Tuesday, November 18, 2008

It's OK for a Board to Micromanage its Management Company!

We have all heard it before. Micromanagement is mis-management. It is bad for a condo or homeowner association Board to micro manage its operations. Just get out of the way and let the people do their jobs. This cry is particularly loud with Management Companies or property managers. They say, empower your employees and give them the freedom to explore, own the problem, deliver and sometimes, fail. Don’t watch over their shoulders and don’t try to jump in and fix problems as soon as you see them. Hands-off management leads to success.

Ideally, this is a great idea. The problem is that not all Management Companies can handle high levels of independence at all times. There are situations when they need help, oversight, and yes, even someone watching over their shoulder. Too many Boards blindly abdicate their responsibilities to a Management Company. This is wrong! When Board members are elected as the association leaders -- then they should lead the association. Many Boards simply choose not to lead. They believe that if they hire a reputable Management Company then the management of the association will take care of itself. Do not sit back and be the victim of a Management Company’s “standard practices”, lack of cost cutting aggressiveness, poor performance, or profit making motives. It is not in the best interest of your association and you must do more than loosely manage your Management Company. In order to do this, you have to stay “connected” and on top of what is happening in your association.

The universal fear of micromangement comes from stories of almost legendary failures associated with overbearing, in-your-face managers who feel that knowledge and control equate to power. This can be a huge management issue that frequently leads to under-performing organizations; however, it is not the only characteristic of poor Board management. Just as bad is a Board that is too timid to get involved with how a Management Company is managing their operations or with key projects that commit substantial association resources. If a Management Company lacks experience in certain areas or is not delivering the expected performance, then a responsible Board must intervene.
There are number of other reasons why a Board may feel that it should micromanage their operations, including:
  • The board has no clear sense of its role in the organization / Board Members think this is what they should be doing.
  • The board has no policies (rules) that delineate appropriate roles for staff vs. the board.
  • Management of day-to-day work is what board members know from real life.
  • We've elected them on the board to perform a task, not to lead.
  • Fear that if they don't do it, no one else will (or no one will do it as well).

Shown below is a four-quadrant chart that can help guide when more active management involvement or micromanagement is required on the part of Board members.

Generally speaking, if Management Company has loads of experience and is a high performer, the Board can give that Management Company a lot of freedom, simply checking on progress now and again. This can be done primarily with a variety of periodic management reports along with regular personal contact on how things are going. In this situation, limited micromanagement is a good way to (a) stay on top of some of the details of the business, (b) determine whether a Management Company is doing things that they should be doing, (c) remind the Management Company of how much autonomy they actually have! The idea is to just jump in, ask a bunch of questions, and see if things match up the way they should. If so, jump right back out. If not - time to dig deeper.

If an experienced Management Company is not performing well, however, the Board needs to more closely and actively monitor the Management Company efforts and use that increased attention to try to bolster that Management Company performance. Performance reports should be used to gage performance and to point out any shortfalls that are being experienced. The Board should also make sure that performance expectations are clear, so that there are no misunderstandings.
Inexperienced Management Companies need to be managed in a very different fashion. Those who are high performers need to be given more freedom and room to experiment and, perhaps, experience small failures. The underlying management style should be one of teaching and guiding. These Management Companies don’t enjoy the freedoms of their experienced compatriots, but they still get a lot of freedom. They should rely upon the experience of existing Board members or draw upon industry best practices.

If an inexperienced Management Company is performing poorly, however, the Board needs to virtually remove all freedoms from their environment and micromanage the Management Company by working with them on a task-to-task basis. There is simply too much at risk to abdicate their responsibility. If a Management Company stays too long in this quadrant, then they should be prime candidates for replacement.

Micromanagement, therefore, is needed in the low-experience, low-performance quadrant and, to some extent, even in the high-experience, low-performance, actively monitor quadrant. More importantly, the Board’s style needs to be different for each of the four quadrants. Even Boards that understand the basics of this need often miss that an experienced Management Company may need to be closely managed as a result of poor performance. Similarly, an overwhelmed, inexperienced Management Company can easily slip from being a high-performer to a low-performer, requiring more attention than before. Again, any low performing Management Company for extended periods of time should be prime candidates for replacement.

Condo and homeowner Boards need to be in tune with what is going on with their association and their Management Company, and adjust their style and effort accordingly. Sometimes, micromanagement is absolutely the right management tool for the job at hand. It should, of course, be used sparingly and its primary motivation should be to move the Management Company into a quadrant that gives them more freedom to learn and excel.

If Boards are inappropriately micromanaging because they don't know what else to do, then the obvious solution is to show them a different role. If Boards micromanage because they are concerned and/or scared, then the obvious solution is to allay those fears. Finally, if Board members micromanage because they have been asked to act as staff, then the obvious solution is not to ask them to perform staff functions.

The Board's main focus must be to ensure the organization is aimed at providing the very most benefit possible for the association members that it serves. It must focus on the on-going capacity to provide that benefit and to assure that the proper management and control system is in place and that it is functioning correctly. For a Board to succeed, the number one key ingredient is: Involvement. Boards fail (and, in turn, associations fail) when board members become disengaged from either the mission of the association or their role in the governance of the organization.

An engaged Board does more than simply show up for scheduled meetings and vote to approve minutes and budgets. Engaged boards partake in vigorous discussions that help shape the vision and future direction of their association. Engaged Boards ask questions of their Management Company and becomes educated on the issues their association is involved in. Engaged Boards read and understand monthly financial statements and accept their responsibility for ensuring the association’s short-term stability and long-term sustainability. Engaged boards define expectations for their Management Company and confront any poor performance. And, finally, engaged Boards must learn when it is appropriate to micromanage and when it is not.

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