The 5 Signs of a Dysfunctional Board

Lean in or run like hell? LOL

Last week, I recorded another episode of HOA Insights: Common Sense for Common Areas (available on all major platforms; Spotify, YouTube, (etc.) with Robert Nordlund. Our focus is primarily Board members and how to help them improve as community leaders and support them wherever we can. This particular episode zeroes in on our industry’s favorite topic—dysfunctional Boards. If you’re new to the industry, this article is for you! And if you’re a seasoned veteran (or "classic," as I like to say), you’ll recognize all the usual signs of a Board that’s not functioning well (believe me - I could have listed about 15 more “signs” …) so let’s talk about just a few of the obvious signs of Board dysfunction, along with some suggestions on how to address these issues with a Board in a way that they might recognize, understand, and attempt a fix.

1. Deteriorating Infrastructure: When a Board isn’t proactive about infrastructure, it often means they’re struggling with budgeting or prioritization issues over many years or even decades (!). This deterioration affects property values and reflects poor governance, foresight, and willful blindness.

What the manager can do:

• Take Board members on a property inspection so that everyone can examine the condition of common areas with you pointing out the most severe issues. Nothing is more impactful than an up-close, visual inspection; they can no longer “unsee” the problems.

• Encourage the Board to prioritize issues and develop a 3–5-year maintenance plan for (reserve and non-reserve) repairs with a clear timeline and budget.

• Engage experts: If the budget permits, advise the Board to consult with engineers or infrastructure experts for accurate assessments and recommendations for improvements. If there has been a relatively recent and good reserve study, the provider will usually be available to consult (potentially for free, up to a point. Ask.).

• Keep the reserve study in front of the Board.  Recommend keeping it updated; and bring it up during discussions about aging common elements and areas. Many Boards prefer to ignore the reserve study – don’t let them.

2. Stagnant Assessments: If assessments haven’t been adjusted for a long time the Board is avoiding necessary financial decisions and is not keeping up with rising costs. While nobody likes higher fees, stagnation can lead to financial shortfalls and future problems that could be even more costly.

What the manager can do:

• Benchmark against peers: Compare the association’s assessments with similar properties in the area. If it's substantially lower, bring this to the Board’s attention. Low assessments, though politically easy for the Board, are detrimental to the community. Remind them that preserving, protecting, and enhancing the common elements now, and into the future, is their fiduciary duty.

• Communicate the need: Educate residents on the importance of adjusting assessments to cover rising costs and prevent larger issues in the future through a regular communication plan. Advise the Board that this should be an ongoing project, not a one-and-done.

• Advise yearly, gradual increases in assessments: Increasing assessments is always a touchy subject, so suggest that the Board consider phased or gradual adjustments to make them more palatable for residents.

• Transparency in decision-making: As part of the ongoing communication plan, let residents know how assessments are determined and how funds are allocated to maintain trust and understanding among residents. Transparency builds trust, and trust begets Board credibility.

3. High or Low Board Member Turnover: Frequent turnover often suggests a toxic Board environment or unresolved conflicts. Conversely, extremely low Board turnover may mean Board members who are intent on retaining power, resulting in -0- fresh perspectives.  Stability is good, but stagnation or a revolving door can be problematic. In addition, high turnover on a Board can be directly linked to a dysfunctional Board with dysfunctional meetings; e.g., lengthy, contentious, not following the agenda, allowing the meeting to be hijacked by one Board member, or several owners, etc. No one in their right mind wants to be a part of that.

What the manager can do:

• Encourage involvement: The Board should seek input from community stakeholders on important issues, specifically those involved in committees who would make good Board members. This input can help the Board evaluate new candidates for Board positions. New blood prevents stagnation and keeps the Board dynamic and engaged.

• Provide resources for the Board on how to hold productive meetings. There are many resources for your Boards on how to hold productive meetings; CAI has many articles posted online. You can also encourage them to enroll in Board member education with our firm (here) and encourage them to get involved in your local CAI chapter.

4. Battling Factions on the Board: Internal conflicts can cripple a Board’s ability to function effectively. When factions are at odds, decision-making becomes difficult, and progress stalls. Healthy Boards work collaboratively and address disputes constructively.

When a Board is in an “us vs. them” mode, there is only so much a manager can do; but here are a few suggestions:

• Advise professional mediation: If the Board has the financial resources, using a neutral mediator or facilitator can help resolve conflicts and find common ground between opposing groups.

• Set clear, shared objectives: Encourage the Board to focus on shared goals and priorities, which can help unite members around common purposes.

• Adopt Board guidelines: Encourage the Board to create guidelines for general operation, behavior, and decision-making, which could be one of those clear goals mentioned above. Suggest forming a subcommittee of Board members to start the project.

5. Poor Communication: Ineffective communication can lead to misunderstandings, mistrust, and disengagement of community members. A Board that fails to keep residents informed or address their concerns is not fulfilling its role properly and is only asking for trouble.

What the manager can do:

• Create a communication plan: Assist the Board in developing a comprehensive communication strategy that includes regular updates, clear messaging and multiple channels (e.g., newsletters, websites, meetings).

• Engage with residents: If there are issues in the community, encourage the Board to host regular meetings or forums to listen to resident concerns, provide updates, and address issues directly.

Identifying the signs of a dysfunctional board is a crucial first step for managers aiming to help address the issues. Whether you’re new to management or a seasoned professional, this article will help you recognize key signs of board dysfunction in any community. These signs include crumbling infrastructure, stagnant assessments, high turnover, ineffective board meetings, conflicts among board members, and poor communication.

The goal for any Board is to collaborate effectively and ensure the community runs smoothly. For a dysfunctional Board, getting there will not be an easy process for them, or the manager. To help navigate the Board back on a functional track, the manager needs to understand the community's current conditions and the Board's dynamics. Major tasks ahead for the Board include inspecting property conditions, communicating openly with residents, and addressing conflicts constructively. Yes, the Board must take significant ownership of this process. Managers – you can contribute by sharing this information, and use some of the techniques listed, to guide the Board toward greater functionality. We hope this helps. 😊 Now, where did I leave my magic wand?

c. 2024 Julie Adamen, Adamen Inc.all rights reserved