to a particular opinion, you don’t want to put your foot in your mouth later.  Once you learn about the political or ideological leanings of a person, just remember to keep it professional at work.

Keeping these habits in mind can help us deflect and appropriately respond to uncivil thoughts and behaviors.  Some other challenges that you may run into at work can be ameliorated by practical strategies.

  1. Write it down: Some people’s stress shows up as aggressiveness, while others’ stress manifests as anxiety.  Anxiety can cause us to start thinking selfishly or otherwise worry about possibilities that may never happen.  When others come to you with concerns or hypothetical situations, fight the inclination to dismiss them as unrealistic.  Instead, try brainstorming your concerns (or your residents’ concerns) and plan some possible solutions.  The anxiety becomes less of an abstract idea to obsess over and more of a concrete problem you can solve.  What are the pros and cons of each option?  What is the worst thing that can happen and how can you mitigate it? 
  2. Set Expectations: In a world where we can get instant groceries, dates and packages with the click of a button, some people expect the same instant gratification of their community manager.  Asking to “speak to the manager” has become an internet joke.  For managers, it can often translate to copying the entire Board of Directors to an email.  Unfortunately, some creative solutions require time to develop, especially if they are to last.  If a problem will take some time to resolve, let the resident know the challenges you are considering.  Provide an estimated time for completion or resolution and keep them in the loop of any progress. 
  3. Acknowledge opposing views: Things aren’t always black and white in community management.  Nor can we predict the future.  So it’s important to acknowledge counter-arguments even when they don’t fit the narrative we want to create.  If you make a mistake, predict something wrong, or there are possible negative consequences of your recommendation, talk openly about it.  How might you pivot your plans moving into the future? 

It can be instinctual to tune out anything that requires extra time or energy when it feels like you don’t have any to spare.  With everything going on in the world, our emotional state and the example we set may be the least of our worries.  However, as a leader of your community, you are in a position to be a calming and positive influence.  Small, deliberate interactions can accumulate and create real change. You may find that you not only save time in the long run, but you also get a little peace of mind!

community associations, condo associations, Cooperatives, Culture, leadership, values

Culture – Let’s Get Intentional

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In our overview of culture in community associations, we noted similarities with other organizations, whether professional, non-profit, social, or familial. We highlighted that there are three primary classifications of organizational culture.

Like most other organizations, associations tend to fall into the “Unintentional” category. Time is a critical factor. More in-depth organizational analysis is most rare. Getting a volunteer board to meet for regular business can sometimes be a challenge. How about dedicating even more time to discuss values, vision, and mission? That might feel impossible. Let alone floating a full-blown retreat with team-building exercises.

You Can See Clearly from Higher Ground

And yet, when community association leaders invest the time to elevate the conversation, they find that it pays back in time and energy. Organizations create and perpetuate an effective and sustainable culture in which principled action is cultivated. Once identified, underlying principles lead to fewer ego-driven opinion battles. There is a context to the conversation. Healthy debate replaces unproductive arguments that suck the life out of the participants.

The result of such an elevated time investment sets up a principle hierarchy for decision-making that looks something like this:
• Values (The Why – what’s important?) drive Vision
• Vision (Where do we want to go?) drives Mission
• Mission (This is what we are about) drives Strategy
• Strategy (How do we make this happen?) drives Tactics
• Tactics (The day-to-day actions we take)

Flow the hierarchy backward, and it looks like this: Our day-to-day decisions make more sense because we judge them in the context of our strategy. Rather than reinventing the wheel or exhausting all parties by going in several directions at once, our strategy is in harmony with our mission. We know what we are about and what we need to focus our energies upon. This is because we have vision. We know where we want to go, and our mission gets us there. At the bedrock of all of this are our shared values. Certain things are essential. We’ve been honest with ourselves and compared our reality with those values.

That all sounds lovely. It might also sound like a pipe dream. It doesn’t have to be. Combine realistic expectations with some practical steps and you’ll get there.

All or Nothing?

Do you need the whole package of values, vision, mission, and strategies to start your intentional culture? No! And that’s where most organizations get stuck. Wise leaders apply the sage words of Arthur Ashe: “Start where you are. Use what you have. Do what you can.”
Like many things in life, the journey may be more important than the destination. Developing the habit of a higher level, principled thinking is the first step. From time to time, I will start meetings with a touch of comedy: “So who are we and what are we doing?” It sounds like levity, but it speaks to a bigger picture and sets a tone. Keep at it, and the baby steps will eventually add up.

So How Do We Do It?

There is no one right way. Every group and situation are different. Some need to rise from the ashes of disaster to get the motivation to do it right. Most need to look for opportunities, however brief, when they can poke their heads up out of the weeds to see what’s already there in front of them.

Baby Steps: It doesn’t matter where you start in the hierarchy. Can you agree on a “Statement of Values?” Great! One or two clear elements of mission? Please write it down. A Vision of what everyone would like to see? Awesome! If you have an agreement in one of them, it can lead to more later. If you stick with it, it will gel over time.

Practice Affirmative Inquiry: We’ve always said the Parrado Principle has a slightly different iteration in community associations. The ratio of people and issues that drive the corresponding amount of time and effort probably isn’t 80/20. It/s more like 95/5. Unfortunately, one of the foibles of human nature is that we will dwell on the 5% that divides us instead of the 95% we have in common. But what we have in common provides the most vital foundation for success. Get in the habit of asking, “What’s right?” instead of, “What’s wrong?”

Be Mindful and Seize the Opportunity: Listen carefully. Pay attention to successes. Look for patterns. Shared values are always there, waiting to be recognized. Some clarity on vision or mission may pop up while doing business. When you hear it, call it out. Record it somewhere, no matter how rough.

Here is a good, natural, non-confrontational question to ask at the right moment: “So I think what I am hearing is…. Is that right?” If heads nod, follow with, “I think we just found a (shared value/mission statement point).”

Annual Planning Sessions: This simple practice can make a world of difference. Scheduling a special meeting to discuss what you’d like to accomplish over the next year can be a terrific jumping-off point. The most useful time to hold this meeting is as soon as possible once a new board is formed after an annual meeting. You may start with strategy, but by applying the techniques above, you may find yourselves painting a bigger picture. After all, if you tell me what you want to do, I will understand what’s important to you. Once I know what’s important, values and vision begin to emerge.

Change Happens…Use It!

People change. Times change. Perceptions change. Understandings change. Physical realities change. Adopted governing principles must grow with the organization in order to remain relevant. To prevent these principles from becoming a nice and shiny, yet irrelevant plaque on the wall (a precursor to the dreaded “Actual Culture”, these must be reviewed and challenged regularly.

If you are already following our recommendation to conduct an annual planning meeting, include reviewing your principles. This is especially important as you are going through the baby step process. It may take years to clarify your values, vision, and mission.

Why Wouldn’t You?

The gap between intentional and unintentional culture is the wherewithal and commitment to finding and memorializing what’s already there. Every group has shared values. Vision and mission are waiting to be found. Taking the time and energy to identify them creates a foundation that your association can rely on when it faces everything from day-to-day challenges to major disruptions.

Clarity in culture reminds us who we are and what we believe in. It saves us from situational thinking, conflicting direction, and wasted time. Any action you take to transcend mere tactics adds depth to your association. It builds team trust, commitment, and fulfillment. All upside with no real downside – so get to it!


community associations, condo associations, Cooperatives, Culture, HOAs, leadership, Uncategorized, values

Culture – The Missing Piece

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The culture of an organization either creates the space for sustainable, defined success or makes it difficult, if not impossible.  A healthy culture allows the organization to tap into the knowledge, talents, experience, energy, and intellectual capital of participants.  It does not permit ego, politics, or dysfunction to get in the way.

In this context, culture can be defined as the environment that establishes norms of behavior for the people in the organization.  It involves the connection between the goals and values of the individual and those of the group.  Culture is embodied in author Seth Godin’s statement: “People like us do things like that.”

Organizational culture provides the context in which the stakeholders understand their roles and can concentrate on doing their best. Healthy cultures in community associations put boards in a position to establish desired results and provide the necessary resources to achieve them.  Focusing on those results delivers rich payoffs. Building a healthy culture yields exponentially compounded interest in terms of time, energy, progress, and community spirit.

Culture is the difference-maker, and yet, community association managers and volunteers almost never talk about culture directly.  It’s about time we did.

Three Cultures

Organizational culture tends to fall into one of three general categories:

  • Intentional Culture- Values, goals, and norms have been identified, codified in some form, and provide the basis for principled action.  People in the organization are clear on “The Why.”
  • Unintentional Culture- Values, goals and norms are left to chance.  Defining them depends on who the influential people are in an organization at a particular time.  Frequently, decisions are made and actions taken on an ad hoc basis.  Sometimes leaders focus on rules and written procedures without explaining why they matter. Other times, there is no focus at all.  Everybody works too hard at reinventing the wheel or making it up as they go.  If such a community is fortunate, things will go well riding on the backs of a few good people.
  • Actual Culture- Values, norms and goals have been identified.  There may be mission, values, and vision statements with lofty aspirations printed on glossy marketing materials and plaques on walls.  Yet, leaders and members of the organization violate those ideals on a regular basis without correction.  The inherent hypocrisy of the organization destroys morale and trust. 

Most organizations fall into the unintentional category.  Their leaders may have no concept of culture or fail to recognize the benefits of the time investment necessary to build a successful one.  They cannot see that the hard work up front will significantly decrease their time and effort in the long run.  They are so caught up in the day-to-day operation that they miss the bigger picture.

What About Community Associations?

Why, specifically, do many community associations tend to have an unintentional culture?  First, boards can be mired in tactics, too busy putting out fires and stuck in the weeds to elevate their perspective.

Second, exclusive devotion to the standard board meeting model can cause an unintended consequence. Leaders and managers are trained to follow the legal requirements for board meetings.  They correctly conduct the association’s business in accordance with open meeting requirements and the standard meeting agenda.  Well-planned and executed board meetings are highly effective in handling the day-to-day business of the association.  However, regular board meetings are horribly ill-suited to address bigger picture issues, complicated projects, and strategic planning.  These discussions will never fit into a standard board meeting agenda in the best of times.  Switch it up by scheduling some town hall or special meetings to listen to what members have to say, get ideas flowing, and deal with big picture issues.

Getting to Higher Ground

Getting out of the weeds is not easy.  Leaders and managers first need the awareness that business as usual leaves too much to chance.  Then, they must recognize that the work to build healthy organizational culture is a time investment that will pay dividends.  For some groups we’ve worked with, it took disgust borne from crashing and burning to motivate them to meaningful change.  In our next segment, we will offer a roadmap to intentional culture for community associations. 

Best Practices, community associations, condo associations, Cooperatives, HOAs, Management

The Annual Calendar – A Key Component of Management Success

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No one can dispute the value of preparation. Coach Wooden knew it firsthand. By his own admission, he was a poor tactician. Still, he was one of the most successful and respected coaches in the NCAA. No team ever out-prepared UCLA.

For various reasons, many managers fall short in this area. They are in reactive mode much of the time. Acting without planning quickly creates a vicious cycle of rushed response and crisis triage. Many never learn the secret of slowing down in order to speed up. 

It’s no surprise then, that many of the annual calendars (a.k.a. “management plans”) in use tend to be less than complete and not always user-friendly. An effective calendar identifies as many controllable activities as possible. It breaks down those activities to specific deliverables. It creates a mechanism to track activities and proactively plan for upcoming events. It is a tool to analyze the workload and make adjustments. It promotes accountability and communication. Creating and implementing a detailed annual calendar will make you the Coach Wooden of community association management!

Manager par excellence Karen Harris, CMCA, AMS, of the Old Georgetown Village Condominium in North Bethesda, Maryland, began utilizing a detailed annual calendar 16 years ago. She notes:

“The annual calendar system is a comprehensive management tool that enables the manager to “manage.” It initiates the planning and discussion between the Board and Management at the beginning of each year, giving everyone the data and participation necessary to promote buy-in.

With an emphasis on organization and goals throughout the year, it keeps management on track, prompting action instead of inaction. In the field of property management, unexpected emergencies always pop up. If you are on top of everything else, you can minimize overall stress. Sitting in the driver’s seat is the best place to be whenever possible.”

Note: This blog is geared towards managers, but a detailed annual calendar can be hugely valuable for volunteer leaders of small and self-managed community associations. In addition to the benefits noted above, the calendar memorializes processes and supports continuity of services as board members change over time.

Yeah, but…

Buying into the concept can be a challenge. It is a lot of work up front. And it requires accountability.

10 Reasons to Use a Thorough Annual Calendar and Include it with Status of Items Noted in Every Management Report

1. You will save time by being more efficient – no time wasted on fixing errors and communicating embarrassing problems.
2. You will rush less, thereby greatly improving the quality of your work.
3. You will have the confidence that you have more things under control.
4. You will have less stress and worry.
5. Your clients will have more confidence in you.
6. You will reduce the potential for unnecessary expense.
7. Your rear end will feel better. (Since you won’t forget important events and deadlines, those things can’t bite you in the butt!)
8. You will control your time better.
9. You will set yourself apart from the pack. (Most managers in the industry do not do this).
10. You will have a clue why you do what you do – once you embrace the concept and use it as a tool, everything makes more sense and a whole new world opens up to you.

Busting Four Commonly Held Myths 

1. Myth: “I don’t have time.”
Reality: If you don’t have time to do things well now, when will you have time to do things poorly later?
Reality: Planning properly and executing a plan saves time because you are far more focused and efficient than when you wing it and perform tasks randomly.
Reality: Successful managers learn to recognize the difference between a time investment and a time expense.

2. Myth: “My clients don’t care – they don’t read my reports as it is.”
Reality: Even if they don’t read it after the first time they see it, no client has ever
failed to be impressed when first introduced to the concept.

3. Myth: “If I tell the client everything I plan to do and for some reason can’t deliver, they will hold me responsible. What they don’t know won’t hurt them or me.”
Reality: Whether the client holds you responsible or not, you ARE responsible. Some think being held responsible is a bad thing.
Reality: If you keep winging it, it’s only a matter of time before you will be held responsible for a major error because you failed to plan – better to be held accountable for little things if they don’t go 100% according to plan.
Reality: Your client will find your willingness to be accountable and honest refreshing. They will trust and respect you for it.

4. Myth: “If I give them all that data, the Board meetings will take longer and they will nag me about everything.”
Reality: The first meeting or two might be longer, but you will find that because they know you have things under control, the meetings are shorter…and they get OFF your back.

OK! I’m a believer… now what?

When is the Best Time to Create or Review a Calendar?

1. When you take over a new client from another company or manager (helps you to learn the property QUICKLY)

2. Right after a budget is adopted and while you are completing your 12 month spread (helps you merge the physical and administrative plan with the financial plan)

What do I Need in Front of Me to Build my Calendar?
1. 12-Month budget spread
2. CC&Rs or bylaws
3. Policies that might impact management activity (ex. ARC)
4. Contracts
5. PM schedule (if it exists…and if it doesn’t, make one!)
6. Annual meeting file
7. Anything from the files that helps you to identify when things are to happen at the community (paid bills, etc)

The 10 Steps to Success

Step 1: Identify the tasks you can control and do routinely, and those tasks and projects that are on the plate this year in the following areas:

  • Administrative tasks (annual meetings, budget processes, etc)
  • Contract administration
  • Board, committee, and community activities
  • Basic preventive & scheduled maintenance
  • Capital and other projects

Step 2: Identify the steps you need to complete each task

Step 3: Identify deadlines and decide during which months these tasks should be completed – work backward from deadlines (ex: contract award process).

Step 4: Draft the plan on a chart in a format that allows you to see the total picture and how tasks relate to one another

Step 5: Review the plan and adjust the timing of events as possible so that you don’t overload yourself.

Step 6: Roll out the plan in the next management report. Let the Board know their input is appreciated and that the plan will be adjusted if needed as time goes on.

Step 7: Schedule time to review your plan during the month, verifying you are on task in the current month and prepared to handle next month.

Step 8: Mark completed items in the chart to track performance and include in the monthly management report.

Step 9: At the end of the year, analyze performance vs. plan, learn from the past, and adjust the plan or your performance as necessary.

Step 10: Enjoy the benefits of being a truly professional manager!!

Means & Methods

Any plan is better than no plan. Annual calendars or management plans exist in various forms ranging from lists by month to tasks plugged into Outlook or Google Calendars. To achieve all the goals outlined above, it is most helpful to have one master document. To find a sample and template you can use, we’ve placed a link on the Association Bridge website for you.  Look for the Samples You Can Use! box.

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

Inequity of Scale – The Challenge of Leading and Managing Small Condominium Associations

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Association Bridge was formed in large part due to my experience teaching CAI’s old “Essentials” program for community association volunteer leaders. Ken Ingram of Whiteford, Taylor & Preston and I were tapped to teach the full day program for a few years at Reston Association. RA member associations are typically very small communities known as “clusters.” By the early 2000s, some of these small associations were facing some serious challenges. The class gave them access to resources that board members in larger associations would probably take for granted.

I will never forget hearing a board president proudly explain his excellent system for keeping the books for his cluster.

“I use different color ink in the checkbook.”

“Oh, you mean to help identify different types of expense and income or something?”

“Well yeah, kinda…”

“OK, can you share the system with the class?”

“Sure. You see, everything in green ink is cluster activity, and everything in blue is mine…”

“Yours?”

“Yeah. That’s how I can easily separate the cluster activity from mine in the account.”

“Wait, are you saying you collect your neighbor’s fees, deposit them in your personal bank account… and pay cluster expenses from the same account?”

“Well…yeah.”

Yikes!

Time & Attention

Teaching the class was an instructive experience. Board members were searching for creative ways to get two things all community associations need if they are to be managed effectively – time and attention. I frequently heard the refrain, “Our management company doesn’t do ANYTHING!” Without fail, some follow up questions revealed the boards weren’t paying for very much of anything. Some gave up and went fully self-managed. They were doing a lot of work themselves to make up the difference between what they wanted from management and what they felt they could afford.

It reminded me that small associations have to make tough choices, all borne from the inequity of scale. Certain costs simply do not scale. Managing a 20-unit building will likely require the same number of site visits as would a 150-unit building. The time required to create board packages, produce monthly financial reports and attend meetings will not scale to the unit count. Neither will the costs of independent audits or reserve studies. This can apply to capital projects as well. A 3-story high rise and a 10-story high rise could have the same building footprint, meaning that the cost to replace their respective roofs may be about the same. Bottom line: Inevitably, unit owners in small condominiums are very likely to pay more per unit in total fees than their counterparts in larger condominium associations.

As a result, boards of smaller associations frequently opt for less service, requiring investment in the time and knowledge base of volunteers to make up the difference. That burden can be very difficult for volunteers.

There may be solutions that require some creative thinking. While I applaud the resourcefulness and sense of duty shown by the board member who co-mingled personal and association finances, I pray he never gets in a beef with a fellow unit owner. That association clearly did not have any crime coverage. I doubt they had proper directors & officers liability coverage, either. Not all creative ideas are great ideas.

What Can We Do?

The goal is to identify the needs and wants of the board and membership, and then design a plan that is in harmony with them. It is a mistake to assume that small associations can’t afford “good” service. Such thinking is a variation on the sin of fee targeting. Many a community has found that a cheap price results in a high cost later on. Whether it comes in the form of making up for deferred maintenance, the bottom dropping out of resale values, disengaged unit owners, or dissatisfied residents, sooner or later everyone bears the cost of short-term thinking.

Analyzing the Operation

A Responsibility Grid is an excellent tool to help see where you are and where you have gaps. First, list the tasks involved in operating the association along the left margin to create rows. Then, along the top of the page, create columns by listing the volunteers and paid personnel or contracted parties who have roles in the operation. A sample grid you can use can be found HERE.

Once the tasks and responsible parties have been listed, fill in the grid boxes, describing each party’s current role in each task. Soon, you will have a snapshot of the operation, seeing the interrelation of the parties involved. This frequently leads to Aha! moments. We’ve noticed that many Boards have a tendency to assume most issues are performance problems. The Grid helps to reveal weaknesses in the system, allowing everyone to differentiate system problems from performance problems. The Grid may point out that someone else in the organization is better suited to take on a certain responsibility. Or you may find that some tasks aren’t being performed at all under the current system. Once clarified, performance issues can be more effectively addressed.

The trick is to use the Grid to address system problems by making adjustments. The context of seeing the operation in totality helps the board to identify areas where more support is needed. You can redline the grid until it makes sense. It takes the guesswork out of the picture, communicates responsibilities with clarity, and increases the likelihood of finding successful solutions. The final grid can then be a tool to adjust contracted specifications and position descriptions as needed.

What Are The Options?

Many contracts are designed to be “competitive” without regard to the actual workload required for the job. Standard “full service” management may not provide the required attention needed to support volunteers in your specific case. Some approaches to bridge the gaps include:

  • Customizing the management agreement to provide more attention in specific areas. Quantify time and attention where possible. If a minimum weekly site visit and monthly or quarterly property inspection with written report will address many of the issues a community is experiencing, include those as specifications in the management contract. Set the expectation and create a system that takes some of the burden off the shoulders of volunteer leaders. It may be that some specifications can be decreased to help compensate for additional cost, such as decreasing the number of board meetings attended.
  • Decrease the management contract to “financial-only” or “financial-plus” service levels to free up assets and redirect them to on-site management. This is where it gets creative. I cut my management teeth as a part-time on-site manager for five different associations over the span of ten years. Two of them had fewer than 50 units. All of them had something in common. They were all too small to justify full-time, on-site management, but too busy to be well-served by off-site management.
  • Adjust the scope of the management contract to dedicate a specific allowance of time. If the management company is willing to consider an out-of-the-box option, they could provide more attention by defining a number of hours per week for dedicated attention, including on-site time. Some management companies in the northwest use this model.
  • It takes a village. Depending on the configuration and condition of the property, a combination of services might make sense. Perhaps the volunteer base is strong, and you can engage management on an a la carte basis to provide only the services needed when you need them. Perhaps you just need a management company or consultant to set up the annual calendar and preventive maintenance programs and come back to audit the system periodically. Perhaps a maintenance position can be beefed up with a system to provide valuable eyes, ears, arms and legs for Management and the Board. Perhaps strategically scheduling a contracted annual architectural and engineering inspection to coincide with the annual budget process combined with “financial-only” professional management gives the association the best bang for the buck. The possibilities are endless.

In the End

The quality of volunteer leadership will always be vital to the success of any condominium association. The smaller the association, the more important this is. Smaller associations have special challenges. Even volunteer leaders who have the time and talent to assume certain management roles are wise to seek resources to set up systems and find best practices. National organizations like the Community Associations Institute  and the National Association of Housing Cooperatives can be very valuable resources. Associations in the Washington Metro area can tap into additional resources such as the DC Cooperative Housing Coalition, the Montgomery County Office of Common Ownership Communities, and the Office of the Virginia Common Interest Commission Ombudsman 
Small associations may have special challenges. But they don’t have to give up, and they don’t have to settle. There are resources and options for volunteer leaders to provide quality service to their members. It may take some creativity and a realistic view of the expenses related to inequity of scale, but it can be done.

Best Practices, community associations, Management, Management Insider, Professional Development

Management Insider #5 – The Power of the Zero Invoice & Other Tips

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In Management Insider #4, we encouraged management companies to provide their managers with tools and support to help them communicate with their clients. This is especially important for newer managers who may not have had the opportunity to grow their emotional intelligence or general business acumen at this point in their careers.

Getting challenged by a client about your company’s practices or business model can be source of considerable anxiety, even for the most seasoned managers. A knowledge of contract specifications, the company’s business model, and business fundamentals can help a manager address challenging situations successfully. These interchanges can either go a long way in building and maintaining confidence and trust, or they can sow the seeds of distrust and discontent. Preparation is everything. And a little practical strategy doesn’t hurt, either!

Don’t Assume They Know

Clients want stuff done. The details are less important, like whether the work being requested is included in the scope of the management contract. Managers must be aware of their contractual responsibilities. But don’t assume the client is aware of them. Nine times out of ten, there’s no evil intent, just a lack of awareness.

The manager’s job is to communicate reality tactfully, yet clearly. The first answer should not be “no.” It is much better to agree that this task needs to be done, and then communicate the options to accomplish the task, even if that means additional billable hours.

Managers must also be aware of their limitations. They are not licensed to practice law. They are not trained as professional engineers, nor are they CPAs. True, managers may have high levels of expertise in certain areas, but they still cannot assume the liability that comes along with accepting responsibility for every task. Yet, clients may not be aware of this these distinctions. Our favorite line: “I would love to take care of this for you, but I don’t think you could afford me if I had a J.D, a P.E., or a CPA.”

Remember, the manager’s key competency is finding a way to get things done, not necessarily doing everything. Clients may forget that from time to time.

Be Prepared to Explain the Model

Helping managers to explain basic business concepts as applied to the management agreements can be useful to help everyone to get on the same page. Clients may raise an eyebrow about reimbursable and extra charges over and above the base management contract. The reality is, there are a few ways to approach pricing to get the compensation needed to run a company.

Imagine a contract for a repair where every condition cannot be known, such as façade renovation for a high rise building. The contractor has two basic options. He can provide a price based on specific quantities, plus line item pricing for specific repairs in the event the final quantity is greater than the base contract. From the client’s perspective, there is a risk the final cost will be more than the base contract. At the same time, they will only pay for the services that are provided.

On the other hand, if a client demanded a set price contract with no possibility for extra charges, the contractor will have no choice but to bid high to account for worst-case scenarios in order to provide a set price. While the client will know what their exposure is, they may well be paying for services not received.

Management contracts are similar. There can be many variables in the operation of an association. Long meetings, extra meetings, major project administration, and insurance claims can require significant time and effort. And yet, they may not happen. Special assessments, bylaw revisions and the like will require much more copying and postage expense than would more typical operations. Asking a management company to eat these costs is as short-sighted as asking a contractor to do work for free. Neither will be in business very long.

Under pressure, managers may respond defensively to questions about so-called “extra charges.” This is a natural reaction. Unfortunately, it also undermines both their and the client’s confidence and may begin to erode trust. Helping a manager to prepare for the question and to explain the business model can avoid unnecessary conflict and maintain the relationship.

The Zero Invoice

My mentor taught me about the power and utility of the “Zero Invoice.” The strategy is simple. When the manager performs a task outside the scope of the base management contract, an invoice is generated in accordance with the terms of the agreement. Let’s say a board meeting lasted four hours, and the contract allows for a maximum of two. Let’s say the contract calls for an hourly rate of $75 per hour. The invoice would clearly show the billable hours, but also include a notation of a courtesy discount of $150, resulting in a net due of $0. It could be either emailed to the board or included in the next board package as an informational item.

This is brilliant for a few reasons. First, it establishes or reinforces the value of the manager’s time. Second, it informs or reminds the board of the contract terms. As such, it can be issued after the manager provides advance notice, or as a tool to be that notice. Finally, it creates space for a healthy discussion to plan moving forward.

It’s About Trust

When trust is present, relationships thrive. It takes time to build but is all too easy to lose. Fair or unfair, perception is always a major factor. Little interactions make or break trust, and eventually, relationships.

Training portfolio managers on the technical competencies of the job is critical. Preparing them for real-world business questions can be just as important. Get both right and build trust. Fail to do one of them, and trust may be eroded. Build up your people, build trust, and strong client relationships will follow.

Best Practices, Budgeting, community associations, Management

Budget Bonus!

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Thanks to some excellent interchanges with Robert Nordland, PE, RS, founder of Association Reserves as we were rolling out the Building the Budget series, we decided to create a budget template In Excel for anyone to use.  CLICK HERE to get to the Helpful Links page at www.associationbridge.com and click on “Budget Template here!” to download the file.    

Excel is a useful format for budgeting.  It provides flexibility in formatting, line items, and data.  When the formulas are set up for you (like they are in the template), it can also help to maintain some of the disciplines we discussed in the blog series.  For instance, the “Proposed” column in the comparative worksheet is set to maintain a balanced budget. The fee income line item will automatically change anytime you change an expense or other income line item.  This helps you to maintain discipline and resist the urge to fee target.

Use What You Need, Chuck the Rest

The template may include more than you need.  It is a workbook of two linked worksheets.  Don’t worry if you are not an Excel whiz.  If you don’t want to use the narrative worksheets, don’t use it.  The comparative worksheet can stand on its own in conjunction with any narrative or other supporting materials you already use. 

If a line item or expense category doesn’t apply to your association, leave it at zero or delete the row(s).  If you do delete or add rows, just make sure you adjust the formulas in the subtotals or totals as needed.

How to Use the Template & Write Your Budget, Step by Step

1. Preparation – A Few Tips

  • Gather everything you need in advance. This may include the latest adopted budget and narrative/line item explanations, contracts, proposals, most recent financial statements, most recent audit, reserve study, utility usage information, and wage and benefit information.
  • This is a good time to collaborate with those who serve the association. Think through and discuss potential projects for the next year with your business partners and professional service providers to get realistic data to plug in.
  • Try to schedule uninterrupted time blocks to complete the work.

2. Populate The Comparative Worksheet

  • Take your financial statements and edit line items in the template to match the format of your financials. We’ve included some typical line items and spaces to add others.  All the total and subtotal cells have formulas plugged in for you already.  Hint: Don’t plug data into the cells shaded in yellow – that’s where formulas have been plugged in for you.  If you add or delete categories or line items, you may need to edit the formulas in the affected totals and subtotal cells. It may take a little while to set up, but it makes everything easier when you start plugging in the data.  We’ve even created a column where you can also include general ledger numbers for each line item if you like.
  • 2019 Adopted Budget Column: Plug in the data from the budget.
  • Audit Column(s): Plug in the data from your last audit or audits if you choose to include multiple years. Hint: The audit may not have all the line item detail included in your financial statements.  If that’s the case, get the Adjusted Trial Balance from the auditors. That will have all the line items.
  • Year-to-Date Column: Plug in the data form your financial statements.
  • Projected Column: Take the year to date figure and add what you think will happen for the rest of the year.
  • Woo hoo! You just helped to take a snapshot of the past and present.  This will help you budget for the future.
  • If you are NOT using the narrative worksheet, populate the Proposed Column, taking into consideration the historical information and all current information. We strongly recommend the use of a detailed narrative, but you don’t have to use the template.  If you would like to use it, go to Step 3.

3. Populate the Narrative

  • Format the line items and categories to match the comparative worksheet.
  • Time for brain work. Describe each line item as best you can. The worksheet includes some samples you can use if you wish, including a calculation of the percentage fee increase.
  • Review the description and the history for the line item shown in the comparative worksheet, and input a dollar figure considering everything you know. Hint: The narrative line item values are already linked to the comparative worksheet. If you plug values in here, the Proposed column on the comparative worksheet will populate automatically.
  • The template includes space for calculations you can plug in to make sure you are calculating things like contract escalations correctly. You can just cut and paste the sample provided into as many line items as makes sense.

4. Supplementary Worksheets: In some cases, supplementary worksheets can be very useful.

5. Take a Step Back: Take a break, and take a look at the draft with fresh eyes.  Edit as needed.

6. Roll It Out: Presentation and communications will be important from here on out. A few tips for doing so are available here.

7. Final Tip: Once the budget is adopted one of the last steps will be completing the 12-month spread that will find its way into next years; monthly financials statements. Make sure the spread is in line with the plan described in the budget.  If you’ve done a solid job writing your narrative, calling out notable expenses and detailing contract escalations, this will be easy.

Congratulations! You are now a certified budgeteer!  Welcome to the club and best wishes for a successful budget season.

Best Practices, community associations, condo associations, HOAs, Management, Management Insider

Management Insider #3 – Getting Off the Hamster Wheel

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Management Insider #2 provided a historical analysis of the current state of affairs. Armed with that knowledge and a deeper understanding of underlying issues, we are in a position to move towards solutions. Trust and perception of value are at the core of the downward press on management fees. Creating spaces where these two factors become strengths in the management-board relationship gets everyone off the hamster wheel of dissatisfaction.
There are no easy answers. Not every approach works in every situation. And there will be boards and management companies that don’t get it and never will. That’s OK. This blog is not for them.

  • System vs. Performance: I learned long ago that most boards assume that management problems are performance issues. Unless I figured out whether issues were actually a performance issue, a systems issue, or a combination of the two, everyone was asking and answering the wrong questions. The analysis must be case-specific. Every community is different. Dig deep into needs and expectations, and compare that reality to the resources in place to meet them. The right system with metrics and accountability puts people in a position to succeed. Outstanding performance can mask deficient systems. Management companies must resist the urge to tell clients they will take care of everything without fully appreciating the implication. Overpromising and oversimplification serve no one in the long run.
  • Enough with the Price Per Door Already: Management fees per unit per month are somewhat helpful to gauge costs, but it is an incomplete metric. Unit count can have little correlation with the work required to manage a community. Age of structure, type of construction, logistics, reserve funding, deferred maintenance, neighborhoods, internal demographics, and expectation for service will all play a part in the system and performance required to manage a community. I am floored when I hear of management companies who provide pricing without so much as a site visit, a meeting with a board, or a review of documents. Estimate the workload. Price it accordingly. A cookie-cutter approach can work for some clients. But without some analysis, there’s an awful lot left up to chance. Management companies that can explain the rationale behind their pricing and system set the table to earn respect and trust.
  • Value the Work: Set price contracts must assume a certain workload. Boards can have the unrealistic expectation that no matter what happens, the monthly management fee should cover it. That makes zero sense. Managers, fearing the wrath of their clients, are sometimes either unaware of contract terms or nervous about charging for extra work. Until those work hours and efforts are acknowledged, a manager’s time is not likely to be respected. Communicate in advance, explain the business model, agree to terms as needed, and change when appropriate.
  • Migrate Management On Site: A common complaint about portfolio managers is that they do not spend enough time or attention to their clients. This may be a system problem. Twenty-six years ago, my mentor Arthur Dubin advocated bringing management on site in an article for the Journal of Property Management. He said, “A growing number of condominium associations are choosing on-site management better serve the needs of the owners, residents, and boards of directors. This reallocation of resources has often proved successful in both cost efficiency and quality of service.” A quarter of a century of experience has proven him right. Boots on the ground and brains on site can be the most effective allocation of resources in many circumstances. Some creativity may be required. Even if the shift means association payroll increases while management fees decrease, everyone wins in the long run. Lower fees that result in higher total profits over several years with a happy client beat higher profits from unhappy clients that fire you after two years every time.

Those are just a few perspectives and strategies to help both boards and management win. If a community has a pattern of dissatisfaction, there’s a reason. Dig a little deeper. Challenge your assumptions. Let’s begin to get off the hamster wheel.

Best Practices, Budgeting, community associations, Management

Building the Association Budget: Fundamentals, Hard Work & Guts – Part 5 (Avoiding Common Pitfalls & Achieving Awesomeness)

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Part 1 of this series established the real goal of the association budgeting process. Part 2 presented a method of budgeting to learn from the past, see the present clearly, and plan for the future. The third piece got into the nitty-gritty, outlining the components of a budget. A common theme began to emerge. Budgeting requires discipline, and sometimes some courage. Having guts was a highlight of part 4 , where we presented strategies for communicating the results of the process, especially when sharing a difficult message. In this final segment, we identify the pitfalls we’ve seen managers, boards, and communities fall into and how to avoid them. Of course, we can’t close out without some final encouragement.

Avoiding Common Pitfalls

  1. Communication Gaps: Never present a draft without a cover memo. Anytime a draft is changed, memorialize those changes and explain them, whether directed by a committee or board. Memories get short. Valuable history can be lost. Managers and boards get unfairly blamed for leaving things out of budgets years later. Allow the documents to refresh memories and tell the story.
  2. Time Blocking: Drafting a budget is a great example of a task requiring sustained focus. Gather all supporting materials in advance and have them at the ready. Try to carve out blocks of uninterrupted time to the extent possible. According to some productivity studies, you can lose up to 50% productivity every time you put a project down and have to pick it up again later. This is not a time to attempt to multitask. It’s Time Management 101.
  3. Fee Targeting: One of the gravest sins in budgeting. If the board or management comes into the process predisposed to a meet specific result (such as no or minimal fee increase), results are inevitably skewed. The values in expense line items must not be artificial. They represent real activity and have real consequence. Lowering an expense line item unrealistically may get the condo or HOA fee where you want it, but it is likely to cause an operating deficit. Keep it real!
  4. Disconnection With Long Range Planning: All too often, the contribution to reserves is a number picked to help the budget meet a fee target at the end of a budget process. This is a blueprint for major problems. Interestingly, the Virginia legislature continues to modify the POA and Condominium Acts in attempts to require boards to maintain this discipline to some extent. We expect other states to follow as more citizens living in community associations suffer from special assessments and significant fee increases because of deferred maintenance and poor budgeting discipline. Careful consideration of current and future capital projects and a realistic funding plan to have the money available when needed are crucial. Including capital projects in the budget, along with a corresponding transfer from reserves- so that these expenses do not impact fees- helps establish and maintain a pattern of discipline in long-range planning. If your budget format does not allow for capital projects to be included in the annual budget, create a separate schedule and include it in the package.
  5. Failure to Plan for Contingencies: Murphy’s Law reigns supreme – it pays to plan for the unexpected. This can be accomplished in two primary ways: an operating contingency line item, or an operating reserve contribution line item. The former raises fees to be maintained in the operating account until needed. The latter creates a plan to transfer a specific amount to a reserve fund each month for safekeeping until needed. It is generally recommended that associations maintain between 10% and 20% in unrestricted funds (i.e. not included in the replacement reserve account). Since associations are not-for-profit organizations, they do not budget for surpluses. That means there are only two options to build up contingency funds: hope the condo fairy comes by and whacks you on the head with her wand, or budget for contingencies. The latter seems more prudent.
  6. Failure to Recognize & Address Reality: Chronically underfunded associations tend to exhibit the same characteristics – they budget too optimistically without consideration of the actual condition of the property and financial history. This is part of the value of the comparative spreadsheet. The end result is recurring budgeting errors, a vicious cycle of deferred maintenance, operating deficits, and underfunded reserves. Inspecting the property prior to the beginning of the budget process will help to avoid costly mistakes. Interestingly, we’ve noticed that associations that show only one or two columns in their comparative budgets and/or have no narrative to explain line items are very prone to chronic under budgeting.
  7. Failure to Allow Include All Possible Options in the First Draft: Rather than force an artificial result by fee targeting on the first draft, it is much better to allow the first draft of the budget to be a “kitchen sink,” worst-case scenario version, packed with every contingency and idea that may have come up in the course of the year. This allows honest dialogue geared towards establishing priorities and making value decisions as the budget is pared down in a systematic, logical, and realistic way. In the end, there will be a real plan that just might work!
  8. Failure to Help Owners Understand the Correlation Between the Budget and Their Fees: People love getting something for nothing. Don’t assume owners understand that the budget defines the services the association can afford. A little education can go a long way in building buy-in.
  9. Failure to Separate Emotional Factors from the Business Decision (a.k.a. Making the Numbers Real): Many owners may intuitively feel they cannot afford a fee increase in any amount. It is sometimes helpful to break down the facts into numbers that are meaningful, such as dollars per month per home. A 5% increase sounds astronomical, but if a condo fee is $300 per month, that’s $15 per month – roughly the cost of 3 Starbucks lattes. If a 5% increase helps avoid a special assessment in the future, is it worth 3 lattes per month?
  10. Accepting Reserve Study Estimates Without Careful Consideration: The reserve study is an essential tool to help the Association plan for capital expenses. But that’s just the beginning. The board and management need to make sure there is a real plan in place. 

Guts

A word about leadership and courage here – sometimes the result of due diligence is bad news.   As tends to be the case with mature communities that have been chronically underfunded, sooner or later the piper will demand to be paid. Significant fee increases and special assessments are not happy news, and it takes a measure of courage to speak the truth to those who do not want to hear it, especially in difficult economic times. The argument will be made that people can’t afford the additional burden, that’s it’s not fair for current members to pay for the sins of their predecessors, and that resale values will plummet if fees are too high. Leadership and management must be prepared to communicate reality. While fees have an impact on resale values, you can bet that a property in disrepair affects values significantly. Poor curb appeal affects more than just values, it affects salability. At the end of the day, it’s the Board’s fiduciary responsibility per the association’s governing documents to do what it has to do to maintain the property. Biting the bullet at some point is sometimes painful, but necessary. Hopefully, the association will learn from history well enough to plan better going forward and avoid having to make up for the mistakes of the past.

A Time Investment

Yes – careful budgeting is a lot of work. But it’s well worth it when you consider the benefits. Stick to the fundamentals and follow the disciplines practiced by successful community associations. Everyone will win in the end. Don’t miss the opportunity to make a difference. This is the reward of leadership. You can do this!

Best Practices, Budgeting, community associations, Management

Building the Association Budget: Fundamentals, Hard Work & Guts – Part 4 (Communicating the Results…Especially the Hard News)

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You’ve done the hard work. The budget’s built. The plan is solid. Now it’s time to roll it out. You may be delivering the first draft to a Budget & Finance Committee or the Board. If you are in a state that requires the proposed budget to be sent to homeowners in advance of adoption, or are blessed with governing documents mandating owner approval of the budget, there will be a second roll out. This can be where your mettle is tested. The bigger the fee increase, the higher the level of anxiety. This segment gives you tools to help.

Even if state statute does not require advance delivery of the proposed budget to membership it’s not a bad idea. Members have the opportunity to have real input, and the Board has the opportunity to listen. Sometimes good ideas come out of the exercise. Even in a worst-case scenario where some members may be unhappy with the news, empowered anxiety is better than alienated, hopeless frustration. It’s ALWAYS a good idea to be as transparent as possible.

The Big Roll Out – First Draft

The budget process should be a means by which communities set priorities. It’s an opportunity to imagine possibilities and a platform to make informed business decisions. Yet many associations short-circuit the process in the very first draft, usually out of fear. If the writers of the budget are constrained by an artificially-imposed limit (“we can’t afford anything above an x% increase” is a familiar refrain), the result will be less than optimal. Worse, a manager could use the budget to curry favor by playing the hero, even if it makes no sense. (Theoretically…I know YOU’D never play that game). Be skeptical of anyone who says “I’ve got great news – there will be no fee increase!” It MIGHT be true (see “Guts, Part One”).

Boards that don’t do their due diligence or that do not provide a space for professional managers to share difficult news may be setting themselves up for poor service.  Boards can blame management all they want for faulty budgeting, but they are ultimately responsible for the end result. Burying one’s head in the sand is a questionable strategy in the short term. In the long run, it becomes deadly when the tsunami strikes. Questioning and challenging assumptions doesn’t have to be a challenge to a manager’s professionalism. Done correctly, it’s a sign of an engaged Board (or Committee) and a healthy relationship. No one is perfect, and Committee and Board input results in a better quality product.

One of the best ways to avoid the trap of fee targeting is to treat the first draft a “kitchen sink” version. Include all worst case scenarios, contingencies, and even the wild ideas that might have come up over the course of the past year. This is the time to throw it out there.

A well thought out and well written cover memo is crucial. If the first draft results in a fee increase, the memo outlines the factors that contribute to the increase, preferably in order of impact. Your outstanding narrative already gives the details for each line item. The cover memo helps to put them into context and allows the group to see the impact of each possible expense. It makes it easier to prioritize. Non-priorities will disappear in draft #2. The cover memo is also an opportunity to explain any new line items or features of the draft, whether or not they impact fees.

Let the Data Speak & Make It Real

If you’ve done the hard work and woven it into the budget document, you’ll save time in budget meetings. When questions arise, you’ll be able to direct attention to the appropriate place in the document to answer most inquiries. There will always be a level of discretion in decisions on many line items. Opinions will matter. But if the data in the budget is thorough and accurate, it will help to drive the discussion. Get out of Opinionworld as fast as possible.

It’s hard to wrap your brain around large numbers. Breaking the number down is a great way to help a group decide if a particular expense is worth considering. Do the math. What is the cost per unit per month? The answer to “Is it worth the cost of a Starbucks coffee per week to beautify the front of the property?” provides way more context than “Should we spend another $2,500 on flowers?” Get out of Theoryworld as fast as possible.

What if the News is Really Scary?

Some associations are behind the proverbial 8-Ball. Like the community mentioned in the first segment in this series, the tsunami is upon them and they are facing some really tough choices. They may be in the unenviable position of playing catch up. They must create an action plan to address years of deferred maintenance and figure out how to pay for it. For the plan to be successful, the process must be communicated effectively to community members. This can be a source of considerable angst for board members and managers alike. It’s no time to wimp out on the disciplines and strategies already shared this and the first three segments in this series.

Here are a few successful strategies and perspectives employed by community association that have successfully dug out of the hole.

  • Collect the Data: Get hard data from professionals as needed. Engineers, architects, lawyers, reserve analysts, and others have no dog in the fight. They are paid to advocate for the association. Work with those familiar with community associations who can communicate effectively with the board and community members.
  • Share The News Like Voting in Chicago: Communicate early and often. When the data starts to roll in, share it, preferably well in advance of the budget process. Plan for town hall informational meetings. Plan for extra budget meetings before adoption. Share recaps of those meetings so that any who couldn’t attend get the information. Members likely have diverse backgrounds. Some may find it difficult to understand some of the information. Be patient and persistent. And don’t get angry when someone stands up at the last meeting and claims no one ever informed them about any of this. It happens.
  • Assemble the Team: This can be an excellent opportunity to form an ad hoc committee. Expanding the board’s knowledge and talent base helps to address trust issues. Got detractors? Bring ‘em in the fold. Use the talents of the professionals who have provided the data that is driving the discussion. Have the committee volunteers and professionals play a part in presenting information at the town hall and other meetings.
  • Show All Options: Lay out every possible option to the members, even those that the board or committee thinks are non-starters. There are three benefits to this; (1) a free flow of options may spur an innovative solution, (2) there is a good chance an uniformed member will claim the exercise is flawed because an option wasn’t considered, and (3) it allows the membership to be a part of the decision-making process and conclude for themselves some options are better than others. Buy-in is huge in these circumstances.
  • There Ain’t No “Them”: The volunteers are going to have to pay, same as all their neighbors. A thorough, inclusive, and transparent process helps to break down the tendency for members to hold on to an artificial and damaging Us vs. Them mindset.
  • It’s Not Personal: Managers and volunteers put themselves at risk of suffering personal attacks. It’s home. It’s money. So it IS personal to the members including volunteer leaders. But the process is not. It’s business. The strategies outlined above will help to mitigate distrust and anger, but for some it might not do the trick. If you’ve done everything you can, it’s good enough. It’s not on you unless you allow it. Never let negative people rent space in your mind (see Lesson #3 here).

And, Finally…

We’ve covered a lot of ground in the first four segments of this series! In the last one, we’ll share common budgeting goofs and how to avoid them.