What Due Diligence Means For Board Directors and How To Apply It Flexibly
Directors often hear this phrase: “do your due diligence” before committing to a decision. But what does that really mean? Read on to learn more about the role that due diligence plays for a director and how to use it to aid with big decisions.
Due diligence is defined as investigating a person or business prior to a contract being signed, but it could also be defined as making an act with a high level of care. Unfortunately, this definition does not provide a whole lot more insight into the matter for the board director already confused. Here are some ways to undertake due diligence when you find yourself in a position of responsibility.
Hiring a Professional Advisor
Do you need to retain an accountant, engineer, manager, attorney or architect? This is a great opportunity to make the decision thoughtfully. Consider the unique needs of your own association rather than hiring someone who simply has the general background in that field.
For example, if you are concerned about complex litigation, you need to research and vet a firm with that expertise. You're looking for things like a solid reputation in the community, a team that has the resources designed to handle your caseload, and a feeling of confidence when interacting with staff. In this case, doing your due diligence is about finding the right fit for your association's needs and making a decision based on the abilities of a particular person or company.
Hiring a Contractor
Due diligence is essential when hiring a contractor, because a relationship with an untrustworthy contractor can go sour quickly. Make sure that the contractor not only has a solid reputation but that he or she has an active commercial license and that you have carefully investigated any complaints filed with that company in the past. One way to avoid this issue is to speak with other community associations first. This will give you a sense of whether the contractor is as reliable as he or she is promising.
Making a New Association Hire
When hiring someone new, use a thorough application and conduct a personal interview. This should also be supported by calls to the potential hire's former employers, using a skills test, or even considering the benefits of a personality test. This gives the board a better understanding of the people being considered for the position, and it also shows due diligence on your part. (Remember that Florida law governs what constitutes a meeting of the association board as well as requirements for reporting outlined under F.S. 720.303.)
Continue that due diligence after the person has been selected for the position. The individual training new hires will need to have some input over the training process to ensure that training goes smoothly and flag any issues early.
Make sure you take these steps to conduct due diligence when you are working with a community association. Peyton Bolin has worked closely with condominium, HOAs and cooperative associations in the past regarding this aspect of board operations. (Feel free to visit our website for additional information.) It's a sound way to ensure that you have the best interest of the association in mind.