While doing all these tasks was not easy, a serious change in our daily operations made things much more difficult. We ended our relationship with our house management company and gave the responsibilities to our house manager. This was a big change for us, but we decided as a board that it would be best for the house. However, it did not come without a price.
Like with any true organization, there are transaction costs that come with making a change. We had to pay a fee for terminating our contract with the old organization. Also, we lost some money of our deposit that we had placed. We knew this would be a loss, but decided it was not a large enough deficit to hold us back. Furthermore, we had to increase the salary of our house manager, so that is another cost we had to pay. This increase in salary required many negotiations between the house manager and us, so we could find a fair price that made both sides happy. This is another cost, even though it did not necessarily cost us money. This is entire process was a massive time cost. With having to end our old contract with the previous company and then, spend time having several meetings to negotiate the increase in salary our house manager was going to receive.
Theses transaction costs were definitely a loss and took away from a few of our other budgets in the end. But, like any good organization, we had to decide whether these costs were worth the change we wanted to make. In our case, we found that it was. There are of course other times where a group may find the transaction costs too overwhelming to make a change like this. It is always vital to consider these factors when making this type of decision in order to make sure you are making the right choice for your organization.
I gather from reading this that the house manager was what we referred to as an independent contractor. Did that person live on the premises?
ReplyDeleteYou didn't give a reason why your board terminated the contract with the management company. Had its performance declined? Had the house manager said the management company was redundant. Rationally, if you make a change, it is an implicit argument that the prior relationship was no long efficient. Assuming that is true, it would be good then to identify the maintained source of inefficiency.
I gather that you are not on the Board now. Would the current board agree with the decisions made by Board when you were on it? This is a different issue in considering efficiency. When the leadership rotates do the preferences of the organization change? And if they do, is that good or bad?
The independent contractor, or as we call house manager, does live on the premises. This was part of the reason for the change. We found it would be more efficient to have someone take care of the problems who actually lives in the house and has to deal with these issues himself because he would be able to acknowledge them and fix them much more quickly. This efficiency is what inspired us to make the change along with the fact that we felt that the previous management company was not entirely catering to our needs. They would take days or even weeks to fix simple things around the house. Plus, we got into a huge disagreement about the quality of our Wifi, which was running very slowly but they thought didn't need fixing.
ReplyDeleteYou are correct as my term on the Executive Board expired with the end of last semester. The current board is still very new and getting ahold of how things are run, but being members of the Fraternity last year and having to deal with the issues the former management company gave us, I believe they definitely would have agreed with our decision. This issue was something the house universally agreed on, however in the future when the new board is faced with other challenges they may handle things in ways that we did not. With a new group of people in charge there is definitely a change in preference and where we may have spent money on getting new fencing around the house, they might find it better spent on adding a meal to our meal plan or expanding our social budget. This presents an issue of equity because you must decide what is best for the house as a whole and not focus on what some individuals may want. Only time will tell as their service on the board goes on, whether the choices they make for the house are good or bad.