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On-site or Management Company? Study Both Options

Many associations wrestle with the issue of whether to hire a professional management company or hire an on-site employee. This thought process can occur when an association first turns over or after a bad experience with one or the other.

There is no correct answer without doing an analysis of needs and wants. Each type of management form has inherent strengths and weaknesses and the board of directors must decide what is the best scenario for the property.

Professional Management Company

Even a four-unit association can use a management company if it is on a limited basis. First, one must look at the types of companies available. for simplicity purposes, I will divide these companies into three categories:

The large company -- A full service, fully integrated company with more than 5,000 units. Generally, problem areas are departmentalized such as customer service, payables, receivables, etc. This allows the property manager to devote more time to management and less time to administration. Unfortunately, this also necessitates that the manager take on more properties. The manager can devote their time to professional consulting and problem solving, but must split that time amongst 1,000 or more units in order to subsidize the cost of sustaining the other departments. The most important factor in selecting a large management company is who is the account manager assigned to the property. It is crucial, regardless of whether it is a novice or a veteran, that by personality and style, the property manager have a rapport with a board. Sometimes a great company can assign the wrong person to an account that would be perfect on another, and it is a disastrous result. Any management relationship is based upon trust and confidence and any long-term relations starts there.
Medium-size company -- 1,000 to 5,000 units. Has many of the aspects of the large company available, although often not as departmentalized, with managers handling more administrative duties hands-on. Sometimes it is the best of all worlds and generally the chief executive officer is still functioning (at least in a limited capacity) as a property manager for selected accounts.
Small-size company -- 1 to 1,000 units. A "ma and pa" or boutique type of company. Generally has 1 to 3 employees handling all aspects of property management. Highly personalized and very hands-on, but when not highly organized, these companies have managers that wear too many hats. It is important when hiring a small company to review their systems and structure.

No matter which type of company your association opts to hire, it is always important to remember that no two properties are alike and like any other type of contractor, the board must establish the specifications for the contract in terms of what services are needed, i.e., financial management, soliciting bids, maintenance supervision, etc., in order to determine the contract price. If the board is a very "hands-on" group, it is unnecessary to pay for full-service management and have a duplication of effort. It is not economically wise and it causes a great deal of tension between the board and the manager when the board is always looking over the shoulder of the manager and micro-managing and second-guessing.

Self-Management

Whether it is a board-managed or an association employee managed scenario, again it must be specifically tailored to the particular property. The on-site manager or board employee has no conflicting interests in representing other properties and is only accountable to a single board (or group of boards in the same community). The benefits, insurance, salary, etc. are all the responsibility of the community. The manager, if the property is large enough, is also a supervisor of staff, contractors and even volunteers.

The on-site manager is like a manager of a small town and must be the eyes and ears of the board. It requires the board to become more involved in the day-to-day operations of the association and that the manager be a highly motivated self-starter who can create and administer a system without a company structure to fall back on. The on-site manager has a greater degree of independence and generally develops a greater protective instinct about the property versus a management company. Usually the on-site situation is in place at large properties, although many smaller properties have at least part-time managers.

On-site managers have office hours and offer the property owners the greatest opportunity to meet face-to-face with the manager. For the board, it can direct the manager to undertake more pro-active programs and not just "play defense." Overall, the property and property manager can progress together.

What the on-site manager scenario does not offer is the independent consulting and resources of a management company where a chain of commend of people with different talents can attack a crisis rather than an individual with more limited resources. They would have to be brought in via independent contractor.

As previously stated, there are pros and cons for each situation. Departmentalization versus hands-on service, expansive services and resources versus personal commitment, economies in spreading the risk versus lower costs concentrated in an individual, etc. The board must first get input from the community, determine what services it wishes to contract for, what the board will handle itself, draft specifications and then hire the appropriate entity or person who can best provide those services for the best price.