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.