For-Profit Corporation vs POA Structure
By Lloyd Sherman, December 5, 2020
Today I want to explore my thoughts on why we have a recurring issue of who is really in charge of the Village and why conflicts arise or why our boards might be perceived as dysfunctional. Please bear with me as there will be some generalizations likely made that can be challenged. This is coming from having seen first hand what happens both with the hiring of a manager (GM) to run the POA and the perceived direction of board members’ campaign promises and becoming ineffective.
So, let’s start with how I operated as a manager in the corporate world. I didn’t start my career as a manager, but largely due to being in the right place at the right time, I arrived in that capacity in 1974 (not including my leadership role while in the Navy). So, my experience in the corporate world of management spanned the next 35 years until I retired the first time. I left the corporate world as a Senior VP and Division Manager of a Fortune 500 company. Any of this sounding familiar to some of you out there who may have followed a similar path? I learned early on that using a dictatorial type of approach didn’t work and so I developed a philosophy of including my direct reports in the decision-making process. However, I always told them that as I would be held responsible for decisions made, they needed to understand I was asking for their input but that I would make the ultimate decision. What I loved most about being in management was my superiors laid out what they expected of me and I had the freedom to operate pretty much independently as long as I was achieving the goals and objectives that had been laid out. Of course, they expected to have periodic reports, but for the most part I was able to operate without interference. The further up the food chain I went, the fewer layers of expectations were placed upon me. In my final role in the corporate world, as long as I was returning the financial results needed or required, I operated autonomously. Pretty sweet and I wouldn’t be surprised if others with management experience don’t have similar types of experiences, including anyone coming into the Village as a General Manager. So, regardless how much you have explained to them about the structure within the POA, they still come with their expectation of how they are going to operate.
So here is where the disconnect starts. The POA is not a corporation like those from which most of us came from.
The POA is set up as a non-profit mutual benefit corporation, owned in this case by the property owners. Our structure and Bylaws have “The Board” as the body responsible for the legal and financial matters of the organization. So, the first disconnect comes from the likely expectations of the person coming in to manage the operations. Their expectations are likely those of a board in private for-profit standpoint where boards are really just advisors. The property owner’s perspective is that they vote for and elect people they expect to be running their organization. This in all likelihood, has set up the first opportunity for conflict.
These disconnects and conflicts start presenting themselves in the form of pushback from management or staff on the involvement of the board members in their day-to-day activities. So, for those board members who have the aptitude, knowledge, and will to fix things they see lacking or in need of change, the conflict escalates. This results in information being shielded from board members, committees, and property owners. Any request for information at a detailed level is viewed as an attack on staff and that they are not capable of doing their jobs.
You can’t expect a body of seven people (or any number for that matter) to have all the skills and background necessary to carry out their full responsibilities, so committees are formed. These committees operate under the guidance and direction of the board, and as such are delegated the responsibility to perform the necessary due diligence and provide recommendations and advice to the Board to assist in carrying out their duties. These committees are formed primarily of property owners, who also came from backgrounds in the area of expertise for which the committee was formed. Should these committees be restricted in what information they can gather, or where their recommendations are ignored, or worse, opposed by management and staff? Doing so just disenfranchised not only the committee but the property owners as a whole. After all, these committees are an extension of the board’s responsibility.
And so, the result is potentially the largest disconnect and conflict we have because management and staff wind up shielding or potentially not providing the full information and use the interference in operations as their shield. No board member should accept that as it is the board that is ultimately responsible. This aspect alone basically renders the board and committees somewhat useless, or at the least ineffective.
So now, let’s move to the board and what I have observed over the past couple of boards and in particular, the current one. Part of the issue has been explained above; however, it isn’t really the biggest problem, IMHO. New board members enter the picture with no real understanding of what will be expected of them. They have their ideas and convictions and have every intention to follow through with them. However, what they discover is that this position requires a lot of work, and the 80/20 rule kicks in. Most of the work is done by 20%, and for those without a sound work ethic and/or strong conviction, it becomes easier to abdicate their responsibility unwittingly. Those who stick by their guns place a target squarely on their back. Those who don’t have the will or where-with-all, basically, again unwittingly, wind up going along to get along.
So, in summary, without realizing it, we have basically set up the perfect storm that is riddled with conflict and controversy. Is there a solution? Maybe, but unless mindsets change, I don’t see how. How many GM types do we have in the Village who are willing to serve on a board with the kind of commitment that is necessary? How many people run, who have no clue and will not be able to contribute to the workload? Lots of questions but few answers.
The one thing I am convinced of now that wasn’t part of my thinking process when selecting a new manager is that we should never again hire an outsider. We need a manager who knows the Village, knows how this POA operates, and how our organization operates differently than the corporate world. Then we need to do a better job vetting candidates for the board and having levels of qualification to run other than being a property owner in good standing. That is not a qualification to be responsible for a $40 million operation. And because we have basically been doing the same thing for the last 20 years and expecting a different result, the first priority and board led activity should be a deep dive into each and every amenity and operation and in hindsight, should have been done before consideration was given to hiring an outside manager. After all, isn’t the deep-dive concept what most people seem to run on?
As always, these are simply my observations and thoughts and are only meant to stimulate discussions and hopefully, positive action. I understood a long time ago that you open yourself up for criticism when you put yourself out there. However, I am always happy to discuss my views and even debate them as necessary.
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Jama Lopez
12/05/2020 — 11:02 am
Lloyd,
You said it all! And, very well.
Jama
Vicki Husted
12/05/2020 — 1:25 pm
Well said, Lloyd. I’m a relative newcomer, but I thought the “interference in operations” issue was unique to Ms. Nalley’s contract. Surely that clause wasn’t included when Mr. King was hired, is it? Over the time I’ve been here I’ve read all our governing documents, but don’t recall seeing anything in them that would allow that excuse, short of being included in the contract. Seems to me the Board may need to vet for more than work ethics, they must develop backbones as well. Thank you for your (continued) service. I understand your reasons for exiting, but regret the result.
Suzanne
12/05/2020 — 8:43 pm
Sadly Vicki this is not the first time our board has argued over this issue and us villagers have been caught in the crossfire while being asked to increase assessments. If I’m not mistaken that phrase is in the bylaws and has been at least since my husband and I purchased a lot here several years ago. I remember because this same board fight (and their assessment push) occurred around that time. I’m starting to see a pattern that is very concerning.
Does anyone have a set of bylaws dated before that phrase was present?
It seems they continually struggle with making and/or following their own rules. Instead they are always either blaming each other, blaming their staff or accusing us villagers of interfering, all while sticking their hand out for more money. NOT ONE DIME!
Lloyd E Sherman
12/06/2020 — 8:04 am
There is NO contract with terms and restrictions as we last saw. In my estimation, the overall issue is that most board members are unwittingly going along to get along, and/or don’t want to admit they may have made a hiring mistake. Doesn’t matter what the reason, the early signs are already there that not enough will change until the board takes control and more importantly keeps control. They have to do this by empowering the committees to perform deep-dives into every operation and amenity. You can’t expect one person (in this case the GM) to do this even though he says he is going to. He will constantly be diverted with ongoing operational issues and will never get through the process. Deep-dives also have to be done by independent sources. Staff neither has the motivation nor in many cases, the skill sets it requires to perform this necessary requirement.
Tom Blakeman
12/05/2020 — 4:18 pm
Excellent piece of work which outlines the problem well from someone who was on the inside and has walked the walk not just talked the talk. It has also been my observation that the biggest problem here is that we keep doing things ‘the way we have always done them’ and, as Lloyd says we keep expecting different results. Then we don’t get results or we only get partial results and wonder why. Lloyd explains the basic flaw at the root of the the situation.
Property owners elect the board and expect them to produce results and deliver the goods consistently and reliably. That requires a hands on, working board (all of them) deeply involved in day to day operations and with full access to every single financial, legal, personnel, contract and operational record however, whenever and wherever they want it. So too with committees tasked by the board to handle special projects or whatever else.
Property owners DO NOT expect the board to simply hire a GM or CEO and turn the show over to them as was done with Twiggs and Nalley and as appears to be happening now. Property owners DO NOT elect the board and expect that almost from the get-go we start hearing the same old song “everybody knows we need more assessments”. There are many many issues requiring resolution in the Village which are long overdue before the board comes to us wanting to dig deeper into our pockets.
Moe
12/06/2020 — 4:12 am
I believe one definition of insanity is to continue to do things that don’t work, over and over and over again.
Elmo Wiggins
12/06/2020 — 9:12 am
Mr. Sherman – I can agree with you that HSV probably needs some changes to the structure of how the board operates and its relationship to POA management and staff.
You refer to HSV being different than a “for profit” scenario and that makes sense also. However, most corporate boards (for profit and non profit) provide specific goals for management to achieve. For example, why do we not ask the GM to provide a detailed plan to (1) reduce the golf amenity subsidy to zero in 5 years? or (2) give us a plan to reduce the “deferred maintenance”” backlog to zero in 7 years?
The board would then vet these plans, fund them and then evaluate the GM’s performance (semi annually) on meeting the goals of the plans? The board (and HSV) could see every 6 months if we are on target or off target and make the appropriate adjustments.
The board then would not have to be “involved” in the day to day management yet we would have yardsticks by which to manage performance. This kind of management is in EVERY corporation yet I have seen none of this in HSV.
The previous board failed at this because they provided the CEO with subjective goals like improving property owner equity and other subjective goals found in the CMP.
If you give the GM a “specific” goal, we can immediately tell how he is doing! To suggest he is failing because he is not an “insider”” is unfair and a disservice to him. I am sure in your experience as a manager you know that if an employee is failing, it is probably his/her manager’s fault!
Keith
12/06/2020 — 9:24 am
Do you hear yourself Lloyd? You want total control but no criticism and someone else to blame for results. You tuck tail and run at the first sign of problems leaving your team behind to fend for themselves, while filling this page with vague innuendo that the rest of us have to sort through and fight about. Did you not hire this GM and declare that the board had restored their power and changed the POA operating model? And did you not participate in numerous opportunities to define the GM’s duties, strategic goals and our related governing documents? Did you not choose the very board members who filled the seats vacated by an elected board member you removed and two others who left in order to complete your campaign promises? We hired you to do a job but you chose to leave it unfinished and in chaos. Time for you to ride off into the sunset so we can pick up the pieces from yet another disappointing board election.
Lloyd E Sherman
12/06/2020 — 11:32 am
First, let me correct you on something. You didn’t hire me to do anything. These are very time-consuming VOLUNTEER positions with zero perks except for the advice we get from property owners like you. I made no vague innuendo. I explained to you as my opinion what one of the major issues and disconnects are. Yes, I could ride off into the sunset and leave you to figure it out for yourselves if you had the will to do so, which too many in the Village don’t. Yes, I could have stayed on the board and continue to speak out and get absolutely nowhere as the majority is going to dictate the message that gets delivered to the property owners. I am not in agreement with that message or direction and at least out here, I can speak out whereas as a board member, I was bound by the oath of office to support majority decisions. And exactly who is the “we” who are going to pick up the pieces? It obvious you are good at providing advice but exactly what are you willing to do to help solve the issues this village faces?
Elmo Wiggins
12/07/2020 — 10:25 am
Mr. Sherman – I think we all realize what a difficult and time-consuming job the board is and thank you to anyone who walks into this arena.
However, I believe that “Keith” (above) posed some very good questions that HSV has a right to hear the answers to. It seems to me that, in the final analysis, you have become angry and are lashing out at everyone who asks tough questions. I can only assume that you were unable to convince other board members of your opinions and possible you lashed out at them too.
If you set yourself out as a “leader”, you must be able to have patience and work to bring others along with your ideas and opinions. This usually works well if you think it through. Consensus, cooperation, negotiation and compromise. However, if your ideas are not good ones, and you fail to get others to see your strategy, maybe it is your ideas and opinions that are at fault (not others).
All in all, getting angry and lashing out at Villagers serves no beneficial purpose. Maybe if you apologized, the other board members would accept you back. We need people like you to step up and fix the village problems!
Linda Anderson
12/06/2020 — 5:54 pm
Mr. Wiggins opinion makes a lot of sense. Our GM was portrayed as a turn-around specialist to cut costs and redefine HSV’s financial position. Now, many feel that the opposite has happened, that it has become all about raising assessments. The Board needs to define and stick to the Goals and let the GM do all the work to comply. How about Maintenance as the 1st prority. After all, isn’t that what he is getting paid $$$ to do. This will determine the Boards resolve to stand behind it’s fiduciary responsibilities to govern appropiately. Without doing this, it becomes the herd mentality to go along to get along. To govern irresponsibly. In the end, it will cause great harm to the Board and especially to the property owners who see a continual attempt to get more money without taking care of what is needed first.
John
12/07/2020 — 9:34 am
Perhaps our governance model is not workable because you cannot get enough qualified people to serve three years of their remaining lifetime in a thankless fulltime occupation. I have no answers. I just get tired of the same old discussions over and over again. If no one is willing to give an inch we will all fall backwards. The question seems to me is what are we willing to sacrifice for the overall good and stability of the Village. If nobody is willing to sacrifice their “sacred cows” we all starve. Unless we can agree on some basics, I do not see how we can move forward or even survive. Stop blaming others and do what you can to make things better even if it is just greeting your neighbors.
Tom Blakeman
12/07/2020 — 5:09 pm
It is not Balboa GC, it is the entire golf operation that is failing. I played today at Balboa finishing my round at about 1PM. Had lunch there and watched as almost nobody came thru the 18th hole for an hour or so. Came home then to my home on Cortez GC and, guess what, virtually nobody on that course all afternoon. Then I took a look at Golf Now to see what POA might be offering and guess what? While other area courses are advertising for people to play, HSV was nowhere to be seen, not tomorrow, not next week, not anything or anytime. Apparently no marketing, no advertising, and no interest in getting outside players to come support us. Meanwhile out golf leadership salary and benefits burden, not to mention other administration, it in huge six figure numbers. What are they doing and why isn’t our BOD fixing it?
Moe
12/07/2020 — 4:00 pm
One sacred cow that needs to move on is the failing golf course at Balboa. It has to go.
Now.
We don’t need it, can’t afford it, and it is a huge drain on the budget, and an eyesore to boot.
John is right…if no one budges an inch we are doomed…the whole place is falling apart and all we can come up with is half-price meals for the employees?????
Gene Garner
12/07/2020 — 4:48 pm
Lloyd, I’m sorry your experience in governing has been so negative. I believe you’ve proven what I’ve believed for a long time; Villagers don’t have the experience, training or aptitude to govern HSV and that includes the BOD and their committees. I’m not saying that to denigrate anyone but as an observation on the last 25 years of HSV governance.
We’ve seen well meaning Directors come & go, after promising to fix all wrongs and get HSV back on the right track- but fail in the end. Maybe the job is too big and demanding for elderly retirees or maybe we just don’t understand the problems. Whatever the reason we need to change the way we govern.
The Nov 30, 2018 “Amendment Vote” let everyone know how the majority of Property Owners felt about the BOD’s power grab. I still believe it was a good decision allowing all interested parties to have a voice. Although some were unhappy with the results most accepted the results and moved on. It was done with a vote of the Property Owners and I had hoped it was a turning point. Unfortunately the BOD & CEO didn’t learn from the resounding defeat and we reverted to our old ways. We again had the the uninformed decisions forced on us by the BOD/CEO and the resulting complaints from the Property Owners.
It makes sense to allow the Property Owners to vote on all major decisions that are suggested by the BOD and their committees. It would allow the Owners a voice in their government and show the BOD what issues they would and wouldn’t support. There are a number of vendors with affordable software and support that will set up a website to collect and count our votes. It would be efficient, inexpensive and speed up the decision making by the BOD. The past and present Board of Directors have proved the property Owners know what’s best for HSV and they should be the ones making the major decisions.–Gene
John
12/08/2020 — 7:10 am
Gene
What have you been smoking? I doubt if the vast majority of people here want to get involved in all these decisions and that is why we elect leaders. There will always be some people that will be unhappy but I doubt if the vast majority want anything but safety and stability. To try to get some consensus is like herding cats. This place is not just a retirement community but also an expensive to maintain outdoor recreation facility that only a fraction of owners use and not self-supported. We all need reality checking! I think we are still trying to adapt to a post Cooper world and it is not going to be pretty.
Gene Garner
12/08/2020 — 9:04 am
John; I do know the vast majority of Property Owners would be glad to vote on issues involving their money. I don’t know if you were around then, but many Owners voted in the “2018 Amendment Vote” and were happy to let their “representatives” know how wrong they were. I keep referring to that election because that’s the last time we’ve been asked for our opinion.
The main problem is the Director candidates promise one thing but end up doing something else, once elected. Kind of like Lucy telling Charlie Brown she will hold the football if he kicks it. And John you’re the one that needs the reality check, go to the top of this page and read Lloyds words. I’m sure he thought he could make a difference and would help to alleviate some of the Village’s problems. I believe he was sincere, I don’t question anyone’s intentions, but he soon found out he “didn’t know what he didn’t know”. In other words, Lloyd didn’t realize the depth of our problems or how entrenched they are.
Your arguments would be a lot more believable if you had the courage to include your last name, it says a lot about your character.—Gene
Tom Blakeman
12/08/2020 — 10:38 am
Totally agree Gene. Plus we now have a newfangled voting system/service which the BOD just approved. This should make it much easier to manage, cheaper per vote campaign, and (so we are told) free from POA manipulation. Using such a system we could bring closure to many arguments and conundrums: Are we a retirement community or not? Does the community really want to support golf courses at a cost to everyone of $2MM per year or not? Do we really want the pseudo gates or not? Should we incorporate as a city? Should we secede from the two counties and form our own thereby bringing home the multi millions of dollars we pay out every year in taxes? Should we have a property value based assessment system in lieu of what we have now?
Of course the big problem is going to be what gets put on the ballot and who is going to control that – the Board, the POA, who? Another issue is that our POA, despite their claims to the contrary, does not have a clean, reliable, error free database of the total property owner rolls. I know this because I helped try to decipher that mess prior to the last board election in order to derive a mailing list for use by a few of the candidates.
Mark
12/08/2020 — 6:32 pm
Since the village loves assessments and fees, how about levying some on owners of rentals in the village? They are running a small business and should be making an extra contribution to the cause. Nobody likes having rental units in their neighborhood and the nightly units create much more trash, noise, traffic etc.
Tom Blakeman
12/09/2020 — 6:45 pm
Totally agree Mark. We have many successful businesses and other endeavors operating in the Village. Some are multi million dollar operations. But, each business is considered the same as any individual property owner. A commercial lot, no matter how big, how many employees or anything else pays the same as an individual lot owner. The only thing different is a “commercial” trash collection fee which doesn’t amount to more than pennies. One water meter, one POA fee – no matter how many buildings, employees or anything else. And then there is the issue of having numerous restaurants competing with those of the POA and people wonder why POA restaurants cost us a half million dollar a year “subsidy”. You specifically refer to the rental businesses here. We have people renting out rooms, renting out their basements, people renting out their investment or summer homes and so on. POA gets nary a dime from any of these businesses. No ‘hotel’ tax, no entry fee, no nothing. But they will all tell you that all the visitors they bring in are a wonderful benefit for the Village. I’m not buying it.
Moe
12/10/2020 — 4:45 am
Short term rentals are ruinous.
They should not be permitted in HSV.
Period.
Mary Ann Kennedy
12/09/2020 — 11:14 am
You have certainly “put yourself out there”, Lloyd, with your articles and comments on public media. I truly believe you care about property owners and want the best for HSV. I understand you had personal reasons for resigning from the board, and wish better times for you and your wife. Had your resignation been for declining health or family needs, property owners could easily accept those reasons. I can appreciate your desire to share your insights to help property owners understand the challenges board members face; however your public criticism of the current BOD and GM are entirely inappropriate, given the circumstances.
In one of several articles, you asked “How much longer did you want me to stick around and watch as a majority began shifting responsibility back to staff?”. The answer is obvious – you were simply “expected” to serve your term. You’re not just providing your “opinion”, you’re faulting and minimizing the remaining directors who are willing to fulfill their obligation whether they were appointed or elected. You’re faulting our GM whom you vetted and supported until he insisted on staff reporting to him rather than to the board and committees.
You created a majority when the new board members were seated in April. Diana was already on the board, waiting for you, Tucker and Dick to nominate her as Chair. A pre-planned and highly promoted majority was formed to pass everything the four of you desired. It was obvious to any property owner who watched the meeting that the actions taken that day had been pre-orchestrated. Committees were abolished, new corporate officers were installed, and that was the beginning of chaos with the chair admitting that she “didn’t do a good enough job in drafting the measures” and some would have to be tabled. When Ella Scotty was assigned to draft the motions desired by the new board (since none of the new board members knew how), everything sailed through with a 5/2 vote. Soon, by-laws were changed, department heads were fired and the much-maligned CEO was discharged (with a very nice “severance”) since nothing “nefarious” was discovered to the surprise of the new board. You stated “new board members enter the picture with no real understanding of what will be expected of them”. Whose decision was it to discontinue board orientation sessions? Did the new board members (and their promoter) believe they knew everything that was needed to “right the ship”?
You stated, “we should never again hire an outsider. We need a manager who knows the Village, knows how this POA operates”. Are you suggesting that the GM position should have been awarded to the newly appointed corporate treasurer who couldn’t get to Florida fast enough when he learned that wasn’t to be? Are you willing to reveal his salary requirements? I’m betting it was at least the $200K we pay Charles King who is highly qualified with vast experience as a community manager.
There are many “disconnects” but (IMO) the reason is that some property owners continue to demand regular reporting on every detail of POA operations and think they should choose who should be fired and how every cent in every POA department should be spent.
There have been plenty of (negative) “discussions stimulated”, but I foresee no positive action as a result of your articles which publicly shame a relatively new board and GM.
Elmo Wiggins
12/09/2020 — 11:46 am
Mary Ann – now that we are on a “first name” basis, I have to say I agree with most of your assertions and opinions. Good job!
Karen Bump
12/09/2020 — 1:57 pm
Ms. Kennedy, even though I don’t always agree with your perspective, I do respect your civil manners. However, in regard to this topic, I do agree very much with what you have concluded here. Micro-managing those hired to do the work never ends well. I also agree with Mr. Wiggins comments.
I believe the board and the GM as well as our employees are doing a good job in spite of a global pandemic that restricts some actions. The ACC committee said they had approved 174 new home permits and 15 more have applied this year. That is terrific. It looks like we are headed in the right direction to me.
Chipmunk
12/09/2020 — 6:53 pm
I guess if I was behind the hiring of at least one of the folks you mention I would support them too. Better bury some acorns though. There won’t be another $3 million bailout coming any time soon.