The end of this year is usually a time for review, reflection and and goal setting for the new year ahead. Whether through a formal review, or casual introspection, it is normal, natural and healthy to ask ourselves about the things we did well, the areas in which we could use improvement, and our resolutions for improving ourselves in the year to come. If you are a member of your association’s board of directors, this is a great time for you and your colleagues to get together and take stock of your accomplishments over the past 12 months, along with your aspirations for the next 12. An honest and constructive dialogue about the obstacles you faced as a board will also be very important in mapping out your plans for the coming year.
Review (or establishment) of your Association’s Mission Statement:
Your community is your home, but with respect to the affairs of your association, your board of directors should be managed like a business. The best and most successful businesses in the world operate from a well-defined, and well-understood mission statement. If your association's board has not developed a mission statement to provide your members with an agreed upon course of governance, now may be the time. Keep in mind that most association boards are comprised of anywhere from 3 to 9 or more residents who until now, have never worked together before in their lives. And while it is reasonable to presume that residents become board members out of the desire to serve their fellow home owners, it would also be fair to assume that each board member is motivated by personal aspirations they may or may not be congruent with each other let alone the health of your association as a whole. A mission statement is a short, simple written communication that conveys an intended sense of direction for the entire organization. Why is this important? Well let’s assume that Board member A and Board member B both give their time and efforts in service to the board of directors, each under the premise that they want to do what is best for the association. For Board member A, this means never raising assessments, for Board member B, this means discussion and implementation of reasonable assessment increases over time. Clearly, both members are well intentioned, but without the open discussion of what is “best for the association” means to each board member, a recipe for discord and gridlock may be on the horizon. If your board has a mission statement in place, this is a great time of year to review it. A well crafted mission statement will withstand the test of time, but even the best ones should be evaluated and discussed. If your board has never established a mission statement, now is a great time to ask all board members to develop their own and hold a board workshop to allow each member to share theirs with fellow board members. The idea is to listen to your colleagues, then collaborate and build consensus towards a well crafted mission. Once finalized, this statement should be shared with your community, and while we know that the final result will not necessarily make everyone happy, your constituents will appreciate and should respect the unified message established by your board. This mission statement should always serve as a reminder to your association during times of conflict, and those who wish to serve on the board should do so with the understanding of the association’s mission statement as its guiding principle.
Establish Priorities for the coming year
The most effective organizations are those who establish measurable goals and are proactive in attaining them. The least effective organizations are those who operate in more of a reactive manner. It is never possible to anticipate all the twists and turns that an association will face in the coming year. While the ability to react to unanticipated events is an important trait that your board must possess, even more important is the ability to foresee problems before they occur. Capital improvements projects, routine maintenance plans, staffing needs, elections and resident concerns are just a few of the areas in which your board will need to provide governance. Anticipating and planning for these events will help insure that you are working together towards constant improvement. Key in establishing these priorities is procuring the involvement of all the stakeholders in your association. As it was their votes which put you into office, empowering them with a forum to share their feelings about how to improve the building for the upcoming year may very well earn you their vote the next time you are running for a position. Many residents are not regular attendees at board meetings, but that does not diminish their opinions. Conducting a year end survey gives everyone in your building the opportunity to share their thoughts and provide you and your fellow board members with some insight that you may not have had otherwise. This is also a great opportunity to meet with door and maintenance staff in your building to listen and evaluate their comments and concerns. While there may be a great deal of information provided for your board to digest, the alternative is to rely solely on the input of a small group whose ideas and priorities may not be congruent with those you represent. Make a resolution to gather information from your neighbors and staff and use this information to build consensus and establish priorities for 2016.
The reality of income and expenses:
So we have a well crafted mission statement, a clear list of priorities in hand. Now, with unlimited funds at your disposal, you can achieve it all. Eventually in some Utopian society this may come true, but the world in which we operate comes with financial limitations. As a board you are well aware of this. We want your association to run like a successful business, but therein lies the rub. There are several metrics that define a successful businesses, not the least of which is the ability to grow revenue. In business, growing revenue is fun! Businesses look outside their organization for new customers, products, and markets to drive this goal. As an association however, your primary source of revenue is the monthly assessment levied upon you and your fellow residents. Raising that assessment does not generate the same warm fuzzy feelings as when a business grows revenue. In fact, quite the opposite! That said, the expenses of an organization, business, HOA or any other, will inevitably increase over time. Expenses must be well managed, but even the most efficiently run organization will encounter cost increases as a result of inflation alone. As unpopular as it may be to say, part of the mission of an Association board is to ensure that revenues keep pace to match expenses. The results of not accomplishing this are even less popular topics including special assessments for deferred maintenance. Far too often we have visited buildings that have sacrificed long-term preservation in favor of a short-term mentality. In other examples, new developers often market units with grossly underestimated assessments in order to attract new owners. Eventually, reality sets in, and the association is faced with a financial dilemma. To combat this, the Board needs to be pragmatic in their approach to financial planning. The annual budgeting process is the first step, but a long-term approach should be taken into account. Hopefully somewhere in that mission statement, the board will include language about the long-term preservation of the property. If so, there must be a realistic plan to make sure that revenues keep pace with the property’s needs. While not always a popular topic, it is a necessary one. Making matters more difficult are the conflicts of interest that arise for those property owners who have bought for the long term vs. those with a shorter time horizon. At the end of the day, regardless of how long anyone in your association plans to own their unit, the priority for the Board should be for the long haul. As your Board ponders its policy for revenue growth in the future, the following should be considered:
Does a consistent approach to small annual increases in assessment outweigh a larger one?
Have your reserve study results been put into a timeline with funding requirements?
What would the ramifications of a large special assessment on your residents?
What other revenue generators can assist towards the offset of any potential assessment increases?
Laundry Room Revenue
Every association board faces a litany of challenges in providing leadership and direction. As with any successful organization, a clear mission statement, the establishment of goals and priorities along with the clear understanding of both the long and short term financial challenges ahead will put your board in a better position to succeed today. It will also help provide guidance and a clear legacy for future board members to maintain the values that are important to your property and fellow residents.