With 39% of Australian strata managers using offshore contractors to do at least some of their work, you would have to assume that falling profitability and a shortage of staff is biting. According to Macquarie Bank’s Benchmarking Report 2024, that number is 57% for the largest management firms above 5,000 lots under management. A further 13% are considering moving some work offshore. When the next benchmarking report comes out, watch how these numbers will have grown.
Our clients report varying success with this model. Some contract with individuals directly, having found them on the freelancer sites. Others work through the agencies specialising in strata. The latter is more expensive but seems to be working better. However, like all staff engagement, the quality of the outcome is directly related to the effectiveness of their in-house training, operating systems, and clear instruction and feedback. Distance changes nothing but the price you pay.
The other strategy of strata managers in search of back-end efficiency is new technology. There's plenty of that about with new entrants claiming Ai capabilities competing with the dinosaurs of strata management software built on last generation programming. They're hanging on like aging rock stars, but their days are numbered too as a new generation of strata managers are looking for something fresh.
So, the question arises: is offshoring and new technology enough to turn the tide of falling profitability and a depleted pool of talent?
Thomas Hout writes in this month's HBR about the secrets of the exemplar low-cost operators in various markets he has studied for decades. Surprisingly, he found that with the exception of Amazon, none of the low-cost providers he studied achieved sustainable success by outsourcing work or adopting new technology. The secret to success was in the relentless focus on customer experience and reimagining ways to deliver services differently. This research says the back end's important, but the front end is where the money is really made.
We've seen some front-end innovation in strata. Online voting for meetings is the standout. But its real value seems to be more about the time saved in preparing meeting papers than the actual client experience of voting online or remotely in real time as the meeting is progressing. That level of technical proficiency is proving too hard for many.
Client portals for accessing information 24/7 is another front-end innovation the sector promotes. However, the truth is the client take-up is poor. Some say as little as 10% and even then, saving little time and the need for human contact. Whose fault is this? Lazy clients, or little effort spent by managers encouraging and teaching owners how to use them and showing them the benefits? Think of the time and money the banks put into getting us to do their work for them when they shut their branches.
Maybe the technology is not yet quite what it needs to be to satisfy the needs of a new world where other service providers have delivered better front-end value, for example Uber and DHL.
We still have a way to go to make back-end innovation deliver bottom line profit, but it's successful front-end innovation of service delivery that is, or should be, the new holy grail.
Michael Teys advises strata management businesses on improving profitability through professionalisation and streamlined operating systems.
He has more than 30 years’ experience as a strata lawyer and academic and has owned 11 strata management agencies throughout Australia. He has a Master of Philosophy (Built Environment) and Bachelor of Laws. He lectures and writes widely about strata management issues in Australia and internationally.
