Sun City
Anthem
Is Transition to
"Self-Management in Trouble?
Part Two of
Three
by
Jim
Mayfield
Director
Sun City
Anthem
Part 2
Improper Governance is the Root Problem
Background
Transition from developer control of governance of a Homeowners
Association to homeowner control is commonly a difficult period in the life of
an HOA.
But, transition at Sun City Anthem has had periods that were
particularly acrimonious and left a legacy of discordant stories and bitterness
that impaired the ability of SCA to develop an organized governance structure
focused on maximizing homeowner benefits.
About six years ago, the Board, led by President Jim Long and comprised of highly qualified Board members,
initiated a process to develop a documented philosophy and structure for Board
governance at Sun City Anthem.
The device used to create a documented governance structure for SCA
was a Board Policy Manual
(“BPM”).
I participated in the initial stages of the process as the chair of
the Finance Committee and then as a Board member during the final stages of
completion and adoption.
I observed multiple admirable attributes of the
process:
Patience
Thorough research
Collective participation by the whole
Board
Broad community input
Respect for diverse ideas
Transparency
Professional input
The development of the Board Polity Manual took many months and
spanned the work of two Boards.
The end product—the BPM-- reflected the use of
theoretically sound governance principles as well as the practical effects of
compromise and recognition of the unique SCA culture.
As a result of that hard work and process attributes described
above, the adopted Board Policy Manual received widespread approval throughout
Sun City Anthem.
Unfortunately, the implementation of the use of
the BPM to achieve consistent, effective governance was progressively undermined
by:
1. Unreliable management services provided by FSR (the former management
company)
2. Misinterpretations of the Board Policy Manual by Board officers for
self-centered personal reasons, and
3. The shift to
self-management.
As the effectiveness and acceptance of the Board Policy Manual
declined as a regulatory structure, the last two Boards attempted to patch
observable defects on an ad hoc basis.
The patches were usually created by a small
group of Board members, appointed by the President, without substantive
involvement by all Board members or affected volunteers.
This approach left homeowners, volunteers, management, and certain
Board members confused, frustrated and lacking confidence in the overall
usefulness of the BPM for the governance of Sun City
Anthem.
This brief history of the governance at SCA is presented to support
the premise that neither management services provided by a
management company nor management services provided by SCA direct employees will
achieve cost effective, operational excellence until the root of the
problem—inadequate Board governance—is fixed.
If Inadequate Governance Is the Root Problem, what is the Solution?
The solution to inadequate governance is straightforward.
The next Board must develop and adopt an
effective governance model reflective of the requirements of
self-management.
I deeply regret that the majority of the
current Board members did not support a concurrent process to the implementation
of a new management approach to address a new governance approach.
This task will now fall to the new Board elected in a few weeks.
I hope the next Board addresses the governance issue using the same
methodical approach used to develop the governance model reflected in the
original Board Policy Manual.
Specific Elements of a
Solution
Changes to Organizational Concepts
During the examination of whether or not to become self-managed,
the Board was repeatedly advised that a successful transition to self-management
would be dependent upon the adoption and implementation of a new governance
model.
What are the specific differences that need to be addressed under
self-management?
Current Sun City Anthem Model
Board organized as a Management Team directed by President /
CEO.
Board Officers provide direction to the General Manager, Community
Asssociation Manager, and Chief Financial Officer without Board action.
Asssociation Manager, and Chief Financial Officer without Board action.
Board focuses on Micro Management of operational
activities.
Maximum transparency to prevent public debate and disclosure of
Controversial issues or management breakdowns.
Needed Model
Board organized as independent governors with equal authority and
accountability.
Board officers communicate decisions resulting from Board
actions.
Board collectively focuses on setting policy, fiduciary duties, and
assessing the performances of the General Manager, Community Association
Manager, and Chief Financial Officer.
Maximum transparency to provide homeowners insight into controversial
issues and actions to correct management breakdowns.
Changes to Commitment to the
Community
A governance model must reflect the values and expectations of the
governed—Sun City Anthem homeowners.
Failure to do so inevitably results in a lack of support for Board
governance and management operations, as well as, engagement in community
service.
Therefore, the governance model and resultant Board Policy Manual
must reflect more than a set of rules.
It must reflect five
commitments by those who are elected to govern Sun City Anthem.
1. Commitment to
Equally Shared Governance
The officers of the current Board, particularly the President,
adopted a model that mirrors a management model (versus a governance model) in
which the President and Treasurer make decisions without the
effective participation of all Board members.
This model subjugates other directors to a role
of being treated as employees of the President and Treasurer for financial
matters, who are expected to rubber stamp their decisions or “pound sand”.
Those who support this model missed a key principle:
The CEO and Treasurer of an organization
report to the Board, not the other way around.
This model has resulted in homeowner disengagement from serving on
the Board, committees, and service groups.
It also encourages a culture in which homeowners perceive of
themselves as a consumer of services perspective versus owners with
responsibility.
Evidence of this problem is reflected in the
fact that:
a. Only approximately 500
residents participate in community service in a community of over 12,000
people
b. Only half of the
homeowners vote in the Annual Board election or voluntarily return the age
restricted community survey, and
c. Few homeowners
volunteer for election to the Board or committee
service.
2. Commitment to
Effective Governance Under Self-management
The existing Board Policy Manual was created to support the role of
the Board and its officers under a management concept organized for the use of a
management company.
While the transition to in-house (self- management) management has
proceeded effectively, the Board has not taken actions necessary to implement a
revised governance process that reflects its role and additional obligations
under self-management.
The lack of a process to evaluate and revise the Board Policy
Manual has led to an ad hoc approach to development
of a concept of governance.
This approaches patches situations as they
arise versus one to create a strategic, comprehensive, holistic concept for SCA
governance.
3. Commitment to
Management Oversight
The current culture on the Board focuses on the concept that the
Board is a “team” which should act in unison to support management and portray
an “all’s well” perception in the community.
I support the concept that the Board and its committees must
support the General Manager and other management employees.
But, the Board also has a fiduciary
responsibility to be an effective employer responsible for open, assessment of
the performance of management.
One example of the failure of the current Board
to implement this concept is the fact that the Board has never adopted a job
description for the General Manager or a documented, structured review
process.
4. Commitment to
Law
Board members have a responsibility to understand and follow the
law, including SCA governing documents.
Using loopholes to circumnavigate the intent of
laws to avoid transparency, public accountability, and homeowner rights must be
unacceptable.
Certainly, the probability of getting caught and being held
accountable under the law should never be the basis for legal compliance.
5. Commitment to
Service
Being on the Board requires time and a commitment to learning the
laws and governing documents of SCA.
New members experience a steep learning curve in their first year
of service.
It also requires a commitment to resolve conflict and accept
accountability for individual decisions.
Being on the Board is not about personal authority or recognition
in the community.
It is about public service.
Good Governance Is a Practical Issue That Affects
You
State laws and SCA governing documents provide your Board and
General Manager with extensive powers to make decisions that are binding upon
you.
Failure to implement a well-designed system of governance that
protects and serves homeowner needs leaves homeowners vulnerable
to:
1. Management running SCA for the convenience and benefit of
employees instead of you, and
2. Board members
implementing personal agendas instead of community
expectations.
As a result, homeowners will experience adverse
effects upon:
Levels of service and quality of life within
SCA
Costs of ownership (e.g., assessment
costs)
Your property rights
Your property rights
Home values
In Part 3, I will present actions you can take to insure that the
governance of SCA serves you.
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Visit us tomorrow for Part 3 of Mr.
Mayfield's assessment of self-management.
Until then...
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Just want to "Thank Jim" for, taking his time, to provide our community with this informative narration.