Friday, February 19, 2010

It's Economics - The Nation is Producing More with Less

The U.S. Bureau of Labor Statistics recently reported that our economy’s productivity level increased at an annual rate of 9.5% during the third quarter of 2009. Surprisingly, this increase was the largest gain since 2003. Further, productivity has actually increased consistently throughout this recession. At the same time, the number of hours worked decreased by 7.5% and labor costs shrunk by 6.1%! How is this possible!!! Harvard University Professor Dale Jorgenson declared this economy as a "Productivity Paradox" because the "economy is in a downturn and at the same time it's becoming more competitive."

The Economist indicated that recent employment reduction may be more permanent than in previous recessions. Organizations appear to be approaching this economy radically difference than historical evidence demonstrates. The primary reason for this trend is that companies have strategically integrated technology into their businesses. Employees are able to complete all necessary work with fewer helping hands. Although history has demonstrated an increase in workforces at the tail of economic downturns, this recession will be unprecedentedly unique. Rather than rehiring staff, executives are pausing to determine their new levels of capacity that have been enabled by leveraging technology.

Unfortunately, the affordable housing industry has been reluctant to adopt technology. Many industry participants consider themselves technically savvy because their employees have acquired personal computers with email, word processors, and spreadsheets. However, these tools simply increase the speed of existing processes. If the company’s operation is not effective, the business has simply accelerated the occurrence of problems –with increased risk.

Those who are leading the industry have done so by leveraging simple, low-cost, but extremely effective tools. That is because leaders intuitively recognize the plummeting cost of technology can deliver an extremely favorable return. Simply for demonstration, the Starta Enterprise offers a effective solution for affordable housing developers or syndicators for as little as $40 monthly. While the cost to development Starta’s technology demanded 8 years and exceeded $7 million, businesses can quickly draw benefits that enable increased production, greater revenues and sound compliance. Starta has proven it value by managing more than 7,000 developments and 13,000 funds (loans, grants, NMTCs and LIHTC funds). Starta’s clients have quickly benefited from the intuitive service that directs the flow of documentation, tracks pipeline development, alerts key staff of approaching issues and provides in-depth analysis of deals. Starta deliver! s more value than several employees at a fraction of the cost. When one considers an employee’s cost at $3,000 to $8,000 per month, the value to cost ratio of technology is astounding.

Some believe that some business owners remain reluctant for the fear of having to add technical staff or purchase computer systems. However, this concern remains unwarranted with the rapid increase of Software as a Service solutions (also known as SaaS solutions). Just as a company does not need to manage a nuclear plant to acquire electricity, SaaS technologies deliver easy-to-use services via the Internet. The similarity of the nuclear plant analogy continues by eliminating capital costs. Therefore, SaaS is often referred as a “Utility Service”. A company can quickly engage a SaaS solution and employees simply access the service just as easily as a staff member can plug-in a lamp.

If the economy continues to challenge your business, consider offloading the pressure to a resource that may demand hundreds –rather than thousands per month –a resource that remains available 24 hours a day/7 days a week and available anywhere. SaaS solutions are easy to acquire and quick to learn. Best of all diminishing prices for technology have positioned business to receive extremely attractive pricing. Consider taking advantage of technology to enable your business to thrive in the current and increasing demanding economy.

The Art of Asset Management

Ask ten limited partners to describe the most important issue facing Asset Managers and you'll likely hear eleven different answers. On the surface, the reason for this is obvious: the affordable housing industry is incredibly niche and varied, with unique demands for every company's portfolio of properties. However, there is a second reason for this phenomenon: human nature compels us avoid the reoccurrence of bad experiences. For example, if an owner has experienced devastating losses from a flood, that individual is highly likely to guarantee that all properties maintain proper flood insurance. Another manager may emphasize compliance because of past penalties, while a third may focus on the accurate distribution of tax credit gains/losses due to pressure from investors. All of these foci are important, but the best approach to asset management will balance forward-looking risk management with an investment strategy, rather than simply react! ing to past events.

Although the specific issues surrounding asset management can vary widely, the fundamental intent remains consistent. Owners seek management approaches that lessen the risk of financial loss while helping properties to increase in value. Although this article does not intend to expose every possible indicator, our team has experienced a theme of reoccurring needs to which owners assign importance -- all of which can be classified as risk management or investment strategy.

From a risk management perspective, maintaining proper compliance leads as the primary issue of concern -- and rightfully so. Compliance has a high level of risk because the process for many properties remains extremely error-prone. Owners rely on the diligence of property managers to gather all the necessary records. Yet with increasing turnover rates in staff and management companies, combined with a variety of other excuses, many property managers would be challenged to locate a specific document for a specific tenant that was collected twelve years ago. While fingers of blame are pointing in various directions, the bottom line result for the owner may include severe penalties. At Starta, we responded to this concern by providing a customizable cabinet of documents for every tenant. Documents are available indefinitely when digitalized, and this sort of centralized approach easily allows for regional managers to review documentation as it co! mes in -- fewer nasty surprises during site visits or audits, that way. Plus, owners can be alerted when any information is misfiled or unavailable.

Another driving concern for owners remains the proper insurance of all sites: enforcement of adequate coverage, claim tracking, and timely renewal of policies. While these tasks are not complex, property staff members are often inundated with daily emergencies that distract from lower-interval routine processes such as these. In addition, without some form of reporting the owners often are unable to quickly review information to ensure that proper insurance is in force. As a result, many owners rely solely on the site manager for critical functions of asset management, just doing check-ins a few times per year. To ease our client’s concerns, Starta offers a variety of services to monitor the enforcement and tracking of insurance policies and claims -- and, as with all information in Starta, authorized people can review the information at any time and from any location.

Many owners recognize the value of a proactive investment strategy. The review of financial budgets with resulting variances a key concern for syndicators and other partners. Asset managers also maintain a healthy respect for proper tax credit distributions. As a result, Starta discovered that the best service incorporates existing financial models. The system can be customized to transparently extract dozens, hundreds or even thousands of data points from Excel spreadsheets when existing pro-formas are placed in the system. With the ability to review financials across time, compared with budgets, and even across sites, all parties with a vested interest gain insights regarding the state of a project as well as the entire portfolio.

Property owners should not rely on a single individual to complete any task where that task alone could potentially destroy a business. People come and go, and, unfortunately, the organization cannot always rely on the actions of any one person. The best solution is to enforce a series of processes for data collection, centralization, and retention. A simple spreadsheet or even a notebook may provide sufficient insights for a few properties, but most property owners must eventually engage an enterprise-level software solution that can adapt to the quirks of their portfolio. Inflexible, canned solutions almost never suffice. The system must combine documents with data to deliver a holistic view of each property. And the technology must present real-time, accurate insights and alerts to key individuals to aid in the production of increasingly valued assets. It may seem obvious, but it bears noting: Asset management is vital for long-term financial success. Leaving it solely to overworked, front-line individuals at the site level is a recipe for the occasional meltdown.

Thursday, June 18, 2009

Easing Efforts of Servicing Tax Credit Properties

A few years ago, the challenge for the industry was enabling developers to produce an ample supply of communities to meet the demand for tax credit allocations. Syndicators enjoyed the effortless trade of tax credits at rates nearing a dollar -- and occasionally, even more than a dollar. Those days have passed. The uncertain economy continues to reduce the value of tax credits. Concerns over compliance are emerging from institutions that purchased tax credits or dedicated dollars for grants. We have witnessed a radical shift in the industry from driving development production to a focus on compliance with existing properties.

Unfortunately for many, understanding the necessary set-asides for an entire portfolio of properties remains less than obvious. This challenge is compounded when funds are received from multiple sources, since usually those sources each come with their own list of requirements. Projects may receive LIHTC funds, historic tax credit funds, and several grants or loans from various organizations. The result is a unique conglomeration of obligations for each property. Multiplying the compliance demands by dozens or hundreds of properties creates the need for a methodical means to track all obligations.

Owners with a few properties may be able to use a simple spreadsheet to track compliance requirements. However given time, the accumulation a number of units will eventually exceed the capacity for tracking with a simple tool. But, what software is most appropriate for this effort?

By nature, this industry demands flexibility. Starta once tried to develop and deliver “cookie-cutter” solutions, but we quickly discovered that every organization is extremely unique – just as most every project is unique. Granted, there are several fundamentals such as the concept of set-asides and period of compliance. Unfortunately, specifics can radically change, the number of units can differ, the compliance period can vary, and much more. A system needs to provide structured flexibility.

Starta addresses this through an extremely flexible, web-base solution. The system has thousands of data fields available, however, you can select the (for example) thirty-seven fields that are important for your business. You can automatically generate compliance reports every week, month, quarter or year with real-time set-asides, vacancy rates, and rental income received. But, regardless of whether you are a Starta client or not, the important requirement is that your chosen system needs to allow your organization to wrap the solution around the business -- not the business around the technology.

A good compliance system will be flexible enough to handle all of your current compliance needs, as well extensible enough to meet any future needs that arise -- many times, the future needs arrive more quickly than you might expect. Whatever system you choose, just make sure that it is inexpensive to extend if you later find that you need to. This should be a conversation you have with any compliance vendor. The needs of your company are growing and changing with this brave new economy, and you want to make sure that your software systems will be prepared to grow and change with you without breaking the bank.

Starta Development Releases a Compliance Services Tool for Syndicators

Starta Development announced a low-cost solution that enables syndicators to avoid costly penalties that can result from non-compliance with IRS regulations. The service supports a variety of funding, including Low-Income Housing Tax Credit (LIHTC), New Markets Tax Credits (NMTC), HOME Funds, Sections 202 and 811. And, the web-based solution captures not only initial funding documentation, but also incorporates all tenant documents. Further, Starta maintains all information indefinitely.

Syndicators face a significant risk of massive penalties that could result from lost, unfiled, or improper tenant documentation. Starta extends an easy-to-use service to gather and organize necessary compliance details in a central location. Having a web-base solution enables access from anywhere with offsite backups that provide business continuity in the event of a disaster. “There are numerous properties in Louisiana that lost everything. Disaster remains an event that we assume will happen to someone else. With the Starta system, LPs can put aside the worry of losing documentation due to natural disasters," stated Gordon Blackwell, founder of Starta Development.

“The recent focus on major financial institutions has generated a significant amount of concern in the industry regarding compliance of existing portfolio assets,” explains Blackwell. Blackwell further relays that “this is a valuable service that Starta enabled years ago. However with the emerging unease, we have packaged a valuable solution at a very attractive price.”

... Click Here for more details.

Monday, March 9, 2009

Newsletter - March 2009 / The Value of Pipeline Tracking

Pipeline tracking consistently emerges as one of the most valuable activities for housing developers, syndicators and other organizations that manage funds such as loans, grants, LIHTC or NMTC allocations.

Read the entire article at... The Value of Pipeline Tracking

Wednesday, January 28, 2009

The Importance of Software Architecture

Many developers begin developing by unknowingly using the concept of Separation of Concerns (SoC).  They dedicate their time to develop software by designing and developing features (concepts) with as little overlap of functionality as possible. This approach is how I once programmed when I was a developer.  It provides instant gratification.  Unfortunately, this methodology succeeds for only very trivial applications.  The approach is completely inappropriate for large-scale or enterprise-level solutions.


The Purpose of Software

The purpose of a software application is driven enviably by the developing organization.  The goals are generally driven with commercial requirements and the ultimate solution must deliver an acceptable ROI.  In most cases, the system’s future return must be promoted to gain buy-in before any investment is allocated.  And in many situations, the architectural design must be leveraged to demonstrate the value and viability of the future system. 


The Value of Architecture

I parallel the need for software architecture with the construction of a physical structure –specifically…  I like to relate every system I design as a Tree House, a Home, or a Skyscraper.

 The Tree House Architecture  As a father of 2 children, I enjoyed the assembly of a multi-level, tree house.  I simply fastened boards repeatedly using a level as needed to ensure horizontal floors and vertical walls.  The effort never required pencil, paper, or really much thought.  Similarly, I have developed applications with the same approach –no advance design, just coding.  Unfortunately, the demand for some of these applications exceeded my expectations and brewed into the inevitable catastrophe.

 The Home  While it might be possible to create a home with no plans or design, every family appreciates the architecture of a well designed house.  The general contractor must properly lay a stable foundation while considering all components of the house like plumbing, electrical, rooms and walls.  The GC must also allow some flexibility for the homeowner to acclimate their living conditions within the structure.  For example, while the home’s design must predetermine the location of the kitchen, the homeowner has the opportunity to select the appliances and the exact location of the kitchen table.  When designing the kitchen, the architect must enforce enough structure to enable reliable functionality (the proper operation of the oven and dishwasher) while offering the future owner to determine where they want to place the silverware.

 The Skyscraper  An enormous building relates directly to the enterprise application, demanding considerable design prior to digging the first shovel of dirt.  An architect must respect abstract concepts like the mission and vision; consider al needs, desires, and demands from all relevant stakeholders; encompass all functional requirements; and design to achieve all quality attributes, like scalability, responsiveness, real-time availability, maintainability and/or reliability (often referred to as the ‘-ilities’).  Understanding and achieving the appropriate architecture demands a substantial effort, a focused team, and dedication from all stakeholders.


Listening Is Key

The architect must begin by considering a diverse pool of concerns from all stakeholders (users, developers, management, investors, customers, etc).  It is during this initial gathering of information that often forms fundamental flaws in a system.  By neglecting the insights from a key individual, the architect may fail to incorporate a core attribute for the end solution.  Although many circumstances may contribute to design flaws, I believe that the primary issue that surrounds the inability to actively listen to others.  People naturally want to explain their thoughts to support their intentions.  But, this is not the activity for the architect at this phase.  A related problem is the inability for the architect to communicate his or her intentions. –But, we’ll save that issue for a later discussion.


What is Software Architecture

At its core, software architecture is a compiled distillation of needs and expectations from all stakeholders.  From its definition, we can recognize that the architecture of a software application will never be flawless.  This is because software always evolves.  While software continues to be used, it is never complete.  Why is software never complete???  Because stakeholders (anyone who is affected by the software) will change their minds, some stakeholders will depart while others will join (Yikes… even after the system is released).  So how do we shoot a moving target?


Shooting a Moving Target

There are 3 tools that I use to enable sound system architecture: Pillars, Design Patterns, and Modeling Criteria.  At the most abstract level, an architect should incorporate a set of Pillars throughout the entire system’s design.  A pillar (by my definition) is a central, foundational, abstracted concept that supports the operation and reinforces the mission of the system.  Because each pillar sustains crucial functional support, a pillar can never be removed.  For example, during the discovery of stakeholder’s needs, the system architect may uncover that the solution must allow for a customizable, role-based security model and all actions must be logged and comply with FDA regulations.  The concepts would be 2 pillars of the new system.  Pillars should be documented in concise, understandable terms and leveraged as a litmus test against every designed task.

The concept of a design pattern involves a common reusable resolution to a commonly occurring problem. The concept and use of design patterns has gained popularity and for good reason.  Design patterns speeds development, increases quality, and lessens maintenance efforts by improving readability for programmers who are familiar with the repeated pattern.  Because this concept is well documented, I will not dig into the details relating to the various patterns.

 The final concept that must be incorporated to deliver a robust, scalable and reliable solution involves modeling criteria which must be pre-determined, documented and applied consistently within all designs and code at its lowest level.  Modeling criteria supports the key aspects surrounding quality assurance which facilitates “Fit for Purpose” and “Right First Time.”  Examples of modeling criteria that I often apply include:

Atomic Components (tasks must completely succeed or completely fail)

Loose Coupling (changing one component does not affect the other component)

Open/Closed Principle (components may be opened for extension, but closed for modification)

Dependency Inversion (high-level components should not depend on low-level components)



Software will constantly evolve throughout its entire life.  Do not attempt to stop the evolution. Rather record key principles surrounding the project to architect the best solution.  As a final remark, I relate software architecture with the design of an airplane.  The wings of a plane maintain sufficient structure to lift the craft into the air.  At the same time, the wings are designed to flex 22 degrees up and 18 degrees down to prevent a total failure during turbulent conditions, protecting not only the craft, but also all stakeholders. Architects must understand and address all discoverable needs while incorporating a fine balance between structure (for functionality) and flexibility (for customization & user acceptance).  By applying Pillars, Design Patterns, and Modeling Criteria, an architect can achieve a proper design to deliver a scalable, maintainable, and reliable system.

Monday, January 26, 2009

The Power of Strategic Operations

Developing a strategic operation plan is essential to ensure a valued delivery of any product or service.  If you believe that valued quality can occur without purposeful intent, then you may also believe that a dictionary can be created by randomly generating characters.  

An organization must develop a broad set of policies and procedures firm to produce the maximum value from all resources of a firm.  The policies and procedures must also align with the business’ long-term mission.  

Policies extend corporate decisions to staff members that do not possess the authority to make corporate decisions.  With policies integrated in its operations, a company can speed and improve responses for internal and external customers by preemptively extending decisions to lower-level employees.  With a parallel purpose, Procedures document optimal methods that produce a specific result.  While Policies and Procedures differ slightly, both predetermine effective actions to produce the greatest amount of value.

The challenge, especially for young, rapidly-evolving start-ups, is the constant change of internal and environmental factors.  However, change does not excuse the need for structure.  Change actually supports the need for structure.  While policies and procedures are documented, both should continuously adapt to organizational change, customer demands, and learned knowledge.  I refer to this concept as “Agile-Structure”.  Another common term is “Best Practices”.

Regardless of the term, operations must not allow their policies and procedures to become unyielding routines, dictated by inaccessible executives.  Instead this structure should become a technique to produce value more effectively than simply performing in an ad-hoc manner.  Organizations must be adaptive, listening actively to their employees, investors, clients, vendors, and the community.  With well tuned and applied policies and procedures, a company can increase the value and quality of its products and services.

Gordon Blackwell

Technology & Entrepreneurial Evangelist

Raleigh, NC

"Some see things and ask Why...  

I dream and ask Why Not..."

Author Unknown