Recently I participated on a panel where the audience could ask literally anything. After a few softball questions to get started, the pink elephant entered the room: What do you think the real estate brokerage company of the future will look like? The room was suddenly still. Everyone leaned forward in their seats. All eyes were on the panelists. And after three other great answers – about companies focused on leadership, treating customers like guests, and practicing the fine art of salesmanship – the microphone came to me. What would be my answer? What will the real estate brokerage of the future look like. No talk about virtual offices and wireless tools. Forget social networking online. Those aren’t models – but tools. Think evolution. So I gave the answer nobody wanted to hear: We already have the future brokerage model, in most companies, today. We just have to be willing to look.
The real estate brokerage model of the future will be a team.
At Matthew Ferrara & Company, we believe the real estate industry is passing through its industrial revolution. A slow, steady, and painful transformation is occurring, moving the industry from a semi-feudal organizational model into a renaissance of modern production methods. The existing business model was created by Baby Boomers, for Baby Boomers, based upon 19th century apprenticeship shops. A loophole in the tax code let Boomers create and sustain non-modern artisan workshops where salespeople remained independent and left to learn their trade from experienced elders. While costs remained low and operations required mostly manual labor, this Old World model worked.
Today, real estate requires knowledge workers, not manual labor. As a result, the future brokerage model must be organized around the knowledge team.
The old model of cheap labor was, essentially, a ponzi-scheme. Everyone had an Aunt Sally who would move someday. A large network of nieces and nephews offered brokers a baseline of social network deals every year. A high attrition rate of non-productive salespeople meant that recruiting – a cheap effort – ensured a fresh flow of nieces and nephews. It worked well, as long as overhead remained low, technology was minimal and sales were confined to the local area of relatives.
Developing the sales forces required apprenticeship, like craftsmen from days gone by. New agents learned by watching and copying experienced agents, ensuring both good and bad habits were passed on. Tradition became ingrained. Managers (often past-agents of varying success) reinforced “how it is done in our office.” Competition became a game of one-up-manship. Whichever company had the shiny-new-thing was thought to be better than others. Since most companies were in the same guild, locally and nationally, all regurgitated basics were codified as “standards.” It was traditionalist and copy-cat, with no penalty for failure. Mostly, agents were left to figure it out on their own. Most never did, which is why we have E&O insurance.
Along the way, the industry languished. Profits depended mostly upon “booms” while busts simply cleared out the tired and weary. Brokers risked fortunes on a model where “hoping” was the dominant management theory. Performance was measured by luck, timing, and the shiny-bullet-of-the-day. Sales fell out of fashion, becoming passive-aggressive postcard canvassing done by “counselors.” Technology was resisted, even when it promised new markets and lower costs. When the most common question from brokers was how to get their agents to attend office meetings, greater dysfunctional problems surely lurked below the surface.
Consumers suffered too. Service was a hit-or-miss, based upon which agent happened to be on floor duty that day. Branches within the same company operated differently. Quality controls were sporadic. As whims and talents varied from workshop to workshop, performance was thought to be based upon superstars, not everyday agents. Yet somewhere within this hodgepodge, a small group of agents discovered how to overcome the chaos around them. They built organizations-within-organizations to do what was necessary to create consistently productive outcomes.
They created teams.
Agent teams divided up the labor amongst a group of specialists. The division of labor is the organizational breakthrough that created the modern world. Most people remember Taylorism as the thinker who studied factory assembly lines. Subdividing work into smaller parts and assigning experts to each stage lets productivity soar. The division of labor isn’t just a time-saving model for manufacturing: It’s a talent maximization model for service organizations like real estate companies.
Real estate teams are amongst the most highly productive entities in the industry today. Each team member person does only that which they have been fully trained to do. And they do it consistently well. Personal talents, now intellectual not physical, are applied systematically. A team’s division of labor positions the right person doing the right job to fulfill customer’s desires.
Output soars. So do profits. As does customer satisfaction.
That’s the model of the future. Organizing brokerages into performance teams that permit each person to focus on their best efforts every day. The proof of concept has already been completed: Most brokerages’ highest source of revenue comes from their in-house agent teams. (If they make little or no profit from team revenue is an entirely different problem.) The very existence of teams proves that the model of independent agents floating aimlessly is disliked by career-minded salespeople.
Outside of real estate, the team model is the norm. Think of high performance organizations – doctors in an operating room, attorneys at a law firm, race car pit teams. Everywhere high performance is needed, a team is involved. Motivated, integrated, seamless, able to create great outcomes over and over again. Teams make profits, turn clients into raving fans, and create careers for team members. Each team has a leader, surrounded by support experts, but only together can they reach their goals: A successful surgery for the patient, a win in the courtroom, a victory lap on the race track. Helping buyers and sellers of a home.
The future model has been right in front of us all along. Today’s teams have mastered the performance and profit formula. Teams leaders are specialists, surrounded by support experts. Team members are paid according to their individual contributions to the goal. Teams expand by adding specialists – a buyer’s agent, a relocation expert – supported by the same team of experts. One nurse supports multiple doctors; one paralegal supports multiple lawyers. The growth of the company is always at the specialist end, not the support staff end. Which is totally different than today’s model, which confuses supporters for salespeople.
The real estate industry needs to focus on its organizational theory. The self-serving mantra being repeated today – that once the market comes back, everything will be fine – is not only incorrect, but traditionalist nonsense. Companies waiting to go back will become extinct. Like steamships in the age of spaceships. The old ways didn’t perform very well, without a false-economic boom.
The only solution is to leave behind the cottage-industry mentality and implement the division-of-labor models of the modern economy. Teams already outperform other models, by targeting the expertise of their knowledge workers, supported by technical experts, technology and management. That’s what teams can today. If brokers are smart, they’ll stop trying to return to the wheel. Just copy the team model – on a grander scale – and prepare to go where nobody has gone before.