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A Reserve Study = “SMART” Leadership for the Jonathan Association
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Minnesota Community Living November/December 2011

A Reserve Study = "SMART” Leadership for the Jonathan Association

By Nate Bostrom, The Jonathan Association

The Jonathan Association in Chaska – with 3,000 homes, 20 miles of paved trails, 47 covered mail stations and bus shelters, 19 tot lot playgrounds, 34 neighborhood entrance monument areas, 23 individual neighborhoods, and a resident population (8,000) that is larger than 75 percent of all Minnesota communities – is one of the largest homeowner communities in the State of Minnesota.

For a common interest community organization of this size to be effectively managed, its Board of Directors must be "SMART” in its annual budgeting and planning efforts.

A homeowner association’s annual revenue and expenditure projections must reflect current specific financial and general economic realities; and Jonathan’s Board is guided by the "2039 Plan,” a 30-year reserve funding and property replacement schedule created via a reserve study which was conducted in 2009. "This is perhaps the most important tool that we have at our disposal,” says Jonathan President Nate Bostrom. "We believe that a reserve study, in our case the ‘2039 Plan’, provides us with empirical research and hard numbers to guide our budgeting decisions.”

Using the "2039 Plan” enables Jonathan to be "SMART” in its budgeting & planning efforts:

S = Strategic
For three consecutive years the Jonathan Association Board of Directors has compiled an annual list of "Strategic Priorities,” which provides structure and intentionality to the Board’s leadership decisions throughout the year. This type of "to do” list guides the Board members along the way, and also gives a clear idea to all homeowners as to what they might expect of their elected leaders.

As they collaborate in setting "Strategic Priorities” for each upcoming year, the Jonathan Board members realize that not everything they need to address is contained in the "2039 Plan,” but having this reserve study-based tool at their disposal helps them determine strategies, tactics and priorities. 
"Setting our strategic priorities in a collaborative way helps the Board to create and then maintain its focus,” says Bostrom. "It helps us remember that while ‘management’ is about doing things right, our responsibility as Board members (i.e., providing ‘leadership’) is to do the right things.”

M = Measurable
The old saying, "you can’t fix what you don’t measure” is a vital component to successfully achieving favorable organizational outcomes in any economy – but is especially true in challenging times of recession, commodity inflation, and home foreclosures.

"In our annual budget planning process, the Board tries to answer the important questions of who, what, why, when, where, and how,” says Bostrom. "Not only does this approach enable us to more accurately forecast costs and predict timeframes, but it also helps our leadership team avoid the all-too-common mistake of confusing motion with progress.” Bostrom believes that the "2039 Plan” is invaluable in that it helps the Board achieve measurable annual results, especially in the areas of overseeing project management and choosing specific capital improvements.

A = Accountable
The Jonathan Board believes that homeowners deserve to know their Board’s game plan and objectives, and for this reason the annual list of "Strategic Priorities” is published in the association’s quarterly newsletter ("Jonathan Neighbors”); the President’s report segment during each monthly Board meeting, which is always open to the public and is televised live on local cable television, is also focused solely on providing a progress update on the "Strategic Priorities” checklist.

The "Strategic Priorities” also appear prominently in the association’s Annual Report each year, which is postal-delivered to every homeowner, along with an itemized list of Board-directed accomplishments for each priority. Additionally, the "2039 Plan” is a permanent fixture on the Jonathan website.

R = Relevant
Recognizing that the process of setting budgets and prioritizing capital projects can fall victim to the personal opinions of individual Board members, or be unduly affected by other influential stakeholders in the association, the Jonathan leaders hold up their "2039 Plan” as the standard for fairness and accuracy in decision-making.

"When a Board has the factual findings gained by the professional services of an outside organization, it would be an indefensible decision to ignore this resource during the budgeting process,” says Bostrom. "I know of no better way to stay relevant in the year-to-year budgeting process than adhering to an up-to-date edition of a reserve study.”

T = Template
"One of the most important challenges for any organization is to maintain sustainability,” observes Bostrom. "For an association that means adherence to its Articles of Incorporation, its By-Laws, and a guide for the budgeting process – i.e., the reserve study.” The Jonathan Board of Directors views its "2039 Plan” as an important template that will outlast the normal fluctuations of myriad personnel changes over time which are so common to volunteer Boards.

"Board members come and go, and as the years go by an association will be served by many different leaders and personal perspectives,” says Bostrom. "However, a reserve study-based tool like our ‘2039 Plan’ can provide an ongoing budgeting and spending guide that creates the kind of leadership continuity that every organization needs for sustainability.”

With its focus on a span of 30 years, the "2039 Plan” has become one of the most enduring documents and planning resources available to current and future Jonathan Association Board members. "We really do see it as a ‘template’ that can influence all of our budgeting decisions – year in and year out,” says Bostrom.

The Jonathan Association’s "2039 Plan” – its reserve study-based planning tool – enables the Board of Directors to achieve measurable results, identify strategic priorities, and effectively prioritize capital projects via its planning efforts. "These are all deliverables of what Jonathan calls ‘SMART’ leadership,” says Bostrom. "Frankly, I don’t know what our Board would do without the Association’s reserve study.”

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