Matthew Ferrara, Philosopher
 

Why Bold Works: Semonin Realtors Makes a Move

We love companies that make bold moves. That’s why the latest move by Semonin Realtors deserves a look by anyone in the housing industry that needs to move forward, if the want to help consumers move in the future, too.

First, a disclosure: Semonin Realtors is a client. Now, let’s move on.

There’s a saying in economics: When a recovery is in the making, you start to see the green shoots. Little sprouts of growth, in different forms. An uptick in sales. A perceptible change in consumer confidence. An innovation.

A bold move.

That last one is our favorite, and exactly what we saw last week, when we heard that Semonin Realtors in Kentucky was throwing away the “traditional” real estate playbook for something new. Something so new, in fact, that it represents a very innovative look at the future of real estate. Here’s their plan:

Semonin will close down its “daisy-chain” model of offices throughout Louisville, and move hundreds of its agents and staff to one central campus in the middle of town. It will retain a few strategically placed, small but efficient, satellite centers, mostly for convenient meeting spaces. And it will empower its agents to maintain full market coverage by maximizing mobile technology, rather than office space.

Brilliant!

Don’t be fooled. This isn’t your typical cost-cutting reaction to a recession. They aren’t just shutting down offices to save costs. In fact, it’s probably fair to say that the money saved in leases will be reinvested in technologies, training and customer services. Nor is this simply a “brick and mortar” company going “virtual” because they aren’t simply sending all their agents home. Semonin plans a very active, very functional central campus. One in which technology and people work together, not work apart from each other.

Peter Drucker would be proud.

Actually, you can hear Semonin explain their reasoning for themselves, by watching the video. But if you want to know why we think this is brilliant, read on.

Semonin’s leadership is undertaking a very big mission. They aren’t just modernizing the physical structure of their company: They are modernizing the management theory of their company. Specifically, they are discarding the old “outpost” model of multiple offices and creating a central, shared-knowledge-and-experience campus that is the hallmark of every successful business in the world. There’s a reason Microsoft, Apple and Walt Disney all have corporate campuses. Modern management understands this.

In fact, the new “central hub” approach to real estate is long overdue. Only rapidly cycling housing bubbles have sustained the wasteful, redundant and dysfunctional model of multiple office locations over the last thirty years. Except this time, it’s different. There won’t be a big boom to paper over the costs of office space expansion in the future. Moreover, the classic redundancy-model contributed to no end of waste, costs, and under-utilization of talent, and mostly still does.

Semonin’s move to a central campus dispenses with these costly trade-offs for “location” with one bold move.

Working from a central campus lets Semonin rewrite the rules of managing its company and empowering its agents. Now, each contributor can do their best for all of the agents, not just the ones who were assigned to their office location. The best coaches will coach, the best planners will plan, best troubleshooters will solve, and best supporters will help everyone. That’s how companies normally do it in America. (The housing industry has just taken an extra century to accept the division-of-labor theory.)

It will be a boon for agents. Now every agent can catch the infectious enthusiasm of new agents who join the company. Everyone can watch and learn from the best top agents, not just the ones who might have been in your old branch. They can share and support and nurture and grow each other – and act as a company. The rising tide really does lift all boats. Likewise, they can hold each other accountable, to contribute, show up, perform.

They can leverage the creativity of each individual, and channel it into the power of their collective efforts.

Customers should be delighted. Centralization has long proven to create desirable outcomes for consumers: the most important being consistency. Future customers will visually understand the power of an entire organization working for them, not just a single agent in a single office in a single corner of town. When they come to a meeting, they will experience the energy, technology and presence of the total brand. It’s no different than meeting a doctor at his hospital campus, even though they once came to the house with little black bags (yes, I’m old enough to remember).

Finally, let’s not forget that central to this campus model of management is the adoption of mobile technology at the heart of the organization. Semonin’s move doesn’t just encourage its agents to use an iPad, cloud computing and wireless tools: It commits them to it. While the campus itself will be bristling with tools and resources, the model will only work if the agents become proficient at mobile productivity. Having worked with them, I’m confident they can reach do this, and Semonin is clearly investing the time, resources and staff to making it possible for every one of their agents. But it sets a new bar for the industry, locally and perhaps nationally: mobile-empowered sales people are not only the wave of the future, but the standard at Semonin Realtors.

That’s a bright line in the virtual sand.

Is this model for everyone? Of course not. There are many ways to create efficiencies, economies of scale and consistent performances in multi-location organizations. Many will operate quite competitively with multiple offices, using other resources, such as massive scale or strict management structures, to compete in the future landscape. It’s not for everyone.

Yet it would be a mistake to dismiss Semonin’s move as centralization only. It’s more than that; and it holds a lesson for every organization.

It’s optimization. At the heart of the change is an understanding that the future of all companies requires organizations to be structured in ways that let people do what they do best, every day. That structure isn’t always the multiple-office model, which have traditionally asked agents, administrators and managers to do tasks they were neither good at or enjoyed (think: recruiting or training). Going are the days of “jacks of all trades” for managers and agents, not just because there are fewer, but because ultimately they are unprofitable on the scale of today’s industry. There’s a reason why teams are so productive: they understand the division of labor. Semonin isn’t just preparing its people for a more efficient way to sell real estate. It’s preparing them for a more valuable way to contribute to their client’s, their company’s and their own success.

Rather bold, we’d say.

  • Hmmm, they’ve “optimized” a broken business model….. very nice (yes, sarcasm 🙂

    Let me know when someone is bold enough to change the broken agent compensation model and the broken commission model of how agents charge for their services.

    Joe Montenigro
    REMAX Home Team

  • Hi Joe:

    I appreciate your comment. Semonin didn’t optimize a broken model; they have redesigned the model. Optimizing the old model would have just meant closing a few branches and laying off staff until things “blow over” but they realize this is the market for the next 20 years, and that needs a new model of operations….. I think, in fact, that Semonin’s actions demonstrate that the core of the model can hold, if you perform significant renovations on important operational structures, like the multi-office model, the distributed management and redundant resource methods that have dominated the last few decades…. At the heart of the model, you still have a service that seems to serve the 4-5 million transactions worth of consumers who engage it each year.
    I’m also curious about your comment regarding the broken compensation model. I hear this a lot, but have never understood the claim that it’s broken. By what standard? For example, brokers who have a business plan know exactly how much to pay each agent. Their plan requires them to make a profit, and they compensate according to volume, quality, management/resource needs and production. Many brokers have multiple tiers, to pay different performers for different performance. Most of our clients make money, in any market, so it seems to demonstrate that the model works; and many different models work in the marketplace – from 100%/renters to 50/50 shops to the pyramids – I see successful models of compensation working all across America.
    I also try to point out that consumers don’t seem to have a big problem with the model, either. Consumers can negotiate ANY fee structure, amount or model into their contracts. Most don’t, which makes me believe that they are at least satisfied enough to pay it; if not really want it reinvented. Some have asked for “price-plus” systems, and the market has responded; others have asked for flat fee, etc., and wherever there is enough consumer reaction, the market seems to have responded… from what I can see. Even FSBOs who try to “buck the model” end up selecting the model 88% of the time, after trying it on their own.
    So, I am not so sure the model is broken. I liken it to this situation: Many people say they’d like to pay “a la carte” for their cable TV channels. Pick each channel, one at a time, for 99-cents, and add up their bill. But would they really do it? They say they want a lower price, but complain they only get peanuts on the plane. They want a deal on their car, but demand the dealer at least offer a service to go to the registry of motor vehicles for them; for an additional fee. I have yet to see a major “uproar” from the consumer side on how they pay for services; and anytime I see it, I almost always see an agent or brokerage willing to enter into a contract under different terms.
    Could different models work? Sure – nobody has written more about them than me. Including auctions, hourly, increasing commissions over time, etc., but there’s nothing holding those models back now. Maybe that will be the next story – you could do it, I’ll write about it – of the next big bold move in our industry!
    As always, appreciate your comments and look forward to them!

    – MF

  • Soldbykarenschlosser

    Good for them.  We’ve been doing it for the last 6 years and love it.  We call it the hub and spoke method.  Works wonderfully!

  • Karen:

    Can you tell us if you modified/redeployed/reassigned your managers, admin and other staff as a result of the change? We’d love to hear how you approached it, too!
    – MF

  • Hi Matt,Let’s start with this….. you can’t get a pizza delivered to a house for less than $10 or $20, right?   So why would a buyer expect to be shown a property for no charge?    The broken part is how agents charge the public for their services…. it’s free for most people and we overcharge people who make it to the closing table.  Why don’t we let consumers put their money where their mouth is and pay for what they use?   It’s because Brokers/Vendors/Franchisors/etc care more about their profits and less if agents operate in an extremely inefficient model and actually lose money on their efforts (and many/most agents DO lose money without even knowing it).  That would be normal except that their businesses are built on/around this BROKEN Agent model.   We could write volumes on this…. Well YOU could !!! and it would be articulate and well written…. ME, I’m tired, old and too cranky to try and change an industry or the general public’s addiction to what they THINK is free, when in fact we OVER CHARGE them every day.

    As for agent compensation plans, they just don’t attract the best talent.   Split’s allow agents to be complacent and work part time jobs.  100% concepts shift the risk of non-productivity from the broker to the agent while most agents are not BUSINESS people and are ill equipped to handle it.  There is not nearly enough quality management of the sales force… how COULD there be when the broker averages a few hundred dollars profit per transaction??  It’s just a mess…. and NO, I don’t know the answer !    I was hoping YOU did 🙂

    On the Semonin restructuring…. based solely on what you’ve said, it sounds like a great move on their part and yes it may even be Bold… but in my mind, the underlying foundation is how we charge the public for our services and if that’s faulty, so will be what’s built up on it.   I hope that makes sense… it only took an hour to write it 😉   Thanks again Matt, for your interesting and articulate blog articles.

    Joe MontenigroREMAX Home Team

  • Swhite

    Matthew, I too am confused about “a broken model” as Joe stated. The only models that are broken are the ones where brokers or agents put themselves at the center. Models that are customer centric will not only survive but thrive. By placing customers at the center of all we do they win. The agent wins. The broker wins. It is a win, win, win model.

  • Agreed. I think the Semonin changes reflect a consumer-centric vision, and will reflect the changing preferences both of modern consumers, but also agents.