7 Key Functions of an Effective Community Association Board
Community associations are only as effective as the board members who run them. But as a board member, you likely ask yourself, how do I know if our board is working to the best of our ability? Are there areas of improvement? Are there areas where we can do even better?
As North America’s property management leader, FirstService Residential knows what makes a high-performance board.
This article will describe what it takes to be an effective condominium or community association board, from defining a vision and maintaining open communication to understanding your fiduciary duty.
Board performance touches on quite a large number of topics; this article will focus on key areas that impact board effectiveness. Those include the community vision, communication with your membership, finances, community governance, board leadership, how to run meetings, and reserves.
Clearly Define A Community Vision
One of the most important things that you, as a board, can do is to establish a focus and set priorities for the community. It helps keep track of what is truly important to the community and its residents, and then strategically plan not only for your time on the board, but even 5 or 10 years into the future.
Communities that have a clearly defined vision statement also tend to be the communities with the most well written documents and rules and regulations. A vision statement allows all other documents to flow naturally from it, which is especially necessary in an environment with many people living together, like a high-rise building.
Often, writing a vision or mission statement can be intimidating. But if a community and a board focus on what they want their priorities to be, the mission or the vision will stem from that. It will simply state what your priorities are and how you want your friends and neighbors to perceive your community. A sturdy base statement also instills confidence for your members, to establish trust in how the board is governing.
Communicate Clearly and Transparently
A well informed community is a telltale sign of a happy community. Every year, you have an election and a potential board transition, so it's important that the communication from one year to the next year stay consistent. What strong leaders in the industry do to help boards with consistency and with open communication is to encourage setting a regular set schedule – have meetings, get your residents involved, open the channels of communication.
Here's one analogy. The relationship between a board and management and the residents is like an arranged marriage. The happiest and healthiest marriages are relationships with good, open, and healthy communication. You don't always have to agree, but you have to agree to disagree and then move forward for what's best for your community.
Transparency is key. Regardless of what's going on, whether it's positive or negative, it's essential that the community is aware. That way there are no surprises if there's something that can turn sensitive. Just put it out there and talk about it.
Some of the most successful meetings happen when a board is forthcoming about a potentially troubling subject, to get ahead of the issue. For example, if there's a special assessment on the horizon for the community or a substantial change to the budget, the membership should know about it, and how the board is addressing it, before it comes to fruition. Florida as a whole is going through significant changes in insurance costs. Getting that message out to the community before the impact is realized allows the community to have discussion around it and prepare for it.
Of course, don’t forget to also communicate the good news! Make sure residents are aware of what the board has succeeded in doing over the past quarter or half a year. Much of the work of a board goes on behind the scenes, and residents need to know that as well. One useful way to do this is to utilize a powerful tool everyone is connected to: email. Especially since the COVID-19 pandemic, residents and boards have become even more technology-savvy. Email allows you to put out messages with consistency. It’s imperative to maintain a schedule, to avoid any confusion or misunderstanding and to maintaintransparency. A lack of communication will ultimately lead to concern or negative assumptions. A consistent cadence of communication will instill confidence and establish transparency.
One recommendation is to send out a weekly news recap with quick little tidbits. This provides regular information about the community schedule – it can be very concise, with bullet points that could easily be read on a smartphone.
Practice Fiduciary Responsibility by Getting Value From the Budget
When you join a board, you're tasked with managing dollars of your friends and your neighbors, which comes with a lot of responsibility.
How can your community look for cost-savings opportunities? Start by dividing the budget into several different buckets. Look at each area individually, like insurance or maintenance, to see what can be done. Perhaps there's some new pricing and the vendors will partner with you on finding a solution. It’s always better to partner with vendors rather than command them, because you want to take good care of the vendors that are taking good care of your building.
Another thing to recognize is that, in the world of finance, it is the desire of many boards to keep maintenance dues flat. But the reality is, with the expenses you face in maintenance, insurance, and reserves, it's sometimes difficult to keep dues steady. When it comes to cost savings, do your due diligence. You’re dealing with somebody else's money. The entire community pitches into this fund and the board and the manager get together and decide how to allocate it. Always secure a minimum of three bids, and keep in mind that the best bid isn’t necessarily the cheapest bid. Value doesn’t always come at the lowest dollar amount.
As always, clear and transparent communication with residents about the budget is paramount. This will put members at ease with the board as good stewards of their capital and their dollars.
Know Your Association Governing Documents Inside and Out
How well would you say you understand your association's governing documents? Reading these documents can be an arduous task, but it is imperative. And often the writing is very clear, making your decisions as a board simple. Many managers will keep their own personal printed copy on their bedside table, marked with folds and highlights, because those are the common sections that they need to refer to frequently.
Your governing documents and Florida statutes form the rule book that association boards must follow. And if you ever get into a situation where you're not quite sure and you're caught in a little bit of a quagmire, you have access to the subject-matter expert on all of this: your association attorney. You can rely on your association attorney or your CPA. Your attorney will be the one defending any decision, so they can often provide a neutral-party view on any tricky issues.
It's important that each board member set aside the time to read and understand the governing documents. At the end of the day, this is a corporation with multi-million-dollar assets, and you must know how exactly it functions and what is permissible. Setting up new board member orientation sessions can help ease this steep learning curve so that everyone fully understands what the expectations are in their new positions.
Many questions that a board member will face from their community are already answered by these documents. Even amidst loud and convincing pressure from the community for certain changes, board members have to maintain clear minds and rely on the governing documents for guidance. Their job is to protect, maintain and enhance their community and their home. The governing documents guide them in that pursuit, and protecting the common interest of everyone in the community.
Board Leadership Comes in a Unified Voice
Elections can inject new blood into a board. New board members come from different backgrounds and experiences and offer different perspectives. Encourage open dialog about policies that are being set or an incident that occurred, allowing everyone to have a say. Even if it doesn’t gel with your opinion, hearing different voices may bring to light a different solution or a better direction.
Once the board votes and a verdict is set in place, even if the decision wasn’t unanimous, it’s crucial that the board present a unified front to the community. If the community sees discord among board members, trust can begin to crack. Members may start wondering if the board is making the right decisions.
A unified voice helps convey confidence. If the Board of Directors is unified, recognizing the multiple opinions on any one subject and doing what's best for the community as a whole and communicating properly, the community will run smoothly. But people need to see the board is united not because they're in collusion or they have one opinion, but because they are working together. One key aspect of making sure the entire community is represented is a wide range of opinions and expertise being fed to the board. It’s crucial to actively bring the board the necessary information and subject-matter experts who will help them lead successfully. An experienced management company will have the knowledge and expertise to guide a board and support them in making informed decisions. That way, when a board is presenting transparently to the community, they can lean back on all of the expertise and resources that went into the decision. This allows residents to feel confident in who they elected to run their community. Another source of confidence is properly vetted board member policies, including ones on confidentiality, ethics, and conflicts of interest. Your association attorney can help craft these policies.
How to Run a Meeting in the Virtual World
One positive to emerge from the COVID-19 pandemic and subsequent lockdown was the rise of virtual meetings. Boards saw a dramatic increase in participation of the residents as a result of being more informed on what was going on. In a recent FirstService Residential survey, 89% of board members reported that they plan to continue some form of virtual involvement in their meetings. Especially for residents who don’t live at the property full-time, digital access is a convenient way for them to stay in touch with the leadership of their investment.
Zoom meetings also helped boost preparation ahead of meetings. Many members would show up with slideshows and visual presentations already created. If you’re able to read packets ahead of the meeting, you are prepared and ready to discuss any topics that need attention in the agenda. Sending out the agenda ahead of time will serve the community by letting them know exactly what the board is planning to discuss. This facilitates transparency and encourages buy-in from all residents. The higher the participation from residents, the more resonance that they’re being heard and are valued members of the community.
Another positive aspect virtual meetings have facilitated is a firmer adherence to parliamentary procedure. Virtual meetings helped prevent side channel conversations or people talking over each other. Sticking to the agenda can paradoxically help keep meetings light and create a sense of community. Some communities have experimented with adding music to the opening and/or closing of meetings, or setting aside a few minutes explicitly for socializing such as a virtual happy hour. These are examples of ways to take what can be a dry affair and make it more personal and fun, reminding residents of the bonds they have with their community. This can help build back the engagement people were missing during the pandemic.
Properly Funding Reserves
Reserves are a great tool that the board uses to plan ahead for capital expenditures, like preplacing utility components that inevitably wear out on the property. Reserves function as your piggy bank for the future. It’s important for a community to be properly funded and have their reserves balanced, since they will impact all budget decisions. Once again, lean heavily on your subject-matter experts, specifically your reserve study specialist. Your reserve study will define what items you need financial backing for. When you lack sufficient reserves, special assessments loom. Where you lack in reserves is where you're inevitably going to have to pass a special assessment. It is essential to your financial health and future planning. All conversations about reserves should touch on the words special assessment so that membership understands that where one lacks, the other one is going to have to come in and fill the gap.
Beautiful communities don’t happen by accident. They take preparation, planning, maintenance, and reserves. When the community is properly reserved, the board can make clear, concise business decisions. When the reserves are not properly funded, it puts the board in a very difficult position to make decisions and puts unnecessary pressure on the board because they don't have sufficient money.
Understanding reserves is only surpassed in importance by the association governing documents. Other subject-matter experts to rely on include your property manager, regional director, or management reserve spokesperson, who can walk you through the at-times arduous process of understanding what isn’t necessarily everyday knowledge. A reserve study specialist can also hold a talk for residents, so that they understand your decision-making process and trust that you’re planning appropriately for the future.
Often, potential new buyers will ask to see the balance sheet and the amount of money in a community’s reserves. Each community is different, but being able to show a strong financial backing can help entice future buyers. The amount in your reserves will fluctuate, particularly directly after large capital expenditures, but a statement from the manager can help explain where and why the reserve level is where it is at.