The Hiring Process: Sizing Up the Boards

Some call it a beauty pageant; others label it a management parade. But for Fred Rudd, president of Rudd Real Estate, it is all about looking for business. "You've got to listen to what they ask," he says. "It tells you what they need."The "they" is the board and the asking occurs at the "beauty pageant" - i.e., job interview - which every manager goes through before taking on the daunting task of running a cooperative or condominium building.

On this day, an overcast Monday morning, Rudd was to meet with two board members at the 35-unit East Side building. He had only gotten a call for the meeting the previous Thursday. The board had long been dissatisfied with the performance of its managing agent (unresponsive), superintendent (frequently AWOL), and the staff (unsupervised).

When asking around for new managers, the board talked to the directors of a neighboring co-op which happened to be managed by Rudd Real Estate. "They heard good things about our site manager and our back office," explains Rudd. "So they called us up."

Pressed for time, Rudd did some preliminary research in the city records and then went by the building before the meeting to check it out. He came to the interview and met the two board members on the screening committee at 8 A.M. With him was the agent from the neighboring building that had recommended the management firm. The quartet took a 45-minute tour of the property, with questions and answers from either side sliding back and forth.

"From their questions, I ascertained that they were not happy because their current managing agent rarely comes to the building," recalls Rudd. They had facetiously remarked that they saw their agent so infrequently they didn't even know who he was. Rudd recalls that the building was filthy and the staff members poorly groomed. "For an East Side building, you want the place to look nice," he says.

One of the board members, the treasurer, asked Rudd about his company's financial reporting; Rudd showed him a sample financial report from one of his properties and also talked about other financial services and controls he had in place.

The management executive also discussed communication with the directors, an area which he feels is important and in which he said his company excelled. He told them that each of his agents had a cell phone and was on call "24/7." One complaint about the super was that he was frequently away from the building, which the board found frustrating. "I said, 'If you find that the super is not there, all you have to do is call our manager on his cell phone, and he'll come by and write him up [with his union]. After three times doing that, you'd be in a position to replace him." Problems have solutions, Rudd says now as he looks back at the interview, and the situation he encountered at this East Side property is "typical of the kind of scenario we come across. The difficulties exist and if they are not corrected, they force boards to seek new management."

For a board at a cooperative or condominium, hiring a manager means making a list, getting references, asking questions, and then making a choice. But what is the process like from the other end? How does this potential management marriage look from the manager's point of view?

SIZING UP THE JOB

To a manager, a building is a building is a building. Paradoxically, although every property is unique, each still presents a similar set of challenges to which a managing agent can apply his experience. Part of that experience is assessing the people with whom he will be working. When an agent comes to a building, he is being sized up but he is also sizing up the property, the people, and the problems. Among the areas examined:

The board. Will the board be more trouble than it is worth? Or will it be sophisticated enough to know how to get the most from its agent? "It is important to find out what the board wants," says Alvin Wasserman, director of Fairfield Property Services. "For instance, what is the amount of time they want the manager to be there? Once a week? Twenty hours? Full-time? There are a broad range of possibilities and the answers determine fees, and affect who you will put on the job."

"A lot of times, we get calls from board members asking for a proposal over the phone before we even see their property," observes David Khazzam, senior vice president at PRC Management. "We are not interested in giving a fee that way. If the bottom line is the fee, we're not interested in pitching."

"Some of them select a dozen companies to interview," notes Michael Wolfe, president of Midboro Management. "That's ridiculous. If they're looking at 12 different companies, I'm skeptical about their approach. They're often just shopping price. You want them to understand that it's a combination of price and service."

The board's collective personality counts, too. Gerard J. Picaso, president of Gerard J. Picaso, recalls an interview that he went on two years ago at an 160-unit Upper East Side building. The directors were very aggressive and unfriendly and Picaso felt uncomfortable around them. "I left the interview very unhappy, and before I got in the elevator, I said to myself, 'I'm crossing this building off my list.' I just did not want to be involved in it. I sent them a letter saying, 'Thanks but no thanks, we have too many buildings. We withdraw from consideration.'"

To many managers, boards can also be too serious in their approach, going overboard in their quest for knowledge. Picaso had a call from a potential client who subsequently sent him a long questionnaire, asking for resumes of everyone in the office, copies of financial statements, sample arrears letters, banking information, and additional data ranging from the essential to the arcane. "They just wanted too much information," Picaso notes. "I felt that much of it wasn't necessary before an interview, so I chucked the whole form. We told them we weren't interested."

The staff. The management executive looks to see whether the staff has good work habits. If not, what will it take to get the workers into shape? The manager is the new boss on the block, and the superintendent and staff already have a relationship with the board. He can be only as good as the people taking care of the building and if the workers have entrenched bad habits, he may not want to take on the challenge.

In any event, most managers want to judge such matters for themselves. "We want the boards to know that we will make our own assessment and draw our own conclusions about the staff," says J. Brian Peters, director of management at Rose Associates. "I'm leery of situations where the board says, 'You can't touch so and so because he's the greatest.' I'm equally leery of boards that say, 'You'll have to get rid of him.' It could just be that the employee is bearing the brunt of management failings. They may not have the proper training and support. This is a team effort."

The property. The executive wants to know the condition of the building. If it needs major work, that will influence the firm's willingness to get involved (or, at the very least, affect the fee). With that in mind, one of the items managers will initially request is a copy of the building's financial report so they can pinpoint problem areas. "I like to review their financial statements and see if anything is glaring," says Don Wilson, president of Blue Woods Management.

"We look at the level of transactions: how much money is coming in and how much is going out," observes Steve Kessler, director of management at Grogan Associates. "It's important to see whether the building is undertaking a lot of work or if it is quiet. If it's quiet, you can adjust the fee accordingly. If the building is not in good shape, you have to spend a lot of time there. The financial statement is very telling in that regard."

After talking with the board members and reviewing the financials, the agent may do additional research on the property before tailoring a package personalized to the building's needs. "We find out anything we can that's in the public domain: how many units, who the agent is - that sort of thing," Rudd says. "We might look up tax records; we look at the reverse directory to see if people we know live in the building. We might talk to doormen, the super, and the people in the building next door."

THE TOUR

The centerpiece of the assessment process is a building tour. Sometimes, this is conducted with the superintendent, which is always preferable since he usually knows the capital plant issues. Frequently, however, the board does not want the current agent to know that it is seeking to replace him so it goes it alone. Or else the directors tell the super that the potential agent is an insurance adjuster needing a tour of the property (which can wear thin after three or four different "adjusters" show up on three or four different days).

The inspection is a crucial step because the agent learns about the capital issues facing the property. Wilson recalls looking at one building where the outside facade looked good because the board had just completed extensive repairs, but when he went to the roof, he noted that the coping stones had big gaps in them. "All that work on the facade could be compromised," he explains. "I pointed that out to them." He also saw an opportunity for extra building income: the basement could be rebuilt as a storage room.

As Wilson's example demonstrates, material gleaned from the tour will often prove very useful at the agent's interview with the full board. Many firms will prepare a "building conditions report," with photographs of mechanical systems and roof conditions. "We get a general sense of where we can bring the building," Rudd notes. "We are making suggestions; we might point out that the building hallways haven't been renovated in 12 years, or that there are 50-year-old elevators and they might need a change."

After these preliminaries, many firms prepare a customized presentation. "If you walk in with an off-the-shelf presentation, you're in the same grouping as any other company," Khazzam explains. "You instead want to interest them with your understanding of their concerns and how you can make changes. A fancy Power Point presentation looks good, but you're only telling them about yourself and not about the building's needs. We gear everything to the building. We create a detailed, personalized proposal."

In addition to that, most companies have a standardized management services brochure, which describes the services that the firm offers. A typical one features sections on financial management and cost-saving programs, day-to-day building operations, capital improvements, and "back-up" services (brokerage and leasing, legal and closing costs, etc.).

These brochures promote the firm as uniquely special, searching, in a highly competitive field, for the distinction that will make a difference. "Most management companies promote management services to enhance their brokerage business," states one. "...cooperative and condominium management is our primary business. Therefore, we use all of our time and effort to enhance the quality of life of your residents. We expect to visit each building at least once per week, more often if a project is in process."

The brochures also usually include biographies of the principals and the director of management, as well as articles by or about the firm. They often feature sample management and financial reports (including building budgets), as well.

THE CRUCIAL MEETING

The most important gathering is the first meeting with the full board, usually a week to ten days after the building tour. It is here that the management executive sizes up the dynamics between the directors and his staff. It is also at this point that the management executive brings the agent he will assign. He chooses the site agent carefully, examining a number of factors, including:

(1) Property location. Does he already have a number of properties in the area? Proximity is best, so the agent doesn't spend too much time traveling.

(2) Type of building. Is it large, mid-sized, or small and what kind of experience does the agent have in dealing with that type?

(3) Agent workload. No one wins with an overworked agent, so the number and size of the properties he handles is key. The average is between five and seven per agent. "We make sure that our agents are not underpaid and overworked," says Jonathan Klein, president of Wentworth. "This is a service business and we have to be able to give service."

(4) Personal chemistry. The most nebulous item of all, what kind of personal chemistry does he have with the board?

(5) Agent skill set. If there are a lot of capital problems, the manager selected may be one with a great deal of experience in that area. If the staff needs stronger supervision, however, that may require a different type of agent.

Most executives, though, stress to the board that the agent is important but not as much as the back office. "The board has to like the company," says Wolfe. "The agent you like today could be gone tomorrow. If you don't like the company don't hire the agent."

With that in mind, some firms even hold this second meeting at their office to showcase their support staff. "About half of them come to the office," says Lynn Whiting, director of management at Argo. "We think it's a good idea; you get a sense of the place and how we manage the shareholder files."

By the same token, most companies also suggest that the board visit the back office independent of the meeting to see for themselves what goes on. "I always encourage the boards to come to our office," says Wasserman. "You get feel for the company when you come to our office. We encourage them to go to any management company they're considering. That shows you an awful lot: how they maintain files, the size and depth of their back office, if they have a purchasing department or a paralegal on staff. Is everyone running around and is it frantic?

"I'm from the old school," he continues. "If I deposit money in a bank, I want to see the bricks and mortar, I want to meet the bank president. I don't want to deposit a check until I know who I'm dealing with. It should be the same with your manager."

THE FINAL DECISION

Executives say that the interview, which lasts anywhere from 45 minutes to two hours, can be freewheeling: a get-to-know-each-other session in which personalities are examined, questions are asked, and initial decisions are made. Then comes the final choice. That can take anywhere from three weeks to six months.

Or it could take even longer. For most managers, the presentation is the easiest part of the process. The most frustrating aspect of the beauty pageant is the indecision of some boards. "We have one job been we've been pitching for 3 1/2 years," Khazzam recalls. "It's a 3,600-unit New Jersey condominium. We came in second at the first interview. They liked us but they went with a larger firm. They told us they wanted size. Three months later, the board wanted to speak to us again because they were unhappy with the new agent. We've been there three times. Internally, we've said we'll give it one more shot. Then we'll close our books on them. The only reason we keep coming back is because we feel we'd be a good match."