Ethical Management: Are You Really Doing the Right Thing?
By Paul Grucza, CMCA, AMS, PCAM

Like association managers, board members are entrusted to work within fiduciary guidelines, exercise sound business judgment, and consistently maintain the duty of care and loyalty they owe to the association. Board members who keep these responsibilities in mind are more likely to preempt member dissatisfaction and even liability.

But there are times when you might be tempted to engage in questionable—or worse, abjectly inappropriate—behavior. When carrying out your day-to-day responsibilities, don’t lose  perspective and veer into an ethical gray area. You can stay on the right track by setting and living up to high service standards.

Beware of Gray Areas

Exactly what is ethical management? “Doing the right thing, all the time, in your role is the simplest way to describe what a board member’s mantra should be,” explains association management expert Paul Grucza, CMCA, AMS, PCAM. “Of course, the right thing isn’t always obvious. There can be differing interpretations of what the ‘right’ thing or ‘wrong’ thing to do in a specific situation is, especially when a board member has lost focus on his role—providing the best service possible for the community, not reaping benefits for himself."

“It’s sometimes hard for board members, and particularly new board members, to recognize an ‘opportunistic benefit’ that they shouldn’t take advantage of,” says Grucza. He explains that opportunistic benefits are tangible and intangible items or accommodations that vendors or members may offer an association’s board member or its staff.

To determine whether something is an opportunistic benefit, ask yourself: Would I have been offered this benefit if I weren’t the association’s board member? It’s not uncommon for vendors and service providers to provide perks, such as complimentary lunches, to board members as way to thank them for the association’s business. And under many circumstances, it’s fine to accept a small thank you, such as an inexpensive lunch. 

But a board member crosses the line when he believes he can take actions that provide a benefit to the association and also enrich himself in some way or otherwise benefit from relationships that have truly been created to foster business, says Grucza. For example, it’s objectively unethical for a board member to build into a request-for-proposal (RFP) from a prospective vendor a so-called kickback that a vendor might offer to entice the board member to steer association business its way, he stresses.

Surprisingly, some board members don’t think ahead about the consequences of taking some type of remuneration when it’s abjectly wrong. “Unfortunately, when they’re put in a compromising situation, some board members find the short-term gain too attractive, and ignore the long-term pain they’ll feel if they’re caught in an unethical situation,” says Grucza.

Widespread Ramifications Ensue
What can seem like a private arrangement between a board member and, say, a vendor to the community, can actually create serious liability and problems for the association. Depending upon the circumstances under which an inappropriate deal was made between the board member and a vendor, the association may share responsibility for any problems arising from that arrangement. 

Liability insurance and other types of insurance may protect the association against the actions of a board member who later tries to sweep them into a lawsuit. But the financial disaster caused by an improper arrangement isn’t limited to paying legal fees.

A vendor that has a payoff arrangement with a board member may very well have done an excellent job, but the net cost to that association conceivably could be thousands more because of the payoff, points out Grucza. He warns that the board is at risk for criticism, or worse, if members learn that money was lost because of the inappropriateness. A board could be accused of not acting in the members’ best interests and wasting their money by paying for the particular contract that the board member was benefitting from.

A board member and board could have major exposure financially, including problems getting insurance in the future, and goodwill can also be lost. Once a board member’s reputation has been called into question, it’s very difficult for him to be hired anywhere else in the industry. And the board may have a hard time gaining back the trust of the membership after there’s been impropriety, says Grucza.

Decline Offers Tactfully
Compromising situations can be awkward, especially when they involve inappropriate offers from members themselves, rather than a vendor whom the board member can choose to avoid doing business with. But no matter who offers you a perk that you don’t want to accept, simply follow the “honesty is the best policy” adage, says Grucza. He tells management trainees that the best thing to do is to comment that it’s a generous offer, but they can’t accept it.

Depending upon who is making the offer, you can smooth things over further. For example, when a service provider offers some incentive or kickback, you can say something like, “the fact that you’re able to provide the work we need done in the community and give us a good price for that work is all I need because as a board member my sole interest is in helping the community,” says Grucza. Telling a vendor or service provider that you’d rather it do a good job at a fair price than give you something personally is a tactful way to diffuse that situation and to politely send the message that, if it persists, you’ll replace that company.

hat about members who offer goods or services in exchange for being given priority over other members? “In the same way that I would talk with a vendor or service provider directly and honestly, I would encourage board members to let that member know that you appreciate what he or she is trying to do for you, but that your satisfaction comes from delivering excellent service to members and the community and that you don’t need any type of inducement to do that,” advises Grucza.

If you’re unsure whether a kindness that a member is showing or an offer that is being made by a vendor or service provider crosses the line, ask yourself whether any harm would be created by the establishment of the relationship the member or company is offering, says Grucza. Lunch with a vendor to cultivate a business relationship could be all right—it’s the depth, length, and cost of the lunch that could raise members’ eyebrows, he notes.

Superior Service Keeps Staff, Members in Check
Board members aren’t the only ones who may be tempted to partake of opportunistic benefits—frontline
staff, such as concierge and maintenance staff are even more likely to be approached by a member with an offer for preferential treatment. 

“Owners are quick to zero in on personalities and vulnerabilities and try to use them as leverage, which is why constant and consistent training for your staff on how to say no tactfully, how to keep an even keel among all the members they represent, and how to report a member who is putting pressure on them is vital,” says Grucza.

The issue of ethics really comes back to the proper delivery of customer service—that is, doing things for the customer, in this case, the association, in the appropriate way,” says Grucza. “If you dispense that service in a detailed, thorough, professional, consistent manner, you eliminate the fissures where lapses in ethics can more easily occur,” he emphasizes.

t’s expected that a doorman in a condo building will open the door and be courteous, and that the concierge will greet members and be accommodating and helpful, because that’s their job, not because they’ll be tipped or given additional compensation for it. And that’s what board members need to consistently deliver in their training messages on what customer service is and what the delivery of service entails, says Grucza. He feels that training avoids potential breaches of ethics, like taking tips.

Training your staff to discreetly decline inappropriate offers also keeps members in line. “We indirectly train owners through the behavior of our staff and the service that our staff provides, that we’re not interested in or willing to accept inappropriate offers.

Set Threshold for Offers
"The reality of doing business today is that it can and will involve the exchange of some level of goods or services,” says Grucza. So to avoid confusion, set a threshold amount of money that an offer from a vendor can’t exceed. Grucza has previously set the threshold in associations he has managed at $25.

Especially around the holidays, however, vendors may send gifts that are in excess of your threshold. Grucza has solved this problem by making sure that gifts are shared with the entire staff or community. That way, there’s never an impression that one board member is benefitting from a relationship with the vendor, he explains. In the absence of a strict threshold policy, you open yourself up to arguments that a gift or service was over-the-top.

Paul Grucza, CMCA, AMS, PCAM, has worked in the community association  industry since 1980 as a portfolio manager, owner-manager and national and international trainer. He has extensive experience working with high-rise condominiums, communities undergoing developer transition and residents who are
aging-in-place, and has provided consulting services to management for many years. Paul presently serves as a consultant for Classic Property Management, AAMC. Paul is a Past President of CAI, Educator of the Year and faculty trainer. Paul has been a member of the NY and Florida
LACs, a featured speaker at numerous CAI conferences, has been published in Common Ground magazine and served on the Board of the Dallas-Fort Worth Chapter of CAI. His television show in Dallas was seen by more than two million viewers.  As a long-time member of CAI's national faculty, Paul is certified to facilitate  all of CAI's courses including the Case Study.

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