SCA Report

The Six-Step Process – Part 2

Four reasons key performance indicators are essential from a committee point of view.

1. Committees are responsible for the body corporate expenditure. Aside from sinking fund projects, the building management contract will usually be the single biggest line item in the body corporate budget. Just because it is a big number, it should not be regarded as an easy target. There will be much substance behind the number. However, because it is a big number it is appropriate results are measured.

2. In my experience adequately drafted caretaking contracts are few and far between. They just do not provide an adequate description of what it means to “keep the common property in first class order and repair”. How do you write the word picture to ensure that gardens are kept to your standard and what is the mechanism for paying appropriate remuneration for the varying tasks which are required from season to season to keep the standard?

3. Where disharmony exists the disharmony may stem from the committee believing they cannot affect the level of control they wish to have over the actions of the manager. Key performance indicators provide a committee with a tangible measure they have appropriate control.

4. As my old mentor used to say: “Nobody buys a unit to get involved in the body corporate”. It is just not an appropriate use of the valuable time of the volunteer committee members to monitor the day-to-day operations of the BM. A dash board of KPIs is what the committee needs to make sure the ship is heading in the right direction.

There are five reasons KPIs are essential from a BM point of view:

1. If the committee is to hold a BM accountable, then it is essential to know where they set the goal posts. Committees are made up of individuals and individuals have opinions that vary and may conflict. Lack of consistency within the committee is problematical. The BM needs to know which opinion is “the” opinion that applies to you keeping the client satisfied.

2. In my experience adequately drafted caretaking contracts are few and far between. They just do not provide an adequate description of what it means to “keep the common property in first class order and repair”.

3. If your management rights business has staff, then they need to understand what it takes for them to do their job. You might be good at reading minds. Don’t count on the BM’s staff having that same paranormal ability.

4. As a BM you cannot be everywhere, all the time. However, if your body corporate has 99 other lots in it, there are 99 bosses patrolling the common property all hours of the day and night. They will inevitably come across things that you miss and things that have happened since last you passed by that part of the common property. You need a transparent system to demonstrate to the others that while you are not omnipresent, you have performed adequately.

5. Owners and committee members buy units to live in or as an investment. It is unreasonable to expect the committee to develop an understanding of the tasks being performed by the BM in satisfying the duties required of the BM under the caretaking agreement, especially when performance is of a technical nature.

The explanation of the steps to develop your KPIs is to understand where you are at!

Step 1. Read the caretaking agreement – this is the framework that presently binds the parties and the framework that you must work within unless both parties mutually agree to vary the contracts.

Caretaking agreements can generally fall into two broad categories, though most agreements have elements of both and are a hybrid:

Category 1: The Do This means the BM, staff or subcontractors paid for out of the BM’s pocket actually push the brooms. The BM must do the cleaning.

Category 2: The Supervise Here where the brooms are by pushed staff or contractors paid for by the body corporate. The BM is responsible to specify the job, manage and supervise these staff and to ensure that they produce the result specified in the caretaking agreement – clean common property. However, the staff and subcontractors will be paid for directly by the body corporate.

Under both categories the BM is the arms and legs of the committee for caretaking.

Step 2. Interpret the caretaking agreement “for the real world”. After reading the agreements decisions might need to be made on how those agreements should become operational. In other words: from an operational perspective what actions are indicative of the duties being satisfied?

For instance:

•If there is an obligation to keep the lift lobbies clean and the lift lobbies are carpeted, has it been decided how many times each week those lobbies should be vacuumed, as being indicative of the lift lobbies being kept clean?

•If there is an obligation to maintain the lawns and gardens, what does this mean operationally in respect of the varying seasons, times of drought, the frequency of fertilising, number of mows?

While breaking down the agreement to such an operational level is not in the pure sense a KPI, it is surely better than not being specific.

Example analysis of one duty required under a typical caretaking agreement:

Check list: Standard questions to be asked when considering a duty required under a caretaking agreement: What is the duty? Write it down. Maintain the garden. Simple to say – but what does this mean in practice? Who is to do it? The caretaker, the body corporate, third party contractors supervised by the caretaker, a combination of the above?

The caretaker has the duty to maintain the gardens, except for any particular functions where a technical skill is required, in which case a third party will be responsible. What is the result to be achieved? When somebody walks into the garden they feel like they have arrived at a six star holiday resort. How do you measure this? Your “six star feel” might be entirely different from my “six star feel” How do we measure that the result is being achieved?

Did the landscape architect on completion of the job leave a specification of the gardens and lawns? How green is the lawn and the gardens? How many weeds are in the lawn and the gardens? How bushy and flowering are the plants? How often is the duty to be performed? 40 hours per week in summer, 30 hours per week in autumn and spring, 20 hours per week in winter – spaced over the week. When is it to be performed During business hours Monday to Thursday?

List some actions required to satisfy the duty? Mowing – list the frequency on a month by month basis. Hedging – list the frequency of a yearly basis. Fertilising – list the yearly program for lawns and various plant types. Pesticides – list the yearly schedule. Mulching – what is the bi-annual schedule? Weeding gardens – what is the program? Weeding lawns – what is the program? Trimming trees – what is the program? Replanting – is a regular schedule required? Are technical and/or trade skills required? If the body corporate is to require their common property to be kept to a commercial standard then technical skills will be required from time to time. Arborist? Soil doctor? Landscaper? Cherry picker driver?

All specialists are an extra fee paid for by the body corporate. Who makes the decision about “calling in a specialist”? Should this be backed by a committee resolution or is it already authorised in the contract?

What tools, equipment and materials are required and who provides them?

All out of pocket expenses are to be paid for by the body corporate. Who is to pay? The body corporate pays for the service as part of the standard lump sum fee paid monthly to the caretaker, except for:

•services requiring a technical skill, in which case an additional amount is paid by the body corporate to a third party contractor.

•Out of pocket expenses for tools, material and equipment. How is the caretaker to report on the duty caretaker is to have a schedule of actions, listing daily, weekly, monthly, seasonally, and annually the actions to be undertaken and corresponding “ticks” in each box inserted as each action is performed, this schedule will form a record of the actions undertaken.

How is performance inspected by the committee? Half yearly committee and caretaker inspections of the garden? Three yearly reports from an independent landscape architect as to the health of the gardens and grounds, assessing that health against the initial brief for the landscape prepared by the original designer?

How are directions give by the committee? Verbal directions from the chair from time to time. Annual written appraisal and follow up meeting to discuss the appraisal.

Question: Does the committee wish to go into this level of detail for every duty?

Step 3. Review the committee’s strategic plan, and produce a subset of goals which the BM should be involved in. The review of the committee’s strategic plan is going to be extremely difficult for any body corporate that does not have a strategic plan. It is an integral step, so I encourage all committees to take the time to establish a strategic plan.

However, for those committees that insist on skipping the step of producing a body corporate strategic plan, here is the easy way through:

I think the role of the BM, at the most macro level possible, is to assist the committee to achieve three things:

1. Creation of a the optimum physical environment for the common property

2. Creation of the optimum social environment (through the promotion of harmony within the community and the enforcement of by-laws), and

3. Maximising the rental return and capital value of the lots within the scheme

Note that these are both tangible and intangible objectives. As some goals may not be mutually consistent, the trick is to balance the conflicting goals. The committee and the BM then need to agree upon the actions that indicate both the committee and BM are putting in the effort to achieve the goals outlined in the strategic plan. Note that this obligation needs to be two-way.

Step 4. Agree the measurements that indicate the goals are being achieved. These are you KPIs! Congratulations.

Step 5. Give them teeth. Mutually agreeing to vary the caretaking agreement to give the KPIs full force and effect (with appropriate consequences where they are not met) is an essential part of the process. “Teeth” does not of itself necessarily require parties to have rights of termination or penalties applying. The draconian approach is not necessarily the best approach. An alternative is an agreement to have additional measured inputs where results fall below the KPIs. For instance, the committee may need to increase the level of spending on materials to assist the BM produce the results in the gardens and the BM may need to increase the level of staffing.

Giving “teeth” may require a concession. Be aware, if you are asking for one party to submit to a new level of more onerous obligations then it is appropriate for you to concede something in return.

Step 6. Reduce everything to writing in one coherent document and pass a committee resolution adopting the document.

If you go through this process and come up with some “you beaut” KPIs that I have not already got in my list – I promise to call them after you! Who wants a star named after them or even a sporting trophy? Wouldn’t you prefer to go down in history by having a management rights KPI bearing your name?

Tim Sheehan
SCA

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