As the economy continues its slow recovery from the struggles of the recession, companies are faced with the all-important task of reexamining services and respective best practices. One reason for this exercise is the fierce competition existing among management companies, as boards are quick to jump ship if a more suitable, cost-effective option is presented.
In New England, the community association management industry has experienced marked increases in professionalism over the last few years, partly because of the economy and technology. “While there are few or no barriers to entry in most states, we have seen fewer clients and prospective clients being wooed by the low-cost, low-experience alternatives,” says Robert McBride, CEO of The Dartmouth Group, a residential management firm based in Boston.
McBride, who founded the firm in 1987, says he has seen marked changes within the industry. “Boards are demanding increased sophistication and higher levels of service from their management companies and there has been a change in the profile of the typical community manager—from property management and administrative backgrounds, to an increasing population of professionals and mid-level managers from other industries,” he says, adding that this new reality is due, in part, to the growth of the industry and the lack of formal training programs at the university level.
As is the case with all industries, different firms have different experiences. And while there seems to be a universal acknowledgement that the industry is morphing as related to board expectations, Stephen DiNocco, CMCA, AMS, principal of the Boston-based Affinity Realty and Property Management, has a slightly different take. “Although not a scientific study, my impression is that the industry has been somewhat static for the last couple of years, although I may be insulated from the general rumor mill,” he continues. “I think that expectations have risen regarding the delivery of services especially in regards to technology but believe that the rise is on both sides of the equation.”
Proof is in the Pudding
While market indicators will always change, a firm’s business philosophy should remain consistent. To this end, Amazon’s CEO Jeff Bezos perhaps said it best: “If you do build a great experience, customers tell each other about that. Word of mouth is very powerful.”
Whereas boards may look for better service offerings and pricing, they are less likely to undertake that charge if they are satisfied, or better yet, if their expectations are exceeded. “What is most important in this current economic climate is showing your worth,” said Tim Paoli, director of business development for Greater Boston Properties. “When a company takes over a building, they should of course always do what is in the best interest of the that building, which might include working with non-union vendors that might charge less money per hour but do just as good of a job.”
Paoli, DiNocco and McBride agree that competition exists but it does vary by, and within, respective regions. Many boards, they say, are in need of leadership but can succumb to overpromised services and low pricing, which presents difficulties. Whereas the running of a board and property is a business, it isn’t always treated as such.
“We routinely start any discussion of management services with a dialogue about level of service and strategic planning. We try to explain that before we can propose a plan, i.e. respond to their RFP, we need to know where they are trying to go,” says McBride.
“Some less-sophisticated boards don’t have the time or interest to do this. Others embrace the idea and immediately create mental parallels to their business and professional operations. Once they understand that running their association is the same as running a business, it clicks.”
To address this increased demand, McBride says he has turned his focus internally by defining, or redefining, what “true service” is and having his staff adjust practices accordingly. “This means more talented people each managing smaller portfolios. The trick is to communicate this added value to prospective clients as current clients get it, and to get them to avoid the pressure to go with lowest cost and focus on best value.”
For all managing agents, conveying return on investment (ROI) is a continuous uphill battle. “Some boards expect certain services and they don’t want to pay for them,” says Paoli.
McBride adds, “Showing the boards and the residents how their decision to hire an experienced management company with a business-like approach to management has generated a return a year or so down the road is much easier. The numbers, the resident satisfaction and the peace of mind are there to prove it.”
Diversification of Services
As more and more boards hold tighter to their respective purse strings when hiring management companies and paying services, management companies have to adjust fee schedules, although this is not new and has historically been the case. “The fees have always been competitive from like company to like company,” says DiNocco. “Some boards are very cost sensitive regardless of the economy.”
When asked if regional management companies that diversify offering additional services like construction services take away from the primary objective, DiNocco responded: “Some companies have focused on diversification into ancillary services. For smaller projects, the association may benefit from these services but there is always the potential for work creation and loss of a competitive bid structure.”
For those management companies that are offering ancillary services to remain competitive and relevant, a conflict of interest could arise ultimately causing more problems. McBride says in these situations, disclosure is crucial to maintaining the relationship. “The company must communicate to the board that it has an interest in any service which is not obviously being performed by the management company pursuant to its contract. Then it is up to the board to determine how, and when to use them,” he continues. “When you get into the area of bid work—not simple handyman services performed on an hourly basis—you begin to get into some dicey areas. The best approach is transparency with the management company first submitting its bid to the board prior to obtaining others. That said, it can make for a messy process.”
Paoli explains that his firm offers different management packages. These can include financial management, property management or what he refers to as a la carte. “When we meet with a client we will offer three packages. Lately we have seen a lot more a la carte inquiries. In theory it sounds good, but in practice they [boards] usually realize it is more work for them than they want, so it helps to do a cost-analysis,” he says.
Industry experts agree that communication and the delivery on promises is essential for maintaining sound relationships. This process has been greatly enhanced via technological updates such as the Internet, websites, social media and smart phones. When asked if those companies that stay a step ahead of the technological curve and bring their board clients along for the ride have an advantage, DiNocco said: “Businesses adopt the technology that makes them more efficient and that addresses their client needs. There may be some advantage to being first but not considerably more than just staying current.”
When approaching the adoption of new technologies, McBride said he is calculated. “We evaluate technology investment such that any investment must achieve at least one of three objectives: Improve the quality of service we are able to deliver to our clients; improve our internal efficiency, or that of our on-site operations; and differentiate us from our competition.” In 2012, he says, his company invested “six figures” in new technologies with an emphasis on improving communications with residents and boards and responsiveness to their needs. “Data security is a critical area of investment and one which I believe is overlooked,” he adds.
Technology and Education
Along with high technology expectations is the importance of continual industry education. Paoli said boards do look for certification from organizations like the Community Associations Institute (CAI) and the Institute of Real Estate Management (IREM). “Our president, Scott Wolf, is also president of the CAI New England Chapter. Our clients like to hear that,” he says. DiNocco adds that “education plays an important role in establishing a consistent, recognizable knowledge base, while certifications and designations provide some measure of formal education and knowledge.”
While it is often difficult to read the minds of board members, they, too are professionals in disparate industries. Since many board members are somewhat new to the position, they likely look at accreditation and education as hallmarks of a dedicated firm. “CAI provides a tremendous platform upon which best-practices can be built and service levels can be made consistent. In addition, the commitment to education, by both the manager and the company, shows a personal commitment to the industry,” says McBride. “If I see a manager with significant designations, I see a person who is in the industry to stay and who has the determination to grow as a manager. While not the whole of a good manager, it is certainly an important part.”
Brad King is freelance writer and a frequent contributor to New England Condominium.