Tag Archives: condo associations

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

8 Characteristics of a Great Board/Management Company Relationship

8 Comments

There are seminal moments in our lives and careers. One of mine was circa 1985. I bumped into  a board member of a condominium for whom my maintenance company had completed some projects. The question she asked me that lovely spring day on a bustling city sidewalk 35 years or so ago changed the way I approached business and I am certain it led to both my entry and inevitable exit from the community management business… “Tom, how come we can’t find a good management company? Are there any of them out there?”  My mind raced as I thought through the three they had fired, all of whom I thought were among the better companies that I had worked with as a contractor. I gave her a tactful answer, but one she did not expect to hear. More on that in a moment.

As a young entrepreneur, I had begun to immerse myself in the study of leadership. I started working with community associations a couple of years before that fateful exchange. I became fascinated by the dynamics of volunteer boards, their communities, and the managers who served them. A few short years later, in a joint venture with a management company, I entered into a contract to provide part-time, on-site management for a small condominium. Eventually, I left my business and dove into management full time for the next 30 years. I had the privilege of working with some great managers and boards. For much of my career, I was also the company’s designated “Fixer.”  If it was messed up, my job was to find a way to make it work. Of course, I was not always successful, but it was the best business education I could have received. Along the way, I saw the great, the good, the bad, and yes, the ugly. Stepping away from the management business and working with clients from the community association field in a different capacity and in different markets has reinforced for me how unique communities can be.  At the same time, I see common principles, fundamentals, and practices that produce results. So…here are eight characteristics that exist in the most successful and sustainable board/management company relationships.

1. Shared Expectations

The working relationship between a board and management company can be very dynamic and fluid. Times change, technology changes, society changes, people change, volunteers change, and properties age. These factors all may impact expectations. An agreement for management services provides a basis for expectation and accountability. It also needs enough flexibility to address the variables inherent in the relationship. COVID has been a testament to this. Who could have anticipated the workload and process changes that the pandemic would require?  Agreement on contract terms and ensuring that these are in harmony with the board’s goals is crucial to a sustainable and successful relationship, which leads directly to our second characteristic.

2. Communication

In my management days, I would receive the occasional phone call from a board member along the lines of: “Would you be interested in sending us a proposal for management? Our company is horrible.”   These days, the question is: “Can you help us find a new management company?”  My first answer has remained the same. “Have you spoken to company executives?”  Astonishingly, 90% of the time, the answer has been no! Changing management companies is a big deal. It can take far less time and effort to repair a damaged relationship than it would to make a change.  Talk about it, set clear and reasonable expectations, see if it can be fixed.  If not, then it’s time to move on, but not before.

Management companies can bolster the relationship by maintaining periodic executive-level contact with volunteer leaders, especially when the players change.  This may be after annual meetings, changes in board liaisons, and any time there is a manager reassignment.  Likewise, new boards are wise to get on the same page with the management team as soon as possible during these transitions.  Don’t let the relationship fall off the rails!

At their core, business relationships are human relationships.   Just like in our personal lives, we get busy, make assumptions, and don’t always get the message right.  Communications suffer and issues fester.  The electronic age makes this a bigger challenge.  Consumer expectations for immediate gratification (the Amazon effect) have challenged all customer service industries.  Businesses can rely so heavily on technology to gain efficiencies that they adopt a transactional mindset without realizing the negative long-term impact on the relationship.  Zoom meetings are great for efficiency, but we miss the cues that the full human interaction experience provides.  Tech and society will continue to change, but some things remain the same.  Community management is a relationship business.  Relationships require effective communication.  And it needs to go both ways.  

3. Mutual Benefit

All sustainable business relationships are mutually beneficial.  A zero-sum game benefitting the client will inevitably lead to poor management performance.  A company that can’t make a profit will fail.  Historically of the real estate management niches (commercial, rental, and community associations), community association management is the least profitable.  A review of the history of the industry and market pressures helps one to understand how we got here. The full story would be an article all by itself.  The net result is that community association management as a professional field has become increasingly commoditized.  Profit margins are always tight.

This can lead to the zero-sum game benefitting the company, which is likewise unsustainable.  Unintentional service creep can happen slowly over time with managers and boards losing focus on contract specifications.  A manager may lose focus of contract out of sheer work volume and when the board is unaware and seems happy with their performance.  Regardless of intent, the reality of this situation is that the relationship is being abused and could end badly.  

In the end, the old axiom is true.  You get what you pay for.  The logical corollary should therefore be that you should pay for what you get.  Maintaining awareness of and regularly revisiting contract specifications for any adjustments to meet the needs of the community are the keys to ensuring mutual benefit.        

4. Flexibility & Reasonableness

Great service companies will go above and beyond from time to time.  Community management is such a dynamic field that a manager will inevitably see the need to do something technically outside of their scope.  They want to make their clients happy and just take care of it.  But there is a danger of an unintentional death spiral. 

I’ve seen this play out many times.  Management agreements typically include provisions to charge for work outside the scope of defined routine services.  Many managers fear a negative reaction from clients and shrink back from noting that a requested service is a billable item.  Sometimes, the assignment is completed and that’s that.  Everyone is happy.  But sometimes, the requests keep coming.  The manager becomes overburdened.  The task list gets longer and longer.  The board grows increasingly dissatisfied, and the manager grows increasingly resentful.  All the while, more times than not, the board has no idea that they are making unreasonable requests because the manager never said a thing about the contract terms.   

When there is healthy communication about the best way to handle non-routine services, boards can make business decisions to allocate funds that allow the company to bring in the resources necessary to accomplish the task or facilitate service by an outside party.  Reasonable boards understand that a set-price contract cannot be a blank check.  (See Mutual Benefit and Communication) 

5. Get Out of the Box

Fundamentals and time-tested principles apply to every relationship, but every situation is unique.  One of the most valuable skills board and management companies can have is the ability to see things as they are and recognize when glue diligence (“that’s the way we’ve always done it!”) needs to be replaced by due diligence, which may involve finding a non-standard solution. This is where my experience noted in the introduction had such a profound impact.  The board member who complained about perfectly good management companies didn’t have a performance problem.  She had a system problem.  She lived in a 27-unit condominium with a seven-person board and half a dozen or so active communities.  Most unit owners were retired.  I loved that community because it had such a remarkable commitment to volunteerism.  If you lived there, you were on the board, a committee, or both.  However, the volunteers had no context to see how much management work was being generated by all that activity.  They were NEVER going to be satisfied with the level of time and attention a portfolio manager could give them under the terms and price of a standard management agreement.  They needed to adjust the system, adjust expectations, or both.

Without analysis, we easily default to assuming that people stink.  Just fire them and get somebody new.   If you can’t see whether you have a performance problem, a system problem, or some combination thereof (usually the case to some degree), you’ll always be answering the wrong questions. Wise board and management companies invest the time to make the determination and have the creativity and flexibility to change the system if needed.

6. Clarity on Roles

The board’s highest and best role to benefit their communities will always be to lead. It sets the culture, goals, and standards for the community and its management.   Everything a professional management company does can be grouped in one of two baskets – supervisory or advisory.   Most boards have no problem rightly holding management accountable for the supervisory tasks it performs on behalf of and at the direction of the board.  Highly functioning boards allow management to assist and guide as it fulfills its role. This allows the relationship to function at its highest level – as a partnership. This can involve helping volunteer leaders to translate strategies that worked in their professional or personal lives into the context of community associations and the statutory requirements,  governing documents, and best industry practices that apply.  Both parties may need to check their egos at the door: Board members might have to recognize the realities of an organization slightly outside their area of expertise, while managers who may passionately recommend a particular path have to recognize that the board is the boss and responsible for the decision.

Ideally then, as a leadership body, the board sets the targets (Why, What, and When), taking into consideration feedback and recommendations offered by professional management.  Leadership gives management the resources to accomplish the resultant goals and delegates the details (How) to them.  In that paradigm, management can focus on getting things done and reporting to the board.   The board can focus on gauging results instead of getting bogged down in the process.   For the board to stay out of the weeds and maintain a bigger picture focus, management must demonstrate competence and proactivity, and be willing to be accountable.

That said, there may be factors that make a certain level of “co-management” ideal.   Communities that are blessed with volunteers who have subject matter expertise and time may allow them to successfully achieve more without having to pay more for management.  Also, small associations suffer from the inequity of scale, requiring more time and attention than their management fees can reasonably command and making the co-management model more likely.

7. Get Things Done Without Being Pennywise and Pound Foolish

It is important to remember that a key role of a manager is to facilitate, not necessarily to do.  A manager’s area of expertise is the administration of the community, governance, and business aspects of community associations.  As such, they may maintain professional designations such as CMCA®, AMS®, PCAM®, and LSM®.  If they were also credentialed professional engineers, insurance brokers, architects, or licensed lawyers, associations would never be able to afford them.  Yet, some boards expect managers to provide opinions and services outside their area of expertise, usually to save money.  Wise boards understand that there are times when bringing in specialists is an investment.   Wise managers, especially those with high levels of subject matter experience, know how to leverage that knowledge and put their boards in a position to make good business decisions.

Managers may feel pressure to have all the answers and assume they are expected to have all knowledge at the top of their heads. As a wise man once observed, it’s perfectly acceptable to say, “I don’t know,” if it is followed by a comma and not a period. “Can I get back to you on that?” can be the best answer a manager can give at the moment. Wise boards allow space for a manager to provide accurate information. Wise managers don’t wing it. This leads us to the final, and perhaps the most crucial characteristic of great board/management company relationships.

8. Trust & Respect

I was thrilled to get an “Aha” moment when I was introduced to a principle that was so simple, so profound, and so applicable to community associations. The basic premise of Steven M.R. Covey’s The Speed of Trust is this: When trust is present, things happen quickly and cost-effectively. When it is absent, everything takes longer and becomes more expensive in the long run. Trust is everything. It underpins all the other seven characteristics. Boards need to trust that their managers are advocating for them and acting in their best interest. Managers and management companies need to trust that the board is dealing fairly and reasonably with them.  Trust begets respect. Both are essential to any highly-functioning relationship.

Let’s Do This!

There is far too much negative media about community associations. Certainly, there are bad players out there, but I am proud to be part of a field where so many dedicated people are working to get it right.  Whenever I hear a negative comment about boards, I always take the opportunity to share that my experience has been that the vast majority of volunteers I’ve worked with serve for all the right reasons. That is particularly impressive considering how many goofed-up situations I’ve been asked to jump into. The same goes for managers and management company executives. Those that stick with the industry tend to be incredibly dedicated professionals with a servant’s heart, qualities that are all too rare these days.  When community volunteers and the professionals who serve them choose to fulfill their responsibilities in a collaborative way and to an elevated level, it has a positive impact on the quality of life and investment of every community member. And they put themselves in a position, not only to leave a legacy of success, but to enjoy the satisfaction of a job well done. It is always worth the effort.

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

Culture – Let’s Get Intentional

Leave a comment

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

Leave a comment

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, Management

A Good Start (and a Creative Solution if it’s Too Late)

Leave a comment

A recent blog focused on the unique challenges faced by small community associations face.  The crux of most of the solutions offered was to provide access to the attention and resources typically available to larger associations.

But First, Let’s Talk About Beginnings

One of the biggest difference-makers in the success of all community associations is how they transition from developer to homeowner control. I had an eye-opening experience taking CAI’s M-370 class , “Managing Developing Communities.” It became clear to me that in many parts of the country, litigation and firing the management company soon after transition are foregone conclusions. I realized how fortunate I was to have come up in the Washington DC area where litigation is not nearly as common. I think there are a few reasons for this; (1) there are more lawyers per square mile in DC than in most areas, (2) those lawyers understand the true cost of litigation, and (3) the transition engineering study procedure has been embraced by boards and developers alike for a couple of decades.

I also found that creating a very transparent, community-specific series of orientation programs leading up to transition was hugely beneficial. When homeowners understood what to expect, understood the fundamentals of the community association concept and best practices, were fully aware of the requirements set forth in their governing documents and prevailing law, and understood the context of the roles and relationships of the developer, association, management, and individual members, things went really well. Another factor was working with developers who were wise enough to invest in set-up fees so that systems and personnel were in place and in concert with the product they were selling so that everything was in place when the first owner settled.

Managing developing communities is a LOT of work. However, doing the hard work up significantly decreased the workload on the back end. For a manager, there is potential for a considerable payback. There are few things more satisfying than being an integral part of successful communities. By the way, the company I worked for very rarely lost contracts after transition.

When these factors are not in place, much is left to chance. I noticed that some of the new clients we took over shortly after transition were working through chaos that could have been avoided had effective orientations and systems been put into place. The same was true for clients of the company I was working with when the programs were not put into place. I heard it from everyone from unit owners to the managers to accounting staff. Failing to prepare and execute upfront impacts everyone adversely in one way or another.

Back to the Little Guys

We saw the impact of inadequate transition practices early in Association Bridge’s history. We would get calls from board members from tiny condominiums two or three years after owner control. The small developers either didn’t know enough or care enough about association operations to set up the owners for success. Owners purchased with no clue, only to realize too late that they would have to deal with issues that in some cases should have been addressed by the developer. It was too late to do anything about that now and the unit owners were faced with significant financial burdens, magnified by the inequity of scale endemic of their situation.

I thought…What if we could find a way to give small associations the tools I had been providing my management company’s clients for over 20 years? Would it work?

An opportunity to test the idea came up in a conversation with Matt Cheney. Matt was the agent selling for a developer of Lanier Station, a 9-unit condominium in Washington DC. I met Matt a decade or so below when he was leading the sales team sat one of my favorite old clients, the award-winning Lionsgate at Woodmont Corner Condominium in Bethesda, Maryland. Matt lit up with the idea of replicating the Lionsgate model at Lanier Station and made the introduction. Sure enough, the developer, Pete Lambis. We truncated the program from three sessions to one and agreed to help facilitate the transition meeting.

We were able to help the owners prepare to assume responsibility for the operation of the condominium. We laid out various operational models for the unit owner board to consider. In the end, they remained self-managed with a full appreciation of their options and the systems they needed to put into place to get things started and maintain them. Their small investment got them off to a great start that will no doubt benefit owners for a long time. The model works!

A Bonus for When It’s Too Late

Some of the condominiums developed in Washington DC over the past 20 years were townhomes converted into condominiums or newly constructed small buildings. Many of them were not blessed with developers as wise as Mr. Lambis. Owners bought in with no concept of how to lead and manage a condominium, much less with an understanding of the association’s rights or developer responsibilities. By the time the fecal matter hit the fan, they were faced with significant financial hardship.

An innovative solution comes courtesy of Don Plank, Assistant Vice President at National Cooperative Bank.  As Don and I were kicking around deep concepts one day, we noted that very small condominiums in distress usually do not have the option their big brothers in condoworld have. They will never be able to qualify for a loan. Suddenly, the proverbial light bulb appeared over Don’s head. “You know, the best thing one of those tiny condos could do would be to re-organize as a cooperative.”

There are legal hurdles to terminating a condominium regime, but this may be a rare time when small size presents a large benefit. Getting mortgagee approval could be tricky, so working with a lender who can write both underlying cooperative corporate mortgage and share loans could help. Unit owner approval to dissolve and re-create the legal entity would likely be a nearly insurmountable challenge for most associations. But with fewer owners to corral, reorganization may well be the best option if a small association is facing oppressive and unfunded capital projects. Working with a qualified lawyer, banker, and project manager, creating a new cooperative with an underlying mortgage would help to defray major expenses over 30 years. Legal costs could also be wrapped up in the loan proceeds. It’s just crazy enough to work! Don is a genius!

Creativity and Innovation

Business as usual can be the death of success. Small associations need creative solutions. We can learn from enlightened developers like Mr. Lambis and original thinkers like Mr. Plank. Community members in small associations will benefit. Success and excellence are possible. Let’s make this happen!

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

The Annual Calendar – A Key Component of Management Success

2 Comments

 

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

2 Comments

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.

change management, community associations, condo associations, Cooperatives, Culture, HOAs, leadership

Just Don’t

Leave a comment

Silly Human Tricks

We work/live/hang around with certain people for a while. We have experiences with them. We get to know them. We disagree on a few things. We begin to get annoyed with them. We draw conclusions about their motives. We remember the disagreements.

Here’s where it gets weird.

We strategize to get the results we want, with assumptions about evil intent and ugly history close in our mind and heart. We overstate. We accuse. We blame. They are doing the same thing with us. The disagreements deepen. On the surface, conflicts appear to be about the matter at hand. But just under the water line, the real conflict lurks. We are simultaneously talking about the issues of the day and the distrust of the past. These bi-level communications can last forever. Things bog down. Nothing gets done. History repeats again and again in the vortex of a vicious failure cycle. Dysfunction reigns supreme.

Sound familiar? Congress, anyone?

The pattern can set in with any organization where we silly humans are involved. The more emotionally or physically close the people and the longer the relationship, the more entrenched the pattern. I’ve seen it happen in social circles, in businesses, in families, and yes… in community associations.

Learning How to Break the Cycle

Breaking the failure cycle is not easy, but it’s achievable in most circumstances. It took me a while to appreciate the uniqueness of my career in the community associations field. Since my first on-site management contract, my main, though unstated, role had been to fix broken things and build trust. In the ensuing years, I was thrust into similarly challenging situations. I’m not complaining. The experience turned out to be the best education I could have gotten. It led to me doing most of the consulting for a management company and the formation of Association Bridge.

Here’s what I learned…

Don’t Let the 5 Percenters Rule the Roost

One of our silly human tricks is to focus on the negative. 95% of things might be working well, but we only focus on the 5% of that which makes us unhappy or divides us. Community association leaders and managers will always spend a significant amount of time fixing problems. It’s a big part of their jobs. But that can create a challenge. A constant focus on the 5% makes it hard to see the other 95.

I learned a secret. There is a reason people decide to move into a particular community. There are shared goals, values, and aspirations there. I’ve never worked with a community where its members didn’t have more in common than that which divided them. They just couldn’t see it at first. They were so into the weeds that they could not see the forest. The weeds are where the 5 percenters live and flourish. And yes, that includes those with wildly diverse demographics.

The problems are real. Different opinions are real. But the bigger picture is just as real. Getting out of the weeds of distrust and dysfunction requires elevation.

Get to Higher Ground

There are a few strategies that can help to elevate the discourse and begin to turn failure cycles into success cycles. Here are three of my favorites:

  • Use Affirmative Inquiry:  Identify that which members have in common. Establish shared values and goals. Then apply those to the 5 Percenters. Seeing the bigger picture helps to set a context and changes the game.  
  • Let Data Drive the Discussion: Much conflict comes from what I call “Theoryworld.” Absent reliable data, people will always rely on what they know – their opinions. Do the homework, communicate the data vigorously, and let that drive the discussion.   
  • Fresh Blood: Sometimes new leaders with a fresh perspective can help groups come together. In other cases, a “disinterested third party,” a facilitator with no dog in the fight, can help bridge the gaps.

Trust is almost always the key. Stephen M.R. Covey made an astute observation in his excellent book The Speed of Trust. When trust is present, things happen quickly and cost-effectively. When trust is absent, things take longer and cost more. Who doesn’t want cheap and easy? Getting to higher ground begins the process of melting distrust and creating a culture of trust.

Yeah, Sounds Great, But….

Does this stuff actually work? Here are some real-life examples of “Breaking the Cycle”:

Case Study #1

One association had an incendiary newsletter that torched the board over every decision. They undermined confidence and deepened divisions in the community. After about a month, I realized that its editor was a board member’s wife.

I expanded my “Board Orientation/Tune Up” program into a two-part community leadership program. The community had several committees, including the newsletter committee, which were contributing to the dysfunction to one degree or another. The first session was for all committee members and board members. This was followed a week later by a board-only session. There was a clear communication of both the letter and spirit of the law and governing documents. Both sessions included a section about best practices in leadership. We applied universally accepted principles to the community association paradigm. This created a space where the group could follow up with a productive planning session. They were able to agree on goals for the year and a program to reach them. Two years of progress ensued.

Case Study #2

Another condominium we took over had severely underfunded reserves and an unrealistic budget. They had also been the victim of theft from their prior attorney, who had pocketed the fees provided by members in collections. The stories were heartbreaking. Community members were equally upset about the condition of the property and the prospect of higher condominium fees. I facilitated a town hall meeting to share the difficult news. The Board, worried about a violent reaction, made sure to hire an off-duty police officer to keep me and them from being attacked.

By the end of the presentation with the data clearly shared, we had unit owners offering to organize to perform some repairs and property clean-up as volunteers. Once members saw clearly the reality of their situation, working together to find solutions became the obvious alternative to blame and complaint. Despite the increase in fees and many challenges, there was a palpable improvement in community spirit at the next annual meeting.

Case Study #3

At an annual meeting 16 days into a new management contract, I had a unit owner point her finger at me and tell me she was going to hold me accountable for everything the board did. In the ensuing months, she took full advantage of owner comment periods at board meetings to remind everyone of every bad decision that had been made over the last 30 years and to call into question board members’ intelligence. I got to know her and at one point suggested she consider running for the board to be a part of the solution. She declined. I still remember the look on her face when I told her that at some point the community would need to learn how to agree to disagree in an agreeable fashion. You would have thought I had two heads. After a pregnant pause, she whirled away and exclaimed disgustedly, “That’s the stupidest thing I’ve ever heard!”

After a full analysis of the operation and a particularly vigorous and expanded budget process, the community understood the needs of the building and where their money was going. At the next annual meeting, my finger-pointing friend rose to deliver her usual diatribe, only to be encouraged to cease and desist by her fellow unit owners. Deferred maintenance projects were eventually initiated. The turnaround put this previously notorious community in a position to win a Community Association of the Year award.

The Bottom Line

We spend too much time and energy allowing our opinions get in the way of getting things done. We are missing opportunities that are right in front of us. Imputing the motives of others has no value. Even if you are right, it doesn’t help.

Stop. Just don’t. Find facts and stick with them. Get to higher ground. Focus on strengths. Find the shared values, goals and aspirations. Let that create context and culture. Put people in a position to be their best. And then…watch success happen.

The iconic Sgt. Joe Friday had the right idea…

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

Let the Data Drive the Discussion

Leave a comment

Change is hard.  New is hard.  Fear makes bad news hard to take.  Is it any wonder that from time to time community association managers, advisors and volunteer leaders find themselves at odds with community members or each other?  Sooner or later, they all will find themselves duty bound to share a message someone won’t want to hear.

Money Hurts

This happens a lot when money is involved.  People hate to spend money especially when they cannot see the value of the expense.  Here’s where community associations remind members of the government, either consciously or subconsciously.  I recall hearing a quote from the Wall Street Journal along the lines of, “People have the same warm emotional connection to their homeowners association as they do the Internal Revenue Service.”  Ouch!

Drill down a little and it makes sense.  Citizens expect infrastructure and services, but they may chafe at paying the taxes that make them possible.  Why?  In a word, trust.  Governments, with their inevitable bureaucracies, have complicated, enormous budgets that the average citizen cannot comprehend.  This makes it difficult, if not impossible, to tell how well utilized those taxes are.  The end result?  Distrust and an assumption of waste…or worse.  Association Fees are a community association’s tax.  If members are not clear that their money is being spent wisely, it’s tough to take.  Members may well default to their assumptions of waste…or worse.

See The Enemy

If you are going to ask for higher fees, spend a wad of cash, or change anything people are familiar with, you need to be ready to explain why.  You may need to combat distrust.  Fortunately, this is much easier to accomplish on the micro level of a community association than is it for the Federal Government!  The information might be somewhat complicated, but it can be available and explainable.

If the direction is sound, it’s based on sound data.  But members may not be aware of the data they need to trust the messenger.  And until the messenger is trusted, the message is lost.

There are two insidious enemies that can erode the trust of your members:

  1. The Law of Omitted Data: The concept is that if a person has some knowledge about a subject but does not have all the facts, it is likely that person’s degree of misunderstanding will grow exponentially over time.  The impact of the law can be devastating in the group dynamic, especially when the Telephone Game factor gets added to the mix.  I’ve seen this blow communities apart.
  1. Theoryworld: The absence of experience or real life information doesn’t stop people from trying to be experts. We imagine scenarios and responses and all kinds of possible permutations and combinations of things that might happen.  Discussion and arguments in Theoryworld last for-EV-er!  They have an annoying tendency to bear little resemblance to reality and waste valuable time and energy.  Theoryworld is exhausting and leads to regrettable decisions.

When data is bad or missing, misinformed opinions and fear can set in and emotions can run high.  It gets personal.  People mistakenly see each other as the enemy.  The real enemies, the Law of Omitted Data and Theoryworld, are hiding just under the surface.

How can you vanquish these enemies?  How can you fill in the blanks and bridge the gap between theory and reality?  How can your group make good decisions and actually get things done?

Fight the Real Enemies

Your first reaction to manifestations of the Law of Omitted Data or Theoryworld may be to correct or defend.  Don’t.  That adds fuel to the ego-driven fire, even if you are 100% right.  Rather than counteracting bad data, seek to fill in the gaps of understanding with good data.  Your goal isn’t to win an argument.  Ego is a major part of the problem.  Elevate the dialogue from ego-based to principle-based– from emotional opinion-based to fact-based.  In so doing, you create a space in which the data can drive the discussion.

The presentation of the data requires more than logic.  It means acknowledging ego and emotion, both yours and others’.  This is another real life scenario where gobs of emotional intelligence will make a massive difference.   Here are a few strategies to get there:

  • Find trustable outside experts. A message from a disinterested third-party can have an impact.  Share their information or let them do the talking.
  • Show and tell. A picture really does paint a thousand words.  And seeing it up close and personal makes things real.  Cruddy pipes, scary boiler rooms, a mudslide behind the pool.  You don’t have to sell it.  Just allow people to see reality.
  • Show your work like doing arithmetic in the third grade. Even if the level of detail seems excessive, the fact that the research was done and you are willing to show your process can build bridges and confidence.
  • Conversely, make it clear the presentation of detailed data isn’t a snow job. Bullet point summaries, charts and graphs– anything that aids visualization is good.  The supporting materials can be in the back.
  • Accept all options and ideas at first, even if every bone in your body tells you they never work. Instead of saying “no” up front, let the group decision making process say “no.”
  • Try to use more questions than declarative statements

Hail Victory!

Don’t worry about making a case.  Create a space where the case makes itself.  Trust the process.  Be patient – time will tell the truth.  Let the data drive the discussion.

What strategies have you used to defeat the Law of Omitted Data and Theoryworld?

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

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

Leave a comment

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

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

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

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

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

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

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

Who & When?

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

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

Bottom Line

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

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

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

Leave a comment

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

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

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

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

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

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

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

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

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

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

Perspective

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

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

Next…

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