Don't control your condo or homeowner association intellectual property and run the risk losing it or someone else controlling it for you!

All companies, including condo or homeowner associations have Intellectual Property (IP) that should be protected and managed.  In a traditional sense, IP is made up of four classes (Patent, Trademark/™ ®, Copyright/©, and Trade Secret.)  However, in associations there is another type that is just as important, but often "flies under the radar" of BoD leaders -- namely it's information, data, and records.  Losing this information or allowing someone else to take control of it opens you up to a host of undesirable situations, including accidental or intentional disclosure, modification, destruction or inability to process that information.  In simple terms -- it could shut your association down for a lengthy period of time and create a tremendous amount of work to restore it back to a useable condition.

Information is a vital asset for the success of an association, but most leaders do not even realize the extent of inherent risks that they are exposed to in the way that manage personal or other data critical to the operation of their association's business.  They probably have not even given a second thought and only face it when there is a loss, breach, or when they try to change Management Companies.  Consider these worst case scenarios:

• The association Secretary has all records, blueprints, official correspondence, deed amendments, financial transactions, etc.
• Manually filed at his/her home.  A fire destroys all documents'.
• Stored on his/her computer when s/he loses a hard drive or a virus erases all data.
• Managed by a unique data management software program that s/he has familiarity with.  S/He is removed from the BoD on unfriendly terms and is unwilling to train anyone on the software, making the data inaccessible.
• The association hosts a website that has personal information of its members (name, address, bank account #, driver license, etc), when someone gains access and perpetrates identity theft.  The association is sued for damages.
• The association BoD wants to change the current Management Company that uses its own proprietary data management system for all association records.  The MC refuses to turn over data for the term of its contract or the information is rendered useless unless you continue to use their system and services.
• The association BoD decides to "bite the bullet" and go with another on-line data management system.  It now has to train, familiarize, and deal with all the start-up issues associated with its 2,000 member community that uses the system for all its daily operations.

Consider the cost of replicating the data that was lost in these situations!  It is huge and can bring an association to its knees.  Just ask someone whoever has lost their computer hard drive -- it only happens once, as the consequences are so severe that they put back up systems in place to protect their data from similar occurrences in the future.

So, what should an association do to get their arms around their IP?

1. Go electronic.  If your association has not already converted its records to electronic form, do not wait any longer.  There are simply too many benefits to be gained.  All the association’s records should be stored in electronic form to save space and money drain and to allow you to take additional security measures to protect it.  You should begin to transition to electronic transactions with members, vendors, service providers as your organization matures and technology becomes readably available.  You should also transition to paperless access for all members and operate on a member "pull" system to extent possible.
2. Select the Method of Storing/Accessing Your Electronic Data.  Determine how and where you will store your electronic data. This is an extremely important decision and you should approach it as if you are selecting a life-time provider, particularly if you use a website or on-line database storage provider.  There are too many negative implications for you to fall into the start-stop-start ditch of switching between providers or method of storage.  Make sure that you always own your data; you have complete control of how and where you store/access it, and NEVER outsource it or give control to someone else.  To a large extent, this decision will be dependent upon the size of your association, whether you are self-managed or use a Management Company and your level of IT expertise and/or availability.  Here are some of the main options you could consider:
• Computer hard drive or disk.  This method would likely be used by a small association to store its historical records and may involve the use of off-the-shelf programs (QuickBooks, Excel, Adobe, etc) to help manage certain aspects of the association business.  The information is normally available to the person entering the data and cannot be directly accessed by association members.  Data security should be provided by regular back-ups and storage in different locations.
• Association website.  This can be a very attractive alternative to small to medium associations and involves the on-line storage/access of data through an independent website provider.  A designated person maintains the website and keeps all of the data current.  Association members can assess the data on-line with the use of their computer or a hand-held device.  Security is very good as the provider regularly backs up the data and stores it in multiple locations.  Costs are minimal.
• On-line database storage provider.  This becoming a more and more attractive options for all sizes of associations, as the offerings by different providers continues to grow.  They have all the advantages of a website, but can also include a multitude of features and options that go well beyond simple website storage and retrieval functionality.  Things like personal data management, automatic payment, resident surveys, move-in move-out forms, amenity and facility management, discussion forums, work order requests, email accounts, contractor management, access control, for sale/rental management, package delivery and tracking, etc., to name a few.  Costs are moderate and security is excellent.   If you are considering a service such as this, make sure you do your homework and again approach it as you were selecting a life-time partner.
• Management Company.  Large associations (and some smaller ones) are likely to use the services of a Management Company to help them manage the day-to-day activities.  Most MC's will have a preferred method of data management and many have their own propriety system or partnerships with other service providers.  It is here that I wish to raise a BIG RED FLAG.  "NEVER, EVER GIVE UP CONTROL OF HOW AND WHERE YOUR ASSOCIATION DATA IS STORED AND ACCESSED TO A MANAGEMENT COMPANY!"  If you do, you could very well lock yourself into a continuation of those MC services into the future or having to reconstruct data that is not compatible or available, for a multitude of reasons.  It is up to the Association BoD to select an independent data management system (or provider) and then require any Management Company or other service provider to use that system as a condition of employment.   Other precautions you could take with a MC to protect your data would be to include a clause in the contract that:
• Assures complete ownership and unfettered access to your data at all times
• States that the association data is the property of the association and returnable upon demand
• Requires the MC to provide "back up" copies of financial and other records on a CD upon request or on a regular basis.
3. Set up the necessary security systems.  A risk management plan should be developed for the association that addresses such issues as data security (personal and association), disaster recovery, meeting any laws requiring record retention and availability, and back-up procedures.

In summary, condo and homeowner associations that do not have their own independent data management system for its processes, procedures or records leave themselves in a venerable position.  They run the risk of losing their data and having to reconstruct it or becoming hostage to someone else who has taken over control of how their data is stored and accessed.  A wise association BoD will recognize this and take the necessary steps to protect this data and proactively manage this very important asset called their intellectual property.

Waste Elinination In Condo or Homeowner Associations

The elimination of waste is the goal of any "Lean System", which has been popularized by the very successful Toyota Production System. It defines three broad types of waste; unreasonableness, inconsistencies, and activities that do not add any customer value. A condo or homeowner association is not exempt from these forms of waste and can also benefit from their elimination.

• Unreasonableness. This includes all the unreasonable work that a BoD imposes on its committees and members, such as forming a committee without a proper charter or description of the duties it is to perform, requiring a member to "jump through hoops" when satisfying a request for financial information, asking a member to investigate a project/idea, knowing that it will never be approved. Unreasonable work is almost always a cause of multiple variations.

• Inconsistencies. This is the variation and inconsistency that may exist within an association, such as; the enforcement of CCR's or the collection of delinquent maintenance fees, granting an architectural variance for one member, but not another. Lean focuses on how the work design is implemented and the elimination of fluctuation at the policy formulation level.

• Waste elimination. This specifies any human activity, which absorbs resources, but does not directly add value to association members such as; poorly run meetings, making a decision without sufficient factual information, continually revisiting a decision that has been made, calling a BoD member to find out the details of a past decision. These non-value-adding activities and results should be eliminated.

Lean is, in its most basic form, the systematic elimination of all forms of waste. Waste elimination is discovered after the process is in place and is dealt with reactively. It is seen through variation in output. It is the role of the BoD to examine the waste in the processes and eliminate the deeper causes by considering the connections to the unreasonableness and inconsistencies of the system.

What Does a Good Association Decision Look Like?

Clearly, the top function of a condo or homeowner BoD is to make good decisions that are best for the association and its members. When a BoD does not make good decisions, it can alienate its members, create distractions, and build mistrust towards the BoD. Decisions won’t stick - they will be revisited again, people will implement actions not chosen, or the results of the decision will be invisible in a matter of weeks. But, what does a good decision really look like?

There are two critical components; the quality of the decision and the timeliness of the decision.

• Quality of the decision. How would you recognize a high quality decision for your association if you saw one? Many would give answers like:

o All the right people have been involved
o We had all the best information available
o Risk was considered
o A decision was made—action occurred!
o Everybody bought in to the process
o The process did not drag on and on and loop around
o We did not get bogged down in the details
o There was a clear set of choices
o We knew about the difficult trade-offs to be made
o Implementation went smoothly
o Etc...

These are all important considerations among a long list of others. Generally, they can be summarized into six categories:
1. Is the right question being answered?
2. Have we generated a small set of creative yet feasible alternatives (or choices)?
3. Do we have meaningful and reliable information, particularly about risk?
4. Have we identified clear preferences and trade-offs?
5. Did we exercise sound reasoning, and clear communication about complex issues?
6. Do we have a commitment to action?

• Timeliness of the decision. The second component of good decision making is its timeliness. Nothing slows down an organization more than paralysis by analysis – the inability to make even smallest decisions quickly. Unnecessarily delaying a decision or making no decision is just the same as making a decision. You have simply chosen the option of taking no action. It means you are defaulting to the status quo.

When you don't make a timely decision, there are a lot of other bad things can happen, even though the decision itself may be a sound one. It can cause delays in decision implementation which in turn, can result in a missed opportunity or make a bad situation worse. It can put the association into a "downtime" condition that brings it to a temporary standstill on the issue being examined. It allows the grapevine and rumor mill to churn, which now brings further complications that have to be addressed. But, probably one of the biggest problems that it brings is a loss of confidence in the BoD leaders. Hesitation or a reluctance to make a decision is often the sign of ineffective leadership and is a surefire way for a BoD to lose support of its members and thus its ability to lead.

When it comes to decision making, successful BoD leaders have learned that action is vital. They live with the reality of consequences and know there will always be uncertainty in their decisions. No one can see all possible ramifications; no one can predict every contingency; no one can absolutely prevent failure. Strong leaders know that failure is not final, it is a learning opportunity. The real danger surrounding decision making is not "will I make the wrong decision" but "did I make the best decision possible given the facts and circumstances in a timely manner". Good leaders will always recover from poor decisions - they learn and become wiser. But weak leaders will mess around and miss opportunities. And once they finally make a decision, chances are their decision will have no momentum, no passion and no urgency and probably too late.

10 Habits of Highly Effective Associations

Taking a page out of Steven R. Covey’s bestseller book, “7 Habits of Highly Effective People”, a similar framework can be constructed for condo or homeowner associations. This is a collection of best practices that can play an important role in the effectiveness of an association. The implementation of these best practices involves knowledge, skill, and desire. Knowledge allows us to know what to do, skill gives the ability to know how to do it, and desire is the motivation to do it. These practices have a strong track record of success and will provide any BoD a high return on their investment.

Communication

Probably the most important element in the success of any condo association is effective communications. A successful communications system can forestall the development of cliques and factions, enable the association to provide services that owners want, and can help owners develop a sense of trust with the BoD. You should carefully craft a staged communications plan that identifies what information will be communicated (new information, progress to date, anticipated problems, decisions made), how it will be communicated (personal contact, letter or email, group meeting), by whom will it be communicated (President, Secretary, all BoD), and when will it be communicated (date, frequency). You want to give the association members a steady flow of information that addresses the things on their mind along with the things that the BoD wants to communicate to them. Other communication options include:

• Go electronic. It is time for associations to go electronic. If your governing documents do not allow it, change them. There are simply too many benefits to be gained. All the association’s records should be stored in electronic form to save space and money drain.
  
• Use e-mail for correspondence and go paperless whenever it is beneficial. Depending on what your covenants/bylaws and state/local government rules state, you may also use e-mail to distribute the annual budget or notify owners of covenant violations and overdue assessments.
  
• Websites can be developed and maintained at minimal cost to condo associations. An effective website can contain viewable and downloadable copies of all of the association’s material records, such as its governing documents, meeting minutes, financial statements, permits, insurance policy, committee structure, business processes, and annual budget. It can also contain forms, copies of the association’s newsletter, a homeowner directory, an event calendar, a community bulletin board. All of these features significantly reduce the need for paper, as well as increase an owner’s ability to become involved in the community. An association website is probably the best move your association can make to improve efficiency and reduce its administration costs.

Management infrastructure

The BoD must understand how decisions will be made, who is to lead and who is to follow, the procedures to be used, the authority levels of its members, the communication system, and a host of other things that should be considered in the performance of their work. If you do not use a management company, you will have to set up your own management control infrastructure. There are multitudes of opinions on the best way to manage a business and there is no loss for management consultants or books that have been written on this subject. At the risk of adding to the fray, it is recommended that a BoD focus its energy on the following elements of a management control system:

• Setting up a committee structure. An effective committee structure helps make an association strong. Committees can lighten the load by focusing on specific tasks that are assigned by the Board. A charter should be developed for each, as well-formulated marching orders can greatly improve the effectiveness of new committees. A charter describes the purpose and authority of the committee, clarifies responsibilities, assures accountability, and creates and limits authority.
• Establishment of several key business processes. Every organization, including associations, should have a set of key business processes in order for it to function in an effective and efficient manner. These processes help define the basic management system and should be well documented, communicated, and understood by all members for them to work properly. The following are recommended; Annual Budget Preparation , Architectural Variance Approval , Assessment and Fee Collection , BoD Request for Decision , Deed Restriction & By-Laws Enforcement , Emergency Contact , Maintenance and Repair Request . If a Management Company is used, they will typically have these in place.

Decision packages

A proven way to help a BoD make decisions is with the use of decision packages that describes everything one should know about an issue, along with a recommended course of action in a very condensed format. The advance work will help you to quickly come up to speed on pertinent information, alternatives that were considered, and an analysis of the preferred solution. It will help you make effective decisions in a timely fashion and save hours of wasted meeting time trying to get the decision makers to a common level of understanding.

Clear roles and responsibilities

There are two important ingredients for a successful Board: One is getting the best people to serve as members and the other is making sure that they know what they are supposed to do. Too many Boards fall into the categories of; “rubber stamps" that dutifully follow the lead of the association’s president; micro managers" who get too caught up in the day-to-day operations of the organization and can't delegate to those responsible for making things happen; or “ineffective” who can’t make decisions, particularly tough decisions that may be unpopular with some members. One of the largest sources of conflict in a BoD occurs when the roles and responsibilities are not clear. Most by-law provisions describe officer’s duties in very broad terms, leaving lots of opportunity for role confusion, overlaps, and/or omissions. As with any effective team, BoD members can’t perform effectively if role questions or overlaps are present. Don’t leave people to figure out things on their own. Get rid of role ambiguity. Nail down every person’s responsibilities with clarity, precision, and attention to detail. There should be no question regarding where one job stops and the next one starts. A detailed BoD roles & responsibility document that supplements the governing documents should be developed and agreed upon by BoD members.

Financial health

Healthy finances are absolutely critical to the sound operation of an association. If you finances are good, it takes the pressure off and will tend to overshadow the minor issues. There are many factors that come into play, including; accounting controls to protect the association’s assets, well thought out and implemented budgets to ensure there is enough operating capital to over the ordinary expenses of the association, and detailed reserve studies to provide enough capital for future capital expenditures. One of the most important things a BoD can do is to create the right cost-conscious mindset with all association members and particularly with the BoD and the Management Company, if one is used. BoD members should continually look for ways to reduce costs and to challenge every budget line item. Any cost increases should receive the highest level of scrutiny. Ask others to justify expenditures. Always, be on the lookout for ways to cut costs, even if they are small amounts.

Rapid decision making

Making timely decisions is a major responsibility of an association BoD. If decisions are not made in a timely manner, it can lead to owner frustration, additional costs, rework, increased wait time, and a host of other undesirable things. Effective BoD’s place particular emphasis on making rapid decisions. They institute processes to facilitate quick decision making, provide pertinent and factual information regarding the issue, provide for the exploration of appropriate decision alternatives, and finally to document all of this information for future reference.

Ethical behavior

Board members are elected to make decisions in the best interest of the association they serve. They are charged with a duty of loyalty and fiduciary responsibility to use good business judgment in conducting the governance of the association. Directors must make sure that their decisions work to the benefit and protection of property values in general and without consideration of personal interest or gain. Members of the Board are protected by the business judgment rule, so long as the Board acts for the purposes of the association, within the scope of its authority and in good faith. It is not illegal to err or even cause financial loss or other harm provided that the Board can demonstrate reasonable investigation, consideration, thoroughness, and good business judgment in reaching its decisions. But, truly ethical practices require more than a fear of legal consequences or a desire for a good reputation. They require a clear understanding of right and wrong, and a motivation on the part of directors, members and contractors to act in the proper manner at all times. This means adhering to not only the letter but also the spirit of all applicable laws and regulations. A written code of ethics policy helps to maintain a culture of honesty and accountability.

Effective Meetings

Efficient and effective meetings are a hallmark of a well run association BoD. A poorly run meeting is expensive and can burn up an inordinate amount of time. Effective BoD’s first know when and when not to hold a meeting. They avoid a meeting if the same information could be covered in a memo, e-mail or brief report. They set meeting objectives before planning the agenda for the meeting. They provide all participants with an agenda before the meeting starts. They give all participants something to prepare for the meeting to assure that meeting has significance to each group member. They practice good meeting mechanics like; sticking to the agenda, starting and ending on time, making assignments for items requiring action, and taking minutes. Also, savvy Board members NEVER have the board meeting "at" the board meeting. They ALWAYS contact other BoD members in advance of the meeting to get their input and reactions to important issues that will be discussed. This can be a time to build support for a particular course of action, to identify any “blind spots” or holes that you may have missed, and to gather information that may be critical for a successful implementation.

BoD leadership, management, and involvement

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.