Governance

April 12, 2022 Published by Golden Horseshoe Chapter - By Dave Williams

Succession Planning for Your Condo Board… Really?

From the Volume 12, Spring 2022 issue of the CCI GHC Condo News Magazine

It never ceases to amaze that, for the most part, not-for-profits either do not have a succession plan or process for board succession, or if they do it is flawed. Granted, to many directors, it appears to be a somewhat daunting task that takes patience, time, and some people skills. Additionally, it involves the scary process of trying to replace oneself.

Currently, I am aware of two non-profit organizations that are struggling to find new directors, one in the condo industry and one in the sports industry. The strange part of both situations is this. There are talented people available to both organizations ... why are they not being asked or why are they not stepping forward?

To be sure there are Condo Corporations that consist of only a few units. One I am aware of in Barrie, Ontario has only eight units so in that case residents sort of rotate through the board when their turn comes. Indeed, the buildings and developments with resident numbers in the hundreds need to consider the idea of succession planning.

It is true that the role of corporate directors and CEO’s is in fact changing which we will show. This applies to both for-profit and not-for profit corporations. There are many facets of business dictating this need.

So, there are lots of concerns! We will look at what trends are developing in the industry as a whole and then offer a few paths to overcoming the challenge of finding new, willing directors.

But first… succession planning is important… why?

Here are some reasons why a good succession plan is vital to your community:

1. Incumbent directors can get sick, can move away, simply quit their post or overstay their effectiveness.
2. It is a given that as condo communities (either high or low-rise) mature into the second decade (of existence), the decisions respecting replacement parts and the financing of, become more critical. This may highlight the need for differing levels of expertise.
3. While not impossible, it is difficult to train a new director overnight. He/ she needs to sit some committee work first to learn the ins and outs of condo board challenges.
4. So often we hear the lament, “No one will put their name up for nomination.” So it takes some time and effort to identify potential candidates.
5. Is there a “comfort zone effect” going on in the current governance model? One must wonder sometimes if the property manager, the legal advisor and the auditor don’t want turnover because new incoming directors may not be as friendly to them.
6. Most importantly, director turnover fosters new thinking, new ideas and fresh perspectives on old problems as well as new ones.

What is happening in our large corporations?

Well, a major boardroom battle transpired this fall that has drawn attention to the fact that some corporate structures are possibly too controlling. If you guessed Rogers Communication, you would be right! Is change needed?

The Globe and Mail article of Monday, December 6th 2021 (Nicolas Van Praet and David Milstead), “Couche-Tard’s end of special voting rights…” points out that the famous Quebec based convenience store operator is ending it’s long held “special voting rights” structure.

What does this mean? It basically means that the company is moving to a more participatory posture than before. Simply put, shareholders will get a voice in governance issues.

Moving into 2022, Globe and Mail of January 11th 2022, (Andrew Willis) writes that “A few of Canada’s biggest companies need post-pandemic CEOs, and they are going to cast a wide net to find them.” Here is a little of what he says. “The pandemic, along with the shifting views of the role of a corporation, means the next generation of leaders needs a whole new tool-box accord- ing to government experts.” By the way, the three companies cited include CN Rail, Westjet and Nutrien Ltd.

Competency Profile for Condominium Managers in Ontario

We have learned that the CMRAO (Condo Managers Regulatory Authority of Ontario) commissioned a study around the competencies required by a potential property manager candidate for a general license. The study found that the minimum expectations involved 79 professional competencies.

Please note the website pathway (end of article) to read the list of competencies. The important issue is the list of objectives or purposes for the profile:

1. Academic program approval/recognition
2. .Providing advice/guidance to members
3. Developing standards and policies
4. Informing matters related to professional conduct
5. Assessing applicants for entry/or re-entry into the profession
6. To inform continuing education requirements.

My point? The Condo industry seems to be preparing for a more complex environment as well.

How does this relate to Condo Governance?

Here’s the thing. Condo Directors may need to become a little more willing to accept change... to communicate more effectively with residents… to embrace the notion that there may be some great talented people out there that would, with a bit of encouragement get involved. Within a tight circle around my unit, no more than 5 units in either direction, are 5 retired executives from some of Canada’s best-known companies and public institutions. There may be more that I don’t know of. So, one must ask why they have never been approached to contribute using some of their talents? Conversely, why have they not volunteered to contribute some expertise? Even if they do not want to stand for office, they could be consultants to the board.

We have already outlined above the notion that future governance will become busier if not more complex. Currently far too many tasks are down-loaded to property managers and with more demands coming from the Condo Act of 1998 (see our article on Annual Planning in this issue)… something has to give.

OK… enough about the problems… some succession solutions please!

1. Nominating Committee

The simplest approach is to appoint a “short-term” committee of 3 people each year approximately 5 months ahead of the election. Their job has two parts… to identify potential “director” candidates and to brief them as to the duties and responsibilities of a director.

Oh, there is a 3rd part to their responsibilities, that being to determine the suitability of the individual for a directorship.
The briefing is important. Don’t scare the candidate but do be certain to outline the good and the bad parts of the job. Important to provide a good understanding of the time commitment, the need to be able to interact with people……both other board members and residents. It is also important that they review any documents, ie. previous month’s financials, meeting minutes and resident correspondence before the meetings, so they can participate in meetings.

Once the nominating committee has found the desired number of candidates, their work is done. The committee should be disbanded until the next year. The election process involving the residents will choose which candidate(s) they think will serve the community best.

2. Committees to the Board

A second potential source of new directors is to establish some committees to study different aspects of community governance. As mentioned, the workload falling to individual property managers must be getting to the point of overwhelming. This is not a good thing for lots of reasons not the least of which they can become less and less effective in terms of what they are supposed to be doing – that being to assist in steering the ship.

So, committee work can serve two purposes. It can prepare potential directors for future board directorship, and it can take on some of this ever-increasing workload. Here are a couple of suggestions:

Safety Committee

We already know that insurance rates are going through the roof. We know that new legislation such as the “Occupiers Liability Act” is requiring greater scrutiny of safety measures in winter.

There are also traffic calming issues to be dealt with (low rise condo developments), there are mental health issues and wildlife issues. So, a safety committee reporting to the board makes a lot of sense.

Now, one Property Manager told me that one of her communities had experimented with a committee and it was hard to control what they did. It is therefore important to define the role properly – to make sure the committee members know their bounds and that their role is more fact-finding, and then recommendation making to the board. They do not have the power to make decisions or implement changes.

Planning Committee

This is a good one. The CAO is recommending the initiation of an annual plan. This plan has a few parts to it including schedules for meetings as well as schedules for various operational and governance initiatives.

The CAO is also recommending annual vendor and service provider reviews as well as the annual collection of feedback from owners.

Who better to gather data than a planning committee? Again, care is need-ed to ensure the committee understands it’s bounds. What a great preparatory experience for future board members.

In our Communications Article from the Fall issue, we were pushing the idea of a Strategic Plan complete with SWOT analysis. The good thing about these plans is the 5-year nature of them requiring updating every year and adding a new fifth year. It may be a little overkill to begin but it would sure be great to see, and not that hard to build considering most if not all condo corps already have a Reserve Fund Study to build around.

Obviously, the foregoing committees are suggestions. The important take-away is the idea that committee work is great preparation for future board members.

The Bottom Line

It is apparent that as time goes by, the workload for Condo Boards will increase. This is evidenced by the move toward planning and data gathering by the CAO as outlined above. The “download effect” to Property Managers is only an answer if those same managers have less buildings/properties to look after. That would mean increasing costs to equalize their remuneration packages.

The need for expanded levels of expertise and experience also dictates the need to attract new directors who have this experience.

If your condo board is having trouble recruiting new directors, there may be a communication problem between your board and the residents. Boards can no longer live in protected cocoons, unwilling to encourage input and discussion with the people who elected them. Rather, it is time for a willingness to listen, to exchange ideas, and indeed to embrace them as equals who deserve their respect.

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Thanks to the following Publications and Organizations:
CMRAO website – Resources – Competency Profile for Condo Managers in Ontario Pages 15 to 21
Globe and Mail - Monday December 6th, 2021, Nicolas Van Praet and David Milstead “Couche Tard’s End……….”
Globe and Mail - January 11th, 2022 Andrew Willis “A few of Canada’s Biggest Companies…….”

Special thanks to Dean McCabe, President of “Meritus Group Management,” for a general chat about the industry and some of its challenges.

We always invite readers to contact us at williamsdavem7@gmail.com . We are interested to hear what you think on the subject.

Dave Williams is a graduate of York University and retired corporate executive.