Does Your Board Undertake “Due Diligence”?
Directors are often told they should “do their due diligence” before making certain decisions on behalf of their associations. How many people actually understand what steps are needed to fulfill that directive?
“Due diligence” is defined as an investigation of a business or person prior to signing a contract, or an act with a certain standard of care.
The foregoing definition, however, might not be enough for some boards or managers to map out a plan. The steps needed to diligently assess something or someone will change depending on the circumstances but what follows are some basic methods to undertake due diligence.
- When evaluating a potential association hire, using a thorough application, holding a personal interview, making calls to former employers, requiring a skills test and perhaps even a personality test can all give the board a better picture of the person they may be hiring. Naturally, your board will want to pick and choose from this list depending on the type of employee you are hiring. It is also important that the person with whom the job candidate will be interacting most closely post-hire has some contact during the evaluation process to ensure a productive working environment.
- When hiring a professional advisor such as an attorney, accountant, manager, engineer or architect, you will want to confirm that the candidate has the skills and resources your community needs. For example, if you are considering complicated litigation, you should hire a firm that specializes in your specific problem or issue rather than a firm that may only occasionally handle that type of litigation. You will also want a firm that has the resources to continue a protracted fight. When considering any professional advisor, you will want to ensure the individual or company has a good reputation in the industry, a proven track record and verifiable credentials. Naturally, it is better to hear great things about your candidate from others as opposed to hearing them only from the candidate. Check out your candidate online. Does the firm or individual have a presence? Can you see what resources they possess? Beware though as not every professional writes his or her own material; sometimes those blogs, papers and summaries are ghostwritten by PR firms. Be blunt and ask your candidate whether or not their written materials are their own. While there is nothing wrong with a targeted marketing campaign, if a professional creates a misleading image that his or her company is larger or more successful than it is, beware. Ask how many employees actually work there and see if their website backs up their claims. Ask to see documentation to verify any success stories. Google can also be a useful tool to see what others are saying about this individual or company.
- When hiring a contractor to perform any type of work in the community, be sure to confirm that the contractor’s commercial license is active, that the license is the type you need for the work you are requesting and investigate any complaint history and resolution of those complaints with both the State and the Better Business Bureau. Checking references with associations who previously used your contractor candidate for the type of project you are considering is also essential to your due diligence.
While there are no guarantees that a properly vetted candidate will go on to perform good things for your community, an improperly vetted candidate can spell disaster. Boards who understand the need to perform due diligence tend to avoid costly problems down the road.