Tag Archives: Community Association Management

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.

Best Practices, Budgeting, community associations, Management

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

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

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

How Do We Get There from Here? Essential Budget Components

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

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

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

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

Other Useful Components

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

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

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

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

It’s Good for You…and Everybody Else

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

Next…

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

Best Practices, Budgeting, community associations, Management

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

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

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

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

The Past, the Present & the Future

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

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

Trend or Zero-Based?  Both!

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

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

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

Why All the Work?

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

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

What’s Next?

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

Best Practices, Budgeting, community associations, Management

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

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

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

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

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

Let us start at the very beginning…

BACK TO THE BASICS

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

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

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

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

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

WHAT’S THE GOAL?

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

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

GUTS, PART ONE

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

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

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

COMING SOON…

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

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

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

Sucking Up is Not Customer Service

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

NO, NO, NO!

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

What Are We Really Doing Here?

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

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

Supervisory + Advisory = Partnership

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

The Challenge? Fear & Schmooze

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

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

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

It’s Not Always Evil

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

When the Customer is Right

“The customer is always right.” 

– Chicago Retailer Marshall Field, 1905

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

When the Customer is Wrong…or Perhaps Uninformed…

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

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

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

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

Getting to Mutual Benefit

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

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

community associations, Management Insider

Management Insider #2 – How We Got Here

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Sometimes managers entering the community association field have a hard time understanding some of the stressful dynamics of the business.  They hear that profit margins are tight.  They may wonder if their bosses are making excuses to justify low wages.  As I’ve stated before in the T-Rex Blog, management fees ARE artificially low.  A look into the past can help explain why.

Fortunately for me, my ex-boss and current mentor was there at the beginning of the early condominium boom, starting his career as a community association manager straight out of college in 1973.   When he walked me through the history of the industry, things started to fall into place.

The United States had its challenges in the ’70s.  Real estate agents wanted to sell and developers wanted to develop, but inflation and interest rates were high.  As the end of the decade loomed, mortgage rates reached into the double-digits.  The concept of converting apartments into condominium associations became appealing.  Enter the first condo boom.

Off The Rails…And We Didn’t Even Know It

This is where some of the persistent challenges that dog us today had their beginnings.  There were several factors:

  • Condominiums were sold as “carefree living.”  Someone else will take care of the grounds, the roofs, and the hallways…no worries! 
  • The transition from apartment house to condominium association shifted responsibility for interior living spaces from on-site staff to the unit owner.  Leasing activity and rent collection were no longer factors.  As a result, the site staffing typical of apartment complexes was either decreased or deleted altogether.
  • The same notion about decreased workload combined with the developer’s desire to keep condominium fees as low as possible led to a baseline of low management fees.
  • Early condominium documents sometimes treated professional management as an afterthought.  Like magic, multi-million dollar pieces of real estate that previously required professional management could now be administrated by volunteer boards with little or no management or real estate experience.

Hindsight being 20/20, in many ways we were set up for failure.

How Could They Have Known?

An Urban Land Institute lawyer and framer of early community association governing documents stood before us, a crowd of association managers and lawyers, at a CAI National Conference in the late nineties.  I still remember his words.  “As I stand before professional managers and attorneys serving community associations and working with the documents we wrote in those early years, I have one thing to say…we’re sorry!”  He explained that they were writing from scratch.   Lawyers need precedent.  They had to go all the way back to 14th-century English horse trail law to find something they could use to define common elements and their administration.

Indeed…who knew that community associations would become so complicated?  Who knew the world would become such a litigious place?  Who knew how legislated and regulated associations would become?  Who knew the promise of technology would result in an immediate gratification mindset? Who knew volunteers would want to do less over time? Who knew societal norms would decrease personal accountability and increase distrust of anyone in authority?  And finally, who would have imagined the current trend where courts would hold community associations responsible for members and residents’ civil rights, even though their governing documents provided no basis of authority to do anything substantial about it?

“I have great respect for the past. If you don’t know where you’ve come from, you don’t know where you’re going. I have respect for the past, but I’m a person of the moment. I’m here, and I do my best to be completely centered at the place I’m at, then I go forward to the next place.”

– Maya Angelou

Industry Trends

Community association management continues to mature.  I think of it as an adolescent – certainly more sophisticated than it was in its infancy, but not yet fully grown.  Business does what it does – big fish eat little fish.  As a result, national, regional, and even local companies acquire other companies to gain market share and leverage volume. At the very same time, technology makes it easier than ever before to start a management company with little overhead.  Whether company costs are minimized by volume or low overhead, the result is the same – a push to be “competitive” in the marketplace.  An unintended consequence is that a professional service became commoditized.  The industry accidentally devalued itself.  As Tom Peters would say, it’s a race to the bottom. 

It All Adds Up

So what have we learned?  Management companies operate in a space with an increasingly demanding client base.  They compete in a commoditized industry.  And they employ a workforce that may be poorly trained, under-supported and generally demotivated to one degree or another.  

Is all hope lost?  Sadly, for too many in the industry, yes.  In my travels and deep dive discussions around the country, I’ve felt their stress and heard their resignation.  I get it.  They’ve had the same concerns and expressed the same frustrations for the last twenty years or more.    

Light at The End of The Tunnel?

If the way it’s always been done doesn’t work, there’s a reason.  Get to the root and you can find a solution.  It requires thinking differently.  That makes unconsciousness a poor option.  It’s time to stop banging our heads against the wall. 

There are no easy answers.  However, there are a few practical strategies and perspectives that have turned things around for some.  These will be the subject in upcoming blogs.       

community associations, Management, Management Insider

Management Insider #1 – Helping the Marketplace

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As I near my one-year anniversary of launching Association Bridge as a full-time venture, I am realizing how much freedom I have to share information. For 30 years prior, I spoke in the voice of a community association manager.  The last 20 of those years were as an executive in the field.  During that time, whenever I commented on the management business, I am sure some people thought that I had an agenda.  In a recent conversation with a client, I had an Aha! moment.  I was able to explain the realities of the management business with absolutely no dog in the fight.  I was able to help that client perceive their reality clearly in a way I couldn’t before, or at least couldn’t quite as effectively.

One of the many ideas that came out of this month’s CAI Annual Conference had to do with the board-management company relationship.   Sy Syms, an iconic discount clothier came to mind.  He had a great company motto: “An educated consumer is our best customer.”  Well, Sy was right and it works in our space as well.  The more a community association board understands about the business of management, the better their odds of securing the services they need.  They stand a better chance of forging an effective partnership with a management company.

Education and Partnership

Yes, I said partnership.  The most satisfying and sustainable relationships are mutually beneficial to both parties.  A zero sum game is transactional, not relational. Elements of partnership are integral to any sustainable relationship.  Trust and confidence are fundamental.  Why would business relationships be any different?

I think that can be a challenge in the community association management marketplace for a few reasons. Hyper-competition and commoditization have resulted in artificially low fees. This is at the core of failure cycles that can inhibit the perception of value, respect, and ultimately, trust.   

The Aha! Moment

The moment I mentioned in the introduction was an Aha! moment for my client, which was why it was an Aha! moment for me.  This board had already recognized they needed on-site management to provide the level of service they expected.  But it did not stop them from expressing dissatisfaction over the performance of their community manager.  They noted he had nine clients and took too long to address concerns or give them adequate support.  They already knew he was overworked, but they didn’t see the fuller picture until I asked to see their financial statements. The interchange that followed went like this:

Me:  So your monthly management fee is $1,686.  That’s about $400 per week.  Let me tell you a little secret.  How much of that do you think goes towards your manager’s salary?

Board: (collective shrug)

Me:  Probably about $100, give or take.  So… how much time do you think $100 gets you each week?

Board: Ohhhhhh

Suddenly, everything made sense.

Solutions

Boards are going to have to go a little deeper.  Management companies are going to have to let their clients see what’s behind the curtain a little more.  When that happens, partnerships can happen.  Failure cycles can begin to transform into success cycles. 

This is the first of a new series of blogs.  My goal is to help community association volunteer leaders understand the management business.  I hope the insights into the challenges companies face and the opportunities that are available will help Board members to ask the right questions and make the best decisions when selecting and working with their management company.

business life, community associations, Culture, Human Resources, leadership, Management

Do You Want To Keep Good People? Build an Intentional Culture

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Turnover is Expensive!

The struggle to attract and keep talented employees and volunteers is universal. For businesses, the hard cost of employee turnover includes hiring and onboarding, initial training, ongoing development, and integration with the team. Finally, it includes the interim costs incurred while a position is unfilled. Yet, soft costs can be far more impactful. Turnover loads a burden on the backs of everyone in a company. These can turn into hard costs with loss of business due to poor performance.

Not-for-profit community associations have different metrics. On-site staff and volunteer turnover result in soft costs such as service gaps and overburdened remaining staff and volunteers. This, in turn, takes a toll on member satisfaction. Increased stress and pressure result. Over time, this can lead to increased turnover and lack of volunteer interest.

Another common and insidious cost of turnover can be an intentional or unintentional lack of investment in employees and volunteers, which inevitably leads to more turnover.

The vicious cycle of churn is costly. And it sucks – it sucks the life out of organizations of every sort.

Strategies

There are plenty of strategies out there to retain employees and volunteers. Google the subject and you’ll find scads of them. They range from simple recognition to the adoption of lofty ideals designed to motivate the troops. Volunteer retainage is its own animal because compensation is defined differently. In all cases, strategies are focused on showing appreciation and providing benefits that are designed to reward people and keep them in the fold. And they might not work.

Don’t get me wrong, many strategies can be beneficial. They may help keep some folks around for a while. But they cannot stand alone. Strategies need to be part of a broader context to have lasting value.

Want Retention? Engage

Retention is a useful metric, but it’s not a goal. It’s a byproduct. According to a 2018 Gallup poll, 53% of U.S. workers are not engaged. Gallup states, “They may be generally satisfied but are not cognitively and emotionally connected to their work and workplace; they will usually show up to work and do the minimum required but will quickly leave their company for a slightly better offer.” Another 13% were reported to be “actively disengaged.” Let that sink in. Two-thirds of American workers spend a significant part of their waking hours at a job they don’t really want to do. Yikes! If they don’t leave, they should.

In their seminal work The Leadership Challenge, Kouzes & Posner conclude that people tend to look at their jobs in one of 3 ways; as a job, as a career, or as a calling. The difference? Engagement. The higher the level of the synchronization between the work someone does and their values and goals, the deeper the engagement.

Want Engagement? Lead

“Engagement is not an HR issue. It is a leadership issue” – Simon Sinek, Author & Organizational Consultant

If the key to engagement is the connection of values and work, it begs a couple of questions. What does your organization stand for? What deeper connection does it offer? This is where many leaders fail. Kouzes and Posner offer an approach to address this. They boil it down to what they call “The Five Practices of Exemplary Leadership:”

  • Model the Way
  • Inspire a Shared Vision
  • Challenge the Process
  • Enable Others to Act
  • Encourage the Heart

All five practices directly impact engagement. Leaders who are hypocritical, directionless, non-communicative, myopic, micromanagers with low EQ  kill engagement. If there is a serious weakness in just one or two of these areas, you can count on good people walking out the door.

So then, effective leadership begets engagement and provides a context for strategy. Putting this all together, what are the leaders charged with doing? They must develop and nurture organizational culture.

Build an Intentional Culture – Defining the Organizational “We”

Culture is who we are, proven by what we repeatedly do. Its engine is the shared values of the organization. Shared values lead to aspirational vision. The vision drives goals, which sets the mission. Goals and mission drive strategies, which then dictate day-to-day tactics. We do what we do because we are who we are.

All organizations have a culture. Leaders are responsible for making it an intentional one. That includes community association volunteer leaders. It’s not easy, but it is always worth it. Leaving it to chance leads to disconnected strategies and tactics. And churn.

“Culture eats strategy for breakfast” – Peter Drucker, Legendary Management Educator

As the stewards of intentional culture, leaders must make sure that what we do stays in line with who we are. They must walk the talk. Disconnects must be addressed. Few things cause disengagement more quickly than an organization that espouses values that are violated in the way things are done. A dedication to a values-driven culture draws like-minded persons and engages them. Engaged people not only tend to stay awhile, but they also draw others who will find a satisfying place in the culture.

“Culture is caught, not taught” – Rolf Crocker, CEO, OMNI Community Management, LLC

But They Won’t Let Me!

What if your boss doesn’t get it? What if you are an on-site manager with a board full of clueless non-leaders that make it difficult for you to lead your staff? What if you work for a soul-crushing CEO? You still create a culture with those within your sphere of influence. In fact, you must…or leave. That will be the subject of another blog.
If a public high school department head can create a pocket of excellence despite deeply entrenched policies and bureaucracy, the odds are good that you can build a culture that makes a difference. Leaders don’t ask permission to lead. They may sometimes have to ask for forgiveness afterward. But results tend to take the heat off.

If You Want Them to Stay, Forget the Fence – Build a Fire

External rewards without engagement are like a fence. Engagement produces internal rewards. If you want to keep people in the fold, stop worrying so much about the fence. Instead, build a fire of culture at the center of the organization. That fire gives team members light so they can see the vision and the warmth of shared values and mission. Create a space where people are drawn and want to stay.

Recommended Study Material:

 

The Leadership Challenge, 5th Edition by James Kouzes & Barry Posner 

The Excellence Dividend, by Tom Peters 

Gung Ho!, by Ken Blanchard & Sheldon Bowles 

The Culture Engine, by S. Chris Edmonds 

And if you are REALLY serious, go to Tom Peters’ website  www.excellencenow.com  for his 50- page “Extreme Humanization/Extreme Employee Engagement PDF 

Communications, Management, Time Management

Time Management Tip #3 – Negotiate, Then Prioritize

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THAT Guy

You hear the phone ring and take a look at the Caller ID, or see the email pop up. Oh no…It’s THAT person. You know the one. You have a history with him. He notices every typo and berates you in public for it. He’s not only exacting, but he’s also demanding. You feel like you have to be fast and perfect to make him satisfied. And he never asks an easy question.
As you read the email or listen to the voice mail (having dodged the call), your gut tightens. Your brow furrows. You are pretty sure your blood pressure just went up. You think, “I do not have time for this today. And I’ve got to get this exactly right…. I will be a good time manager and put it on my task list for tomorrow, first thing. That’s responsive enough.”
Great plan. Until life happens. The day blows up, you get into emergency mode, and the day zooms by. And you haven’t responded. Now we are up to day 3. Having heard nothing back, the guy communicates again. Loudly. Copying everyone, their supervisors, and their grandmother. Now you’ve got several people hounding you and a crisis on your hands. So much for being a good time manager.

It didn’t have to be that way.

Seize the Opportunity

It’s natural to make assumptions when you have a history with someone. If a person is demanding, you may assume that they not only want a perfect answer, but they also want it NOW. You are under stress. You do not make the best decisions when under stress.
Having a process in place can help.

For the most part, people want acknowledgment and then a solution, in that order. By time-blocking email and phone message responses a couple of times daily, you can proactively take care of the acknowledgment part.
There’s an opportunity hidden in the acknowledgment. This is your chance to negotiate a solution that benefits everyone.

“Thanks for your email. I want to make sure I get you what you need when you need it. And I would like to take a little time to do some research, if possible. Would it be OK if I got back to you on Thursday? If you need the answer more quickly, just let me know and I’ll see what I can rearrange for you.”

Key points:

  • Fast acknowledgment with a message: “I hear you. I want to take good care of you”
  • A reasonable and respectful request 
  • Both a request and an invitation to negotiate
  • Non-confrontational way to determine the urgency of the request

Under Promise, Over Deliver

There’s an extra bonus built into this approach. In offering a negotiable solution, I am certain I can deliver the answer on Wednesday. If unforeseen circumstance rears its ugly head, my contingency planning makes it more likely I will deliver on time. And if things go well, I’ll be a day early and be a hero!

Our tendency may be to try and please people in the moment. This may lead to assuming a best-case scenario or overpromising. This will increase your stress and might set you up for failure. Stop. Breathe. Think with your head, not your heart.

Sounds Good…But Does It Work?

I started employing this strategy a couple of years ago. The results have been pleasantly surprising. About 8 out of 10 times, I find out the person is happy to wait a couple of days for the answer. In other cases, I am able to confirm this is a priority for the person. I do whatever reprioritization is necessary. Even in those cases, I can usually buy at least a little time.
They frequently appreciate the dedication to quality work. Sometimes I hear, “Thanks for getting back to me so quickly.” And I’ve turned a few critics into raving fans.

Give it a try. Let me know how it goes!

Oh, and my blood pressure is fine, thanks.

Attitude, Management, Professionalism

Tie Guy

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When I taught my first M-100 class for the Community Associations Institute, I had a little bio to share with the class. I wanted to let them know where I came from, and that at one point in my career, I was them. In many ways, I still am. I’m still a student too, nervous amongst people I don’t know and worried about saying something stupid in the classroom. And once upon a time, I too was anxious about passing a test so I could get reimbursed for my educational expense. I wanted to let them know I respected them and would do my best to give them the best value I could during our time together. I also wanted them to realize how impactful their jobs were, and how important it was to be a professional.

And then a funny thing happened. I said, “I’m a tie guy.” It just fell out of my mouth.

Respect

Community association management is an interesting field. It is typically less profitable than its older cousins, commercial and “residential” (i.e. apartment) management.  This is true for a few reasons, which I will no doubt rant about in a future blog. To do it well requires a skillset and level of emotional intelligence uncommon in the workplace. For these reasons, many commercial and residential managers want nothing to do with community association management.

Community association management has a different paradigm than other real estate management niches – community managers are managing their bosses.

Volunteer leaders are ultimately responsible for the success of their communities. And as successful as they may be, or may have been, in their respective fields of endeavor, only a tiny percentage have ever been in the shoes of their community manager. They frequently do not realize what it takes to be one.

Put it all together and it’s not surprising to find that many community association managers struggle to feel appreciated and respected.

Chickens and Eggs

In all these years of training and mentoring managers, I noticed a pattern. Many managers were missing the boat and accidentally creating self-fulfilling prophecies. They yearned for respect on their terms, but they weren’t always doing the things that would earn respect in their client’s eyes. Feeling underpaid and under-appreciated, they assumed a victim’s mentality. They often say, “I’ll do more when I get paid for it,” which is somewhat akin to staring at a gas stove and saying, “If you give me flame, I’ll give you some fuel.”

On the whole, the profession hasn’t always been synonymous with respect, even within the industry. I gave a presentation at CAI’s Law Conference a couple of years ago. I bumped into one of the lawyers from the Midwest who had been in the audience. He let me know he really enjoyed the presentation, but he was confused that I was from the management side of the business. His exact words? “…But you are articulate.” Ouch. We’ve got work to do.

Professionalism

Several years ago, when my concerns about professionalism in the industry began to rise, I served as Education Council Chair for the Washington Metro Chapter of CAI  I was thrilled that Joe Douglass of Whiteford, Taylor & Preston agreed to present on the topic for CAI. During that time, I was working for a management company that had a reputation for being “old school.” Unfortunately I was slammed and could not attend the session. The next day Joe took the time to call me.

“Thanks for calling, Joe. How did the session go?”

“It went really well. But I wanted to reach out to tell you about something I said before you heard it from anyone else.”

“Umm…OK….”

“Well, I got up there and looked around, but I didn’t see you or anybody else from Zalco there…”

“Joe…what did you say??”

“My intro was ‘What does it mean to be a professional? Do you have to wear a suit and tie every day like a Zalco guy?’ The room broke out in laughter. Then I said, ‘No, but it doesn’t hurt!’”

He was worried it would seem like he was making fun, but I loved it. I thought it was great that our reputation was so well established with the local business community. Talk about branding!

So Why the Tie?

Does a tie make me smarter? Nope. Does it make my work better? Not directly. But it sends a message. It reminds me about my mission and it lets the world know I’m serious about it. Don’t get me wrong, I know several professional community association managers who represent themselves, their organizations, and their industry in an exemplary way who rarely if ever, wear ties. Plus, CAMS in Texas and Florida might even faint from heat exhaustion if they had to wear one every day!

Still, here in the Mideast, a tie says something. I want to equip as many managers as possible to be worthy of the respect they seek. I want managers to get paid what they are worth. I want the profession to be respected and appreciated. Like it or not, appearances can either add or detract. A tie dresses up a man physically. It can likewise accentuate his professionalism. If it’s backed up by actions, it says:

  • I am serious about what I do
  • I respect you
  • When I represent you, I want to do so favorably
  • I respect the value of the work I do for you
  • I am a professional

Necessary? No. But it doesn’t hurt.

The M-100

So there I was, beginning of the class. I gave my spiel about our profession and the tie, and why I would be wearing one throughout the class. I explained that I am more comfortable wearing ties pretty much every time I do educational presentations out of respect for the participants and their time. Most of the class was dressed in business casual, which was entirely appropriate. I thought nothing further of it.

Then Friday morning, Marvin shows up with a nice red tie. I was so tickled that I couldn’t even give him a hard time about the unbuttoned collar.

Marvin was on the staff of a high rise condominium. He was an excellent student, bright-eyed and clearly serious about his career. I could tell he understood the impact a professional manager could make on a community, and he was into it.

A few months later, I was not at all surprised to learn that Marvin had been hired as the general manager at another condominium association. I am certain he will do well.

Did he need the tie? No. But it didn’t hurt.