Evaluating Management How to Improve & When to Cut Ties

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Striking a healthy balance between the governance and the management of a condo or co-op community can be a challenge. While it’s the board that governs, it’s management that executes…at least that’s how it’s supposed to be in theory. That rule of thumb can become a lot more complicated when there’s a disconnect between board expectations and management performance. Course-correcting when things get off track is tough; changing managers completely can be even trickier. Let’s take a look at how you can assess your management’s performance, and what can be done to right the ship if things have begun to drift.  

Assessing Performance

Considering that boards are composed of volunteers, most of whom have little or no prior experience in effectively operating a large (or small, for that matter) multifamily building or complex, having competent, reliable management is critical. Even more critical than legal and accounting advice, it’s the glue that holds the place together. Management provides the day-to-day oversight and administration that keep the community engine humming.

Much of how a manager or firm approaches a client community depends on the type of property involved. “Different buildings have different needs,” says Hal Coopersmith, a partner with the law firm of Coopersmith & Coopersmith based in New York. “A building with a hundred units needs different systems in place than a building with six. A new building has different priorities than a prewar. 

“When reviewing their management’s performance,” he continues, “boards might consider how cost-effective the management tools and systems are, how consistently they’re meeting deadlines and expectations, and how effectively they’re addressing any problems that arise. Boards can get the most out of their management team by providing clear instructions about what their building and residents need and want to prioritize. With the right instructions, an effective management team can develop custom systems that are right for your building.”

Mark Einhorn, a partner with Marcus, Errico, Emmer & Brooks, a law firm based in Braintree, Massachusetts, stresses that like any successful relationship, a healthy, productive board-management relationship is built on honesty. “The board has to state what their problems and issues are,” he says. “If there are five issues, and the manager doesn’t do the five things that need to be done to address them—or doesn’t do them well—they need to be told about it. And if the manager is honest, they’ll say why it didn’t happen. Whether you’re an existing manager or a new one, don’t promise the world to the board and not deliver. 

“At the same time,” Einhorn continues, “some boards vacillate from aloofness to micro-management. That’s not a good approach either. It’s a dialogue. Outline issues, and break them down—politely. Figure out how to fix it. Is it a performance problem, or expectation and compensation problem? To be candid, boards often don’t give enough direction to their manager, or expect way too much to begin with—and I get a lot of initial pushback when I point that out. But different management is not usually what they need. I urge [boards] to have a conversation with their manager and the company, lay out the issues, and give the manager a chance to address them.”

Coopersmith agrees, and notes that boards must also take accountability when evaluating their manager or management firm. “Has the board clearly communicated its expectations?” And just as importantly, “has the board provided their management the tools needed to execute those expectations?” Something as simple as providing contact information for the board members in charge of a particular project enables a manager to know who to call for the building’s various operations. “A manager without that information might spend a lot of time figuring out how to address problems and who is the best person to reach out to,” says Coopersmith. If problems arise, he adds, a board’s first question should be, “‘What’s holding the manager back from delivering on their tasks?’ Maybe new systems must be put in place, or additional staff must be added to the team. If there are no practical solutions to the problem, it may be time to terminate.”

Making a Change

When that’s the case—when issues persist despite the board clearly communicating its needs and expectations to their manager or management company—it may be time for a bigger change. But that’s a major business decision that shouldn’t be made lightly.

Changing management is not an easy transition to make, says Einhorn. “In general, changing management is not ideal. Except in extreme situations, it’s asking for trouble. It takes 12 to 18 months to get to know a community, property, and board. I try to give my clients a balanced perspective when they’re considering changing management. You won’t get a better result just by changing managers. Work with who you have first.”

Most management contracts contain a termination clause. “It must be reviewed before termination,” Einhorn notes. “Typically, a termination can occur without cause on 90-day notice or shorter in Massachusetts. The association’s lawyer should look at the notification requirements. End your relationship with the management peacefully. You will need them for the transition.”

In New York, Coopersmith says, ending the relationship with a manager or firm “will depend on the terms of the contract. Many service contracts include terms allowing parties to terminate the deal upon the occurrence of certain events, or upon certain notice periods. Otherwise, the parties can always negotiate a mutual termination, or the board can take the risk of defaulting on the contract if it makes economic sense and does not violate their obligations to other stakeholders.

“When bringing in new management,” continues Coopersmith, “boards should consider how efficiently other buildings managed by the firm are operating. Do buildings in their portfolio generally have strong financials, happy tenants, and a good reputation? What kind of systems and procedures do they have in place to deal with complaints and requests, board packages and closings, collecting fees and accounting? Do they have a large enough team to accommodate your building’s needs?”

Real World Examples

Two tales from the trenches illustrate how the process of evaluating—and ultimately changing—a building’s or association’s management can be a complicated endeavor.  

The first comes from a small 16-unit, four-story condominium located in Greater Boston. The board member who spoke to us requested anonymity for both her and the property. Like many smaller condominium properties in New England, this property was self-managed for many years after conversion. That self-management ultimately led to serious problems with the property’s financial health and physical condition. In 2002, the residents voted to bring in a property manager to help them straighten out the association’s myriad problems. The story since then has been one of ebbs and flows, with several subsequent management changes.

“We hired a full-time manager in 2010,” says the long-serving board member. “And to be honest, he was good. He did solve some of our problems. He was highly skilled and knew property law. But, despite the fact that you have a manager you still need oversight. We found that his staff person, the one who paid our bills…paid the amount due but not the full balance, and we got into a hole again—something we sought to avoid by having a manager. We had to tell him that’s not how we wanted things done. You must oversee the overseer. The problem was that our owners, to a great extent, have a renter mentality. We have a three-person board. Two new trustees came on at some point and caused problems with the manager, so he quit.”

After that, they hired another manager, who lasted two years. “He was having family issues,” explains the board member. “We were chasing him around to get things done.” Eventually, they let him go and found a third manager, affiliated with a larger company based out of Boston with a Cambridge/Somerville office. 

“This manager was good,” says the board member, but problems eventually arose. “Plowing, for instance,” which can be a major item in wintertime Boston. “She told us, ‘we do that,’” says the board member, “but when it snowed, it was a disaster. She hired people who didn’t know what they were doing, who didn’t clear the sidewalks, etc. She managed the property during COVID, and we lost a lot of staff and then she resigned. We’ve just hired our fourth manager. They started about a year ago.

“Looking for a manager is a crapshoot,” the board member continues. “You look in the trade papers first, and then search online, and you find out that many management companies don’t want to deal with small condo associations.” That’s a big problem in New England where nearly half of associations are under 20 units. “It’s been a challenge to find someone,” says the board member. “We’re having a meeting this month to discuss the possibility of yet another change.”

Another view of the question of satisfaction—or dissatisfaction—with long-term management comes from a co-op in NYC. Built in the early 1950s and converted to co-op ownership in the 1980s, the property has been managed by a large Manhattan-based real estate management and brokerage firm since its conversion—and had the same managing agent for nearly 20 years. “As far as the company who manages us is concerned, they are very good,” says a board member, “and I must stress, our manager has been good. First and foremost is her honesty and integrity. But she’s nearing retirement and doesn’t seem as sharp as she once was. We have expressed displeasure with her but never officially discussed getting rid of her. Higher-ups from the management have attended our meetings so they could witness the proceedings and important issues, but nothing has happened officially.”

The board member goes on to say that “we now have an administrative assistant at the property who’s doing things our manager should be doing. Though she’s an employee of the management company, we pay for her.” 

The addition of the assistant has quieted the push for a new manager for the time being, though the board member says some on the board believe that a new manager would do things differently—and likely better. “Perhaps he or she would be more analytical with issues and problems and take more initiative with settling disputes. Our current manager is good at presenting things in a fair way, but doesn’t take initiative with resolving them. We would appreciate more analytics and more recommendations.”

When the time does come to bring on a new manager or management firm, the Boston board member recommends seeking out a property manager with a fair amount of experience; for them, that means a minimum of 10 years in the field. It should also be someone with excellent communication skills. And whether an independent manager or a larger firm, they should have strong financial management systems and regular, thorough reports on how they manage client communities’ finances. All good advice from someone who has been there. More than once. 

A J Sidransky is a staff writer/reporter for New England Condominium, and a published novelist. He may be reached at alan@yrinc.com.

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