Endogenous factors affecting the performance of owners' corporations

Abstract

Hong Kong’s housing stock is predominately in the form of multi-owned buildings (MOBs) and often plagued by the problems of collective action. The HKSAR government has been encouraging owners to incorporate themselves into a legal entity called owners’ corporations (IOs) under the Building Management Ordinance (Cap. 344) to take part in the management of their properties. Previous studies indicate that engaging a property management company (PMC) is helpful in alleviating some of the problems of collective action and yet, for some reasons, about 22% of private buildings in Hong Kong are managed by IOs without the assistance of a PMC. Apart from its nature being a collective action with the inherent problems of over-exploitation and free riding, managing a MOB without engaging a PMC is a difficult venture, given the complex operating environment and a plethora of applicable regulatory regimes. Obviously, some of these IOs perform better than others. What makes these IOs more successful? Since the actual work of an IO is carried out by members of its management committee (MC), one may hypothesize that the personality characteristics of the members (e.g. dedication, legal knowledge, prior public office experience) may affect the performance of IOs. If this is the case, to what extent do these personality characteristics, among other endogenous factors, affect the performance of an IO? The answers to the above questions are significant in that if the performance of an IO depends on the personality characteristics possessed by the members of the MC, then perhaps more can be done to ensure that these characteristics are replicated and made available to assist IOs in building management. This study used a structured questionnaire survey to measure building management performance of 13 residential properties for which an IO had been formed but no PMC was engaged. Three personality characteristics of MC members were identified and examined in the survey, namely: a chairman’s dedication, and members’ relevant skills and knowledge and their experience in public office. Then correlation between performance and the characteristics was tested. The results support that there is a significant moderate positive linear relationship between performance and the skills and knowledge of MC members gained in a field relating to property management. However, a correlation with performance was not observed with respect to the rest of the characteristics, or if a correlation was observed, it was not significant. One implication of this study is that individual IOs may consider appointing professionals with the relevant skills and knowledge to advise and work closely with MCs, especially properties without engaging a PMC. Another implication is that the government may mandate that property management practitioners be equipped with the relevant skills and knowledge so that PMCs engaged by IOs are able to help owners improve building management performance.