Management 2012

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THE BUSINESS PARTNERSHIP
Experience coupled with volunteerism: a unique relationship that can last for decades or end in a flash. How to make it last, and make it good.

Eric Ackerman, president of a 192-unit co-op in Mamaroneck in Westchester County, recalls the incident clearly. A tenant-shareholder approached him in the elevator and asked: “Where was all that smoke coming from the day before yesterday?”

“Smoke?” Ackerman replied. It was the first he had heard about it.

Puzzled, he called the manager.

“Oh, yes,” said the longtime agent at the complex. “There was a minor incident with one of the boilers. It let off smoke – so we got the fire department in here – but it turned out to be nothing.” The agent was going to mention it at the monthly board meeting.

Ackerman was not pleased. “When anything – and I mean anything – goes on here, I should be notified,” he told the manager. “There should be nothing that I, as the president, do not know about. Even if no action is required, I should have been sent a note. And then a notice should have been posted in the lobby explaining what went on. I shouldn’t be out of the loop – and the owners have a right to be informed.”

Andrea Bunis, president of Andrea Bunis Management, recalls a conversation she had at another co-op. The board president was complaining about tardiness in her response to the board’s e-mails. She felt the complaint, though common, was based on a misunderstanding of how the communication process should work. “We get close to 300 e-mails a week,” she explained to him. “Most boards will copy us on their internal discussions, so we may get 10 e-mails on one day from one board. We try and respond quickly, but some of these e-mails need research – so we can’t give you a quick answer on those.” What she usually does in such cases, is send an e-mail saying, “We’re working on it.” But, she adds ruefully, “although they want an instant answer from us, sometimes they don’t get back to us with a decision for weeks.”

Two views from different sides of the fence, highlighting a key part of the management-board relationship:  frustration. Indeed, although the bond between a co-op/condo board and its managing agent has been compared to a marriage, the two relationships are ultimately profoundly different because the management-board connection is a business partnership – but one that can go on for many years, often with the same account executive, and one that frequently becomes very personal. Despite this longevity, or perhaps because of it, the management relationship is one of the most talked about, complaint-prone, and personality-challenged one in New York today.

In an exclusive co-op/condo board survey, Habitat has identified four key areas that make a difference in the success or failure of the board-management partnership: expectations, initiative, communication, and board involvement. And, even though complaints are often heard about and  from manager and board member alike, the survey (and follow-up interviews with board members and management executives) shows that most of those partnerships actually seem to be working fairly well, and that their successes (and failures) offer lessons for all.

Expectations
To begin with, the surveyed boards seem to stick with their management firms. Slightly over 60 percent have been with their current firm six years or more; some 16.5 percent have been with the same firm for 11 to 15 years; and some 12.6 percent have had a more than a 21 year relationship. Despite this longevity, 40.6 percent say the performance of their current agent is “sub-par” or “needs improving.”

In a follow-up interview with one participant, a board member at a 77-unit Manhattan co-op said the directors wanted a non-sponsor-affiliated manager who would take initiative. The early impression of the agent was “terrific,” but a little over a year into the partnership, expectations were not being met. “We were hoping that the new manager could train and guide the super, because he has some good qualities but he needs supervision,” notes Rhona Magelowitz, the treasurer, about the firm. “We’re just not seeing that yet."

Many managers feel that boards frequently have skewed, unrealistic expectations of what a manager can do. As Neil Davidowitz, president of Orsid Realty, notes: “Expectations of service and reporting are often tied to an economic model that doesn’t work for us. In short, for the fees we’re paid, it’s hard to live up to certain expectations for clients that are in a different business model. They’re in a corporate world where there’s an expectation of a different kind of reporting – financial models, long-term capital planning – that’s hard to [achieve] for the compensation we receive.”

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How do the successful boards get their expectations met? The key is to meet, to discuss, and to monitor. “You need to have face-to-face meetings with your board members especially at the beginning to come up with a fair and balanced plan for what you’re looking to do for your property short-term and long-term,”  says Robert Friedman, a principal in Maxwell Kates, a management firm.

What this means is that you must clearly lay out what needs to be done and check in periodically to see that everything is on track – and then make course corrections as needed. “At the beginning of each year,” notes Michael Berenson, president of AKAM Associates, “we’ll go into each building and go into all goals and objectives for that year; we’ll see what we want to accomplish, whether it’s a five-year capital plan, or a new preventative maintenance study, or setting up a website. We’ll address that at that meeting and throughout the year there will be points where we meet to discuss the status of the items, and what they expect from us.”

Initiatives
The survey also revealed that a strong majority of the managers – some 68 percent – offered new initiatives. These ranged from a conversion to a gas heating system and the replacement of all common area fixtures with energy efficient bulbs to security cameras and boiler controls.

Managers say that offering new ideas is a no-brainer – and also a necessity if they want to be competitive with their colleagues.“The trick is to stay ahead of the board and be presenting them with the ideas, the initiatives, and putting it before them before you’re asked about them,” says Don Wilson, president of Blue Woods Management. “Tell them what the issue is and what some possible options are. If you present that all up front it makes them more comfortable and puts them at ease.” He says he draws ideas from his observation of all the properties he manages, often bringing an idea that worked at one building to another.

“You should have a strategy session,” says Dan Wurtzel, president of Cooper Square Realty, “where you look at goals and objectives and see how [your approach to them] can be improved. Otherwise, if you continue to maintain the status quo and the status quo isn’t working for either side, what you have eventually is a very unhappy client and a manager who isn’t doing the right job.”

“The key to being successful in a service business is to be proactive,” adds Berenson. “Just to sit back and wait for the client to ask is a reactive way to manage. At AKAM, we meet with our managers on a weekly basis and do a lot of proactive thinking. The managers go through items on a regular basis to discuss what they can enact in their buildings. We do a monthly walk-through of each building and give the client a written report – a checklist of all the items in the building [highlighting areas that need attention].”

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Such attention to detail leads to satisfied customers. “Our manager negotiated payment plans with our vendors because we were financially strapped,” says Alma Frank, board president of a 12-unit co-op in Chelsea, a survey respondent. “He suggested things to do, like prepayments on maintenance. He took the initiative. He had to communicate with people [the residents] who were never satisfied, who were never happy, who were belligerent. Our annual meetings were atrocious. There was board bashing, but he stayed on track, discussing what the city regulations are, how the elevator laws have changed, what new costs were, and so on.”

Nonetheless, over a third of those surveyed – 34 percent – said the manager proposed no new initiatives, and some even said they didn’t expect them to, either. “We usually come up with initiatives, and then work with the manager,” explains survey respondent Eugene Broughman, vice president at a 528-unit garden-style co-op apartment complex in the Bronx. “The last one we did was a boiler conversion and now we’re doing meter room upgrades. We’re a very proactive board. We say to [the manager], ‘This is what we’d like to achieve, is there anything out there that fits that model?’ And they’ll come up with their own suggestions.”

“Generally, the managing agent is responding to what we want,” adds another respondent, Charles Anderson, president of a 160-unit Manhattan co-op. “They offer a wide range of suggestions, but it is the board that makes the final decision.”

What can a board do to get more initiatives from the manager? “We measure initiative by productivity,” says Steve Greenbaum, director of management at Mark Greenberg Real Estate. “If there’s an item that needs to get done, the amount of time it takes to be done and the amount of professionalism involved proves how much initiative the agent has. It’s our role to take initiative and move things across the board.” If you feel the manager is not taking initiative, Greenbaum says you should talk to him about what you expect and if that doesn’t work, report it to his supervisor.

Communication[[wysiwyg_imageupload:799:]] The way boards deal with the managers on expectations and initiative illustrates another important area in the management-board relationship that came out in the survey: communication. Not surprisingly, the main method of communication these days is e-mail. Some 94.9 percent use e-mail as the primary means of communicating, as opposed to 38.8 percent who primarily use the telephone. “E-mail is great,” says Jay Silverberg, president of Zenith Properties. “It’s way easier to coordinate projects, getting in touch with vendors and board members in one communication instead of trying to coordinate conference calls. It’s concise and to the point.”

There is a great potential for abuse here, however. Nearly a third (31.3 percent) communicate with their manager every day, which seems like a lot (unless they’re involved in a project), while a slightly smaller number, 28.1 percent, communicate (perhaps more reasonably) once a week; a solid 50 percent do so only as needed.

Managers have mostly positive things to say about e-mails, but offer caveats. “Because of technology, the expectations are for immediate replies, immediate answers,” says Friedman, of Maxwell Kates. Adds Davidowitz of Orsid: “You have an obligation to get back to them [within 24 hours] and say, ‘We received it. This is what I can answer right now; these additional questions are requiring further analysis, further review. We need more time.’”

What can boards do to smooth out the lines of communication? “Boards don’t often speak with one voice,” complains Davidowitz. “They’re split on decisions. We need one voice and one decision.” The solution is to set up a single person as the liaison – usually the president – with the manager, which should cut down on confusion and save time. But even while you’re doing that, adds David Goodman, director of business development at Tudor Realty, “you should copy all the other members of the board so no one says they weren’t informed.”

Board Involvement
Board members who complained about their managers in Habitat’s survey were also among the ones who described themselves as “proactive.” In fact, even boards that expressed satisfaction with their agents – and had stayed with them for years – said they tended to be involved or very involved with their building’s activity, describing themselves in subsequent interviews as “proactive” or “hands-on.”

The survey found that nearly half – 47.9 percent – were involved in the day-to-day running of the property, while 45.8 percent were “very involved” but not on a daily basis.

“Tougher economic times require the boards to pay even closer attention to where their money’s being spent,” says Silverberg of Zenith, “so there’s a lot more activity by boards.”

A few board members in the survey follow-ups, point to the management kickback scandals of the 1990s as a turning point in the management-board relationship. Until then, many boards were content to turn over the reigns of power – the day-to-day decision-making, if not the basic running of the building – to the manager. But after two rounds of indictments in 1994 and 1997, most boards realized that oversight was necessary and an ever-increasing number got more involved, attending educational seminars and taking more of an interest in what had been considered a mundane job.

In follow-up interviews, most managers said this was a good thing, since savvy boards make their jobs easier. “Co-ops are not as mysterious as they were in the past,” says Greenbaum. “People understand them more. There’s been a lot more information and people have been educated about co-ops. I’m like Sy Syms, I believe ‘an educated consumer is my best customer.’ The more they know about what we do, the better they are, and my most educated boards are the ones that are most responsive. The more educated they are the better.”

Habitat, July/August 2012 (written June 12, 2012)