HOA Boards of Directors…Do You Know What You Don’t Know?
In the field of psychology, the Dunning-Kruger effect describes a cognitive bias in which people of limited or no experience mistakenly assess their skill level as greater than it is. This phenomenon is no more established and self-evidently true then in the governance of community associations and the boards of directors who are elected to direct them.
Elections in community associations often result in a board of directors with no experience in community association management, facility management, accounting, or community association law. Despite that, there is often a high degree of confidence in these board members who assume that they know best. A two-hour board certification does not make on an expert on a given subject. There is truth to the expression that “a little learning is a dangerous thing.”
This leaves us in a dangerous position where newly elected boards with little or no experience take control of properties worth millions of dollars. Mistakes are inevitable. Some of these mistakes are the termination of employees and vendors, some of whom deserve to be released but many who are crucial to the property. A mass dismissal is often the first major action of a new board.
Given time, anyone can rise to the demands of the role, but in the early days of an inexperienced administration serious mistakes will be made. Their certainty leads to rash and inflexible decision making, but any expert in the industry can tell you the best way to proceed is always with caution and prudence. This phenomenon can best be visualized in the following chart:
To be clear, I am not suggesting that individuals without experience in real estate management refrain from joining a board, but I do encourage new members to be students of the industry. There is a world of educational opportunities offered by community association vendors, attorneys, and at trade shows. These classes are always open and welcoming to new board members. There are hundreds of books that board members (new and old) should read and if you can only read one book I highly recommend “The Condominium Concept’ by Peter M. Dunbar, Esq. which should be the second thing you read. The first thing that every board member needs to read are their own association’s governing documents. This may seem a daunting and boring experience but if you wish to serve well you have no choice.
Many board members have life experience that is helpful and that is good. Come to the job humble but never forget your reasons for being on the board. In the early days of your tenure try not to be blinded by the impression that you have abilities due to a false sense of competence. Listen, learn and then lead your community to higher property values, a better quality of life, improved facilities, and a solid financial standing. Always remember that even if you are a board member of a small association chances are it is an asset of great value and people are depending on you to govern it well. Real knowledge is to know the extent of one’s ignorance.