Imagining the Future, Part 5: Systemic Brokerage

m1-tanks

At last.

We have arrived at the destination of this series.  (See parts 1, 2, 3, and 4).

In Part 2 of this series, I spoke at length about institutional CRM and why that can be an unbeatable competitive advantage when properly implemented and used. In Part 3, we examined whether an institutionalized brokerage could shift the grounds of competition in such a way as to obtain a competitive advantage.  In part 4, we looked at specialization in real estate.

The culmination of all of these factors is something I am calling “systemic brokerage”.   Systemic brokerage is the future of real estate.

Power Relationships in the Real Estate Industry

This is an idea that was germinating when I was still working for Realogy. As a corporate strategy freak, I’m always interested in looking at various drivers of business inside a company. Another way to ask that same question is to ask, “Who has the power?”

At Realogy, I learned that the agent has enormous power, at least as far as Realogy was concerned. It seemed so illogical at the time, when you consider the talented executives, industry giants, and other men and women of great skill and expertise who toil away at 1 Campus. But time and time again, I saw something like this happen:

  • Joanie Smith is a top producing agent in a large CB affiliate. She becomes unhappy about something. In this particular case, it’s a brand or franchise-wide issue: for example, maybe some rule about how yard signs have to conform to a brand identity standard.
  • She goes to her broker-owner and tells him that if he doesn’t let her do her own thing, she’ll be leaving to join Remax.
  • Her broker-owner, a top-10 broker in the CB system, calls the CEO of Coldwell Banker and says, “You must get rid of that rule, or let me break it, because if I lose Joanie, I will not be renewing my affiliation.”
  • The CEO of CB calls the top management of Realogy and says, “We had better do something about that rule, because we’re about to lose $150m in GCI if this broker walks.”
  • The mandate descends from on high down upon the lowly marketing manager who enforces yard sign brand identity guidelines: Thou shalt not mess with Joanie Smith.

When I started looking into it, I started to learn amazing things about the real estate brokerage industry.

For example, I met one agent who was a top professional, a consistent #1-3 in her market, who was on a 100% split with her broker. Think through that one with me: 100% split. The broker was still on the hook legally for all her deals. He was still paying for her technology support costs and overhead. But for every sale she made, he was making exactly zero dollars from it. Meaning, he lost money on having her work for him. Yet, he kept her on, and treated her like a queen, because having her let him boast that his brokerage was the #1 company in his market.

I met another agent from Texas who worked under the Remax brand, and was doing millions of dollars in business every year as the head of her own team. But she had nothing whatsoever to do with Remax, or her local broker for whom she ostensibly worked. She never showed up at the office, never took direction from the broker, never shared her leads or listings with the office, and was basically a one-woman operation. She had a very large support team that she was paying for herself — a marketing person, a graphic designer, sales assistants, even an IT pro — while working out of her house. I asked her and she told me that she was on a 95/5 split with her broker. She was essentially paying him a 5% royalty for the use of his broker license and for the use of his brand (including the Remax brand). I asked her why she bothered at all with being a Remax agent, or with that particular broker, and her answer astonished me: “For the insurance.”

The only reason why this agent was with that office was for the liability insurance.

Why This Is A Problem

So what? Superior performers have always been held to a different standard, in every industry, throughout history.

The problem is that when you have a situation where individual agents are so empowered, concepts like Brand, Quality Control, and Customer Experience go out the window. Notions like company unity become hollow jokes, as the top agent gets treated like royalty, while everyone else is treated like serfs.

Furthermore, the agent-centric model leads to untenable business models for brokerage companies.  The average profit margin for a brokerage company in the United States is around 3%, according to industry experts like Jeff Wheeler of Coldwell Banker United.  That was back in 2008, and may be far worse now.  When you’re giving away 95% of the revenues to the agent, or even 100% of the revenues to the agent, then you simply can’t “make it up in volume”.

Instead, the big brand brokerages find themselves engaging in ever-sillier loss-leader schemes like using the superagent to draw in crap agents on whom they will actually make a reasonable profit using high 50/50 or 60/40 type splits.  But only if they provide these new agents next to no support, and spend next to nothing on them.  Churn and burn is all but guaranteed under such a model, and customer service goes out the window.

In other cases, the real estate brokerage operations become simply a lead-generation mechanism for the actual money-making operations such as title or mortgage.

In these scenarios, I find it difficult to classify such brokerages as “real estate brokerages” at all.  They are actually in the title or mortgage business, and the real estate brokerage is just a marketing spend.

There is another way.  The Bill Belichick way.

I am a genius.  Yes, I am.  A genius.

I am a genius. Yes, I am. A genius.

What Does Bill Belichick Have to Do With This?

At the time I was looking into this issue and thinking about it, one of the big stories in the sports world was Terrell Owens and his dispute with the Philadelphia Eagles. The whole story of these super-agents and what they were getting away with reminded me quite forcefully of how star athletes are treated. People like Owens, Michael Vick, Pacman Jones, and Barry Bonds routinely get away with behavior that simply would not be tolerated if they were not producing on the field.

Financially speaking, these athletes can demand (and get) absolutely eye-popping contracts, because the team owners are willing to pay those terms. The rule appeared to be that teams would bend over backwards, negotiate away their future, and ignore just about any principle in order to sign the big star.

In the NFL, there was one clear exception: The New England Patriots.

Their philosophy, often described as “good players, great team” is not news. There is even a business management book written about the Patriots. The Patriots have actually practiced their philosophy in a way that is shocking to the sports fan; the most illustrative example is when they let their future Hall of Fame kicker Adam Vinatieri go to their top rival, the Indianapolis Colts, when he got too expensive. They then made it to the Superbowl with a rookie kicker.

It seemed clear to me that Bill Belichick, the coach of the Patriots, believes that it is his system that makes players great, not the other way around. It is his plays, his offensive and defensive schemes, his practice methodology, his way of playing football that makes the Patriots great, not the individual excellence of his players. Then when you add superstars to that system, superstars who understand how it works and understand how to sublimate their egos to the Belichick system, you get results like the recordbreaking 2007 Tom Brady – Randy Moss season. But without stars, Belichick’s team will find a way to win, even if that means using second and third string running backs, or putting WR’s in as cornerbacks. It’s the system that wins, not the players.

From the Gridiron to the Brokerage Office

I began thinking whether this Belichick-inspired approach could work in the highly individualistic, star-driven world of real estate brokerage.

Could a broker get to a point when he can comfortably tell his top producing agent that if she doesn’t like her splits, she can take a walk? Could a brokerage operation develop a system where one could take a rank novice, stick him into the system, and have him perform as an above-average realtor?

What’s amazing about these questions is that in theory, that is precisely what a franchise is — except in real estate.

What if Ronald ran a real estate brokerage?

What if Ronald ran a real estate brokerage?

When you buy a McDonald’s franchise, you are not required to know a thing about cooking. McDonald’s will come and teach you its system, sell you all the raw materials, and set you up to be a reasonably successful restaurateur. No one is going to confuse you with Bouley, but you’ll make a pretty decent living as long as you’re hardworking, reasonably savvy, and you follow the McDonald’s system.

As a McDonald’s franchisee, you don’t need to go scouting the labor market for the best French Culinary Institute chef. You just need to find inexpensive labor that can follow orders and show up for work on time. You don’t worry about your french fries being good one day, and horrible the next, based on who is manning the fryer.

Therefore, following both Bill Belichick and Ronald McDonald, a working definition of systemic brokerage is as follows. (By the way, I’m 99.9999% sure that preceding sentence has never been written before in the English language.)

Systemic brokerage is one in which success is dependent entirely on a set of objective, definable, and teachable processes.

Personal traits and quirks of the individuals implementing the processes may be advantageous (or disadvantageous), but are not essential (nor fatal) to success, as long as the processes themselves are properly implemented with consistency.

Processes, therefore, cannot rely on individual personality traits or specific individual talents. In fact, too much individualism can be harmful to consistency that is absolutely required of systemic brokerage.

Is this Doable?

Not only is systemic brokerage doable, it is being done.

The concept of “teams” where you have a rainmaking leader (or a group) who brings on younger, more junior agents on some sort of a private arrangement, then pay support staff out of their own pockets, is something that is being praised in various places in the RE.net. I can’t see how these “super teams” are all that different from institutionalization.

Even more on point, there are major brokerage companies that are on their way of putting together the necessary infrastructure to make systemic brokerage possible.

The core challenge is to understand value. What is it, and how is it delivered?

In football, it may be that Belichick has a definite philosophy of value. “Value” might be something like, “Gain at least 4 yards per play” or “Stop the run” or whatever. And he has an understanding of how that value is actually delivered — blocking assignments, deceptive looks, trick plays, whatever. Knowing the value and the delivery method, the Patriots are able to isolate the particular skills needed for a particular position.

In real estate, I have learned that there are two broad “values”: business development, and service delivery.  In both, a set of objective, definable, and teachable processes can be implemented to create and drive value thanks in large part to advances in technology, particularly the Internet.

Systemic Brokerage

In business development, a systemic brokerage model replaces the highly personal agent-centric “sphere of influence” model with one leveraging best practices based on objective performance criteria.  For buy-side representation, it means deploying resources to develop the best web-based lead generation and customer service system possible.  Investment is made not into recruiting expensive 95/5 split agents, but into well-designed, easy-to-use, and highly searchable websites with extremely strong lead generation and CRM capabilities.

Given that the vast majority of buyers start their real estate search on the Internet, going webcentric is a viable strategy today.  Companies such as Redfin have raised the bar on what the customer experience should be on a real estate website, and brokerages should be studying these industry leading sites carefully.  In addition, the practice of ecommerce and web-based education are more advanced outside of the real estate vertical.  Leaders of brokerages — especially those with responsibility over marketing — should be studying sites like Amazon, Newegg, and (deep dark secret) the adult industry websites carefully as well.

On the listing/sale side, it means developing best practices for winning listing assignments coupled to a robust CRM and transaction management system for delivering the highest customer services using a low-cost workforce.  It means creating the “why you should list with us” message based on objective and definable metrics (e.g., “sales price to list price”, “days on market”, etc.) by consulting the best practices of the most accomplished agents in the network, then creating materials, training and systems to allow even your most junior agents to deliver that message effectively.

A model for real estate?

A model for real estate?

With the technology in existence today (e.g., high quality on-demand printing, on-demand market statistics), there is no reason why getting a listing has to rely only on personal contacts and networks.  In practice, to develop this system out probably means implementing one or more expert systems such that each agent has access to the collective knowledge and wisdom of the entire brokerage/brand.  But companies such as Fidelity Investments and Vanguard Investments have managed this in financial services — there’s no reason to think it impossible in real estate.

Then on the actual service delivery side, systemic brokerage will rely on support personnel (e.g., transaction managers, data entry, etc.), systems, and processes to deliver consistent, high-quality service.  Again, expert systems play a role here by forcing junior agents into a checklist/milestones driven workflow process to ensure that all the T’s are crossed and I’s dotted through the course of a transaction.

Over this whole operational process, systemic brokerage installs effective management with access to productivity, customer satisfaction, and customer loyalty metrics.

Why Systemic Brokerage is the Future

Systemic brokerage is the future of real estate because it delivers consistent, high quality customer service at a higher profit margin than traditional brokerage.  In much of the theory and back-and-forth, what often gets missed is that brokerage is a service provided to buyers and sellers of real estate.  Brand-this or systems-that are all entirely meaningless if they do not lead to higher quality service delivered more consistently across the board.

The agent-centric model of today is lacking because while some individual agents can deliver high quality service, as a brokerage company, there is little if any consistency in service delivery.  A pure web-based lead-generation play (or ad-supported media play like Trulia) is lacking because it cannot provide end-to-end service quality, even if it can deliver consistently good user experience online.

Only a systemic brokerage approach — whether done by a Big Brand broker or by a small independent — can ensure end-to-end service quality as well as across-the-brand consistency.  Objective, definable, and trainable processes — backed up by technology and training — are the only ways to combine them both.

The specific implementation, the specific processes are all up to the individual or to the brokerage itself.  Some will be more successful than others.  And new innovation will drive new systems and new processes in time.

But they will all be systems of some sort, codifying processes that derive from best practices, with support from well-designed technology systems, and leveraging enforceable (and enforced) processes for business development and service delivery.

The ultimate winner will be the system that can do that at around a 8-10% profit margin, thereby guaranteeing a sustainable competitive advantage.  The next few years promise to be interesting ones for real estate.

-rsh

  • http://www.chicagohomepartner.com/ Amanda McMillan

    Rob – another great post. I can totally agree that the high profile/high split agents area usually not “worth” their weight in a company. With ridiculous splits and demanding ways, their are usually a fairly large cost. From an agent’s perspective, it is also these agents that do so much business that they are miserable to work with as a cooperating agent…the attention to detail is usually minimal. Understandably though, it would be impossible to do THAT much business and actually do it well! So I do see parts of the systematic brokerage that will be helpful. HOWEVER – and you know with me there is almost always a HOWEVER – the one piece that the systems cannot teach that is imperative to success is compassion. And not all of the systems in the world can teach that!

  • http://www.chicagohomepartner.com Amanda McMillan

    Rob – another great post. I can totally agree that the high profile/high split agents area usually not “worth” their weight in a company. With ridiculous splits and demanding ways, their are usually a fairly large cost. From an agent’s perspective, it is also these agents that do so much business that they are miserable to work with as a cooperating agent…the attention to detail is usually minimal. Understandably though, it would be impossible to do THAT much business and actually do it well! So I do see parts of the systematic brokerage that will be helpful. HOWEVER – and you know with me there is almost always a HOWEVER – the one piece that the systems cannot teach that is imperative to success is compassion. And not all of the systems in the world can teach that!

  • http://kathleenbuckley.com/ Kathleen Buckley

    Rob-

    Love reading your writing. He’s where I started to disconnect: “Then on the actual service delivery side, systemic brokerage will rely on support personnel (e.g., transaction managers, data entry, etc.), systems, and processes to deliver consistent, high-quality service.” I’m not sure that support personnel is up to the task of delivering high-quality service for the reason that Amanda cited: compassion and empathy are *key* factors in the quality of the service side. The data-entry and transaction management are the easy parts!

  • http://kathleenbuckley.com Kathleen Buckley

    Rob-

    Love reading your writing. He’s where I started to disconnect: “Then on the actual service delivery side, systemic brokerage will rely on support personnel (e.g., transaction managers, data entry, etc.), systems, and processes to deliver consistent, high-quality service.” I’m not sure that support personnel is up to the task of delivering high-quality service for the reason that Amanda cited: compassion and empathy are *key* factors in the quality of the service side. The data-entry and transaction management are the easy parts!

  • http://www.notorious-rob.com/ Rob Hahn

    @Amanda & @Kathleen –

    Thanks so much for your comments. I guess I agree that compassion is a key element, but I see no reason why only licensed real estate agents would have compassion, or see any evidence that getting the REALTOR certification somehow increases compassion and empathy.

    In fact, I think I can go out on a limb and say that the average Zappos customer service employee has more compassion, and more training on customer empathy, than the average churn & burn real estate agent.

    Am I wrong in that thinking? Do REALTORS receive coursework and training on empathy and compassion as a continuing education type of requirement? I haven’t heard of it if true.

    -rsh

  • http://www.notorious-rob.com Rob Hahn

    @Amanda & @Kathleen –

    Thanks so much for your comments. I guess I agree that compassion is a key element, but I see no reason why only licensed real estate agents would have compassion, or see any evidence that getting the REALTOR certification somehow increases compassion and empathy.

    In fact, I think I can go out on a limb and say that the average Zappos customer service employee has more compassion, and more training on customer empathy, than the average churn & burn real estate agent.

    Am I wrong in that thinking? Do REALTORS receive coursework and training on empathy and compassion as a continuing education type of requirement? I haven’t heard of it if true.

    -rsh

  • http://kathleenbuckley.com/ Kathleen Buckley

    You’re absolutely right. I always figured that was just the special ingredient which makes some people cut out for the business. Zappos customer service may be more highly trained for what they do. The relationship between real estate professional and client is very involved and intense, far more than you’d typically find in customer service anywhere.

    • http://www.notorious-rob.com/ Rob Hahn

      Yep — and the successful System, in my view, would let REALTORS do what they do best, and let the support staff free them up to do just that. If you have someone who is really just great at relating to people, making them feel comfortable, helping them make difficult choices, etc., why have them waste time with data entry, paperwork, checking on counterparties, etc.?

      Specialization for Domination (part 4). :)

      -rsh

  • http://kathleenbuckley.com Kathleen Buckley

    You’re absolutely right. I always figured that was just the special ingredient which makes some people cut out for the business. Zappos customer service may be more highly trained for what they do. The relationship between real estate professional and client is very involved and intense, far more than you’d typically find in customer service anywhere.

    • http://www.notorious-rob.com Rob Hahn

      Yep — and the successful System, in my view, would let REALTORS do what they do best, and let the support staff free them up to do just that. If you have someone who is really just great at relating to people, making them feel comfortable, helping them make difficult choices, etc., why have them waste time with data entry, paperwork, checking on counterparties, etc.?

      Specialization for Domination (part 4). :)

      -rsh

  • http://www.SunsetStripRealty.com/ Luis Pezzini

    a well written blog, its very true that systematic brokerage will be the future,coz it mutually benefits the customers and agents.
    -thank you

  • http://www.SunsetStripRealty.com Luis Pezzini

    a well written blog, its very true that systematic brokerage will be the future,coz it mutually benefits the customers and agents.
    -thank you

  • http://iciclecreekrealestate.com/ Geordie Romer | Leavenworth WA

    Rob- I love your vision of the future. Now we just need someone to fund it.

    I know lots of agents who have compassion. Compassion is commonplace while skills like business building, marketing, negotiating, and home valuation are pretty poor throughout the industry.

    I would love to work for a Bill Belichick. Unfortunately, the real estate arena is more commonly filled with the Rick Venturis of the world. (2-17 with the NFL. 1-31-1 at Northwestern.) I have had some of these as my broker in the past. The producing agents ignore them at every turn, and the newbies churn and burn as expected.

    I’d love to read more of your thoughts about the idea of creating a brokerage closer to the law firm model of Partners, Associates, etc. I think you have hinted at it before and I wonder if that might be worth exploring in a small market or boutique shop.

    • http://www.notorious-rob.com/ Rob Hahn

      I’m actually working with a few entrepreneurial minded folks who are bringing the vision to life. I hope to be writing on not just theory, but the practice of making that happen. :)

      -rsh

  • http://iciclecreekrealestate.com Geordie Romer | Leavenworth WA

    Rob- I love your vision of the future. Now we just need someone to fund it.

    I know lots of agents who have compassion. Compassion is commonplace while skills like business building, marketing, negotiating, and home valuation are pretty poor throughout the industry.

    I would love to work for a Bill Belichick. Unfortunately, the real estate arena is more commonly filled with the Rick Venturis of the world. (2-17 with the NFL. 1-31-1 at Northwestern.) I have had some of these as my broker in the past. The producing agents ignore them at every turn, and the newbies churn and burn as expected.

    I’d love to read more of your thoughts about the idea of creating a brokerage closer to the law firm model of Partners, Associates, etc. I think you have hinted at it before and I wonder if that might be worth exploring in a small market or boutique shop.

    • http://www.notorious-rob.com Rob Hahn

      I’m actually working with a few entrepreneurial minded folks who are bringing the vision to life. I hope to be writing on not just theory, but the practice of making that happen. :)

      -rsh

  • Droid

    Rob: Here’s an interesting question and perhaps a topic for a future blog… Do franchises provide any REAL value to the public or to agents? Are you better off listing or buying thru a franchise?

    1. Do franchise listed homes sell for more then non franchise listed homes?
    2. Using the measurement of successful listings… if I take 10 listings and sell 9, then I am better then a team who takes 100 and sells 60. Does CB, C21, ReMax, etc do “better” then a non-franchise?
    3. Do people REALLY list/sell with an office because it is CB, C21, ReMax?

    An office doing $1M in annual GCC and pays a 6% franchise… I mean service fee is paying $60K a year. What is the franchisee getting for the money? Would they be better off spending an extra $30K in marketing and having the broker/owner take home the other $30K?

    I am not sure if any of this can be answered statistically…. but homes don’t sell faster then they did 20 years ago before computers and franchises… and the basic real estate model has not changed.

    I think that an argument could be made that franchisors benefit from the fees, and the agent and/or office who are paying the fees don’t… and that the public is not any better off with franchises then if we could in theory go back to the pre-franchise days.

    • http://www.notorious-rob.com/ Rob Hahn

      Since I have no statistics or numbers, I can’t answer the question. However, there *is* value in brand recognition, which a franchise provides. Until we see some numbers, it’s hard to say what that value is.

      Since no one is going to give me accurate financials, one of the reasons why I’m so interested in bringing NetPromoter Score to real estate industry is to be able to see if things like franchising helps at least the average NPS.

      But I do agree that a franchise that can’t prove value numerically may have some issues going forward convincing brokers/agents to continue to cough up a share of their revenues for uncertain value. My personal opinion is that all current franchisors should stop being afraid of numbers and start studying the numbers and start publishing the numbers and start actually improving the numbers.

      Nothing short of actual fact-based evidence will silence the critics and the skeptics.

      -rsh

  • Droid

    Rob: Here’s an interesting question and perhaps a topic for a future blog… Do franchises provide any REAL value to the public or to agents? Are you better off listing or buying thru a franchise?

    1. Do franchise listed homes sell for more then non franchise listed homes?
    2. Using the measurement of successful listings… if I take 10 listings and sell 9, then I am better then a team who takes 100 and sells 60. Does CB, C21, ReMax, etc do “better” then a non-franchise?
    3. Do people REALLY list/sell with an office because it is CB, C21, ReMax?

    An office doing $1M in annual GCC and pays a 6% franchise… I mean service fee is paying $60K a year. What is the franchisee getting for the money? Would they be better off spending an extra $30K in marketing and having the broker/owner take home the other $30K?

    I am not sure if any of this can be answered statistically…. but homes don’t sell faster then they did 20 years ago before computers and franchises… and the basic real estate model has not changed.

    I think that an argument could be made that franchisors benefit from the fees, and the agent and/or office who are paying the fees don’t… and that the public is not any better off with franchises then if we could in theory go back to the pre-franchise days.

    • http://www.notorious-rob.com Rob Hahn

      Since I have no statistics or numbers, I can’t answer the question. However, there *is* value in brand recognition, which a franchise provides. Until we see some numbers, it’s hard to say what that value is.

      Since no one is going to give me accurate financials, one of the reasons why I’m so interested in bringing NetPromoter Score to real estate industry is to be able to see if things like franchising helps at least the average NPS.

      But I do agree that a franchise that can’t prove value numerically may have some issues going forward convincing brokers/agents to continue to cough up a share of their revenues for uncertain value. My personal opinion is that all current franchisors should stop being afraid of numbers and start studying the numbers and start publishing the numbers and start actually improving the numbers.

      Nothing short of actual fact-based evidence will silence the critics and the skeptics.

      -rsh

  • http://kathleenbuckley.com/ Kathleen Buckley

    Droid, will you marry me?

    Independent Brokerage is the most efficient model! From a local newspaper article on the subject:
    “Buckley credits her ability to provide so much support to these various causes to her decision to not affiliate with the larger, franchised real estate brokerages. As an independent firm, she explains, she doesn’t have to pay fees to a franchise – which can be eight percent of the real estate transaction fee.
    “We don’t have that piece of overhead… It allows us to use these funds to best market a property and it allows us to invest in the community,” said Buckley.
    She also said that not being part of a franchise keeps her and the five agents who work with her on their toes.
    “With every transaction, our reputation is on the line,” she said.

    • http://www.notorious-rob.com/ Rob Hahn

      When you say “independent brokerage is the most efficient model”… got any numbers to back that up? :D

      Just like I like to demand numbers/evidence for franchises or big brokerage, I also like to see something that shows independents are in fact more efficient. Let’s define “efficiency” as either transactions/unit of labor or GCI/unit of labor. I’m not aware of any evidence that independents are any better than franchised companies in either metric.

      Again, you may very well be correct :) I just have no evidence one way or the other, y’know?

      The _only_ piece of evidence I have is anecdotal, and it comes from well-run tight TEAMS where the team leader(s) really enforce discipline. In short, a Systemic Brokerage. :)

      -rsh

  • http://kathleenbuckley.com Kathleen Buckley

    Droid, will you marry me?

    Independent Brokerage is the most efficient model! From a local newspaper article on the subject:
    “Buckley credits her ability to provide so much support to these various causes to her decision to not affiliate with the larger, franchised real estate brokerages. As an independent firm, she explains, she doesn’t have to pay fees to a franchise – which can be eight percent of the real estate transaction fee.
    “We don’t have that piece of overhead… It allows us to use these funds to best market a property and it allows us to invest in the community,” said Buckley.
    She also said that not being part of a franchise keeps her and the five agents who work with her on their toes.
    “With every transaction, our reputation is on the line,” she said.

    • http://www.notorious-rob.com Rob Hahn

      When you say “independent brokerage is the most efficient model”… got any numbers to back that up? :D

      Just like I like to demand numbers/evidence for franchises or big brokerage, I also like to see something that shows independents are in fact more efficient. Let’s define “efficiency” as either transactions/unit of labor or GCI/unit of labor. I’m not aware of any evidence that independents are any better than franchised companies in either metric.

      Again, you may very well be correct :) I just have no evidence one way or the other, y’know?

      The _only_ piece of evidence I have is anecdotal, and it comes from well-run tight TEAMS where the team leader(s) really enforce discipline. In short, a Systemic Brokerage. :)

      -rsh

  • http://www.livingtwincities.com/ Jason Sandquist

    leave it to you rob to toss Billy and Ronny together. :-)

    piggybacking on Zappos and culture, just think if a boutique brokerage like Geordie states operated like this.

  • http://www.livingtwincities.com Jason Sandquist

    leave it to you rob to toss Billy and Ronny together. :-)

    piggybacking on Zappos and culture, just think if a boutique brokerage like Geordie states operated like this.

  • Droid

    Franchises in general may have better name recognition overall, but I am not sure if any individual brand is seen as “better” then another. More likely it depends on which brand is dominant in a specific town or area.

    Where the franchises do have a leg up is with relocation… where major corporations want to go with a “name brand” and don’t want to shop for a relocation partners on a one-on-one basis from town to town.

    At this point, we’ve had enough history with franchises that we should be able to find some kind of measure of how well they work, and if one is better then the other.

    Kathleen is a prime example of how the independent company works well in certain areas. It’s a tough fight… I’ve been on both sides and see the benefits of both models.

    Kathleen… thanks for the proposal, btw. :)

    • http://www.notorious-rob.com/ Rob Hahn

      Good points, Droid. What’s funny is my next chapter of the other side of this, the “Insurgency” series, is going to talk about relocation, network effects, and the like. :)

      -rsh

  • Droid

    Franchises in general may have better name recognition overall, but I am not sure if any individual brand is seen as “better” then another. More likely it depends on which brand is dominant in a specific town or area.

    Where the franchises do have a leg up is with relocation… where major corporations want to go with a “name brand” and don’t want to shop for a relocation partners on a one-on-one basis from town to town.

    At this point, we’ve had enough history with franchises that we should be able to find some kind of measure of how well they work, and if one is better then the other.

    Kathleen is a prime example of how the independent company works well in certain areas. It’s a tough fight… I’ve been on both sides and see the benefits of both models.

    Kathleen… thanks for the proposal, btw. :)

    • http://www.notorious-rob.com Rob Hahn

      Good points, Droid. What’s funny is my next chapter of the other side of this, the “Insurgency” series, is going to talk about relocation, network effects, and the like. :)

      -rsh

  • http://www.UtahDave.com/ Utah Dave

    Now you are talking Rob. Thats what I like to talk about! :)

  • http://www.UtahDave.com Utah Dave

    Now you are talking Rob. Thats what I like to talk about! :)

  • http://www.moreutahlistings.com/ rob aubrey

    obviously you done your homework on this article.

    I agree wholeheartedly with you.

    That is what I believe KW has figured it out better than most. Not to be confused with the end all be all, things change all the time. Obviously a small local non-franchise has the ability to do some things the big logos can’t, this is not about big box vs boutiques.

    KW has local owners and local agents serving the board of directors. In fact my office right now has no owners serving the ALC (board).

    We are an open book and open door and that is a logo policy. What that means is all the finances are open and we close our books every month, you cannot be a profit sharing company and have closed books doesn’t work. Open door means if you decide you want to leave the company you can take your listings, that comes from the logo (agents if a local office says no, call corporate)

    FOR THE RECORD KW is not an MLM, it has a profit sharing model that has a multiple levels to it, the fundamental difference is it is based on PROFIT not a percentage of an agents deals. We don’t get profit share for bringing someone in, we get a share for bringing someone in and having a PROFIT. I will say it again PROFIT, income minus expenses = PROFIT and that portion is shared. If the office is not profitable that month there is no PROFIT shared PERIOD. Once an office matures loses do not carry over.

    The model is conducive for top agents to build a team and grow a business and thrive. Part of that success is the training. There are tons of beginning and mid level training in the market centers, all the while there is deep level training coming out of Austin and the regions.

    The model is to offer the best training in the industry and people stay, there is more to it and that can be a whole site let alone a comment.

    As for splits and shoe deals, we do not have the queens walking around and the owners and team leaders kissing their butts. Everyone pays the same amount to the house (it varies from house to house) & to the logo but not to the logo. There are no shoe deals, meaning the house isn’t going to buy you a billboard for joining, there may be some transition help, signs and cards…

    My particular office is debt free, cash reserves and we had only one month since launch phase we did not turn a profit. Because we follow the model the logo has laid out to the Tee.

    I encourage anyone that is going to flame this comment to do a little digging with an open mind first, it is comical when someone knows someone that knows someone and that person said that their cousin heard that…

    If that is your basis of commenting stop taking up cyber space.

  • http://www.moreutahlistings.com rob aubrey

    obviously you done your homework on this article.

    I agree wholeheartedly with you.

    That is what I believe KW has figured it out better than most. Not to be confused with the end all be all, things change all the time. Obviously a small local non-franchise has the ability to do some things the big logos can’t, this is not about big box vs boutiques.

    KW has local owners and local agents serving the board of directors. In fact my office right now has no owners serving the ALC (board).

    We are an open book and open door and that is a logo policy. What that means is all the finances are open and we close our books every month, you cannot be a profit sharing company and have closed books doesn’t work. Open door means if you decide you want to leave the company you can take your listings, that comes from the logo (agents if a local office says no, call corporate)

    FOR THE RECORD KW is not an MLM, it has a profit sharing model that has a multiple levels to it, the fundamental difference is it is based on PROFIT not a percentage of an agents deals. We don’t get profit share for bringing someone in, we get a share for bringing someone in and having a PROFIT. I will say it again PROFIT, income minus expenses = PROFIT and that portion is shared. If the office is not profitable that month there is no PROFIT shared PERIOD. Once an office matures loses do not carry over.

    The model is conducive for top agents to build a team and grow a business and thrive. Part of that success is the training. There are tons of beginning and mid level training in the market centers, all the while there is deep level training coming out of Austin and the regions.

    The model is to offer the best training in the industry and people stay, there is more to it and that can be a whole site let alone a comment.

    As for splits and shoe deals, we do not have the queens walking around and the owners and team leaders kissing their butts. Everyone pays the same amount to the house (it varies from house to house) & to the logo but not to the logo. There are no shoe deals, meaning the house isn’t going to buy you a billboard for joining, there may be some transition help, signs and cards…

    My particular office is debt free, cash reserves and we had only one month since launch phase we did not turn a profit. Because we follow the model the logo has laid out to the Tee.

    I encourage anyone that is going to flame this comment to do a little digging with an open mind first, it is comical when someone knows someone that knows someone and that person said that their cousin heard that…

    If that is your basis of commenting stop taking up cyber space.

  • Pingback: Twitter Trackbacks for Imagining the Future, Part 5: Systemic Brokerage | Notorious R.O.B. - Conversations on Marketing, Technology, [notorious-rob.com] on Topsy.com()

  • jeffrey

    Rob, very interesting model sent it off to a corporate speaker/coach of mine that works on team building–I thought there is some good insight he might appreciate.

    one issue though, you spoke only of online marketing focus, my 7 years experience on PPC/SEO/Social Networking and their respective ROI strongly suggests online marketing is a part of the package, but in no way a majority of the marketing focus.

    jeffrey

  • jeffrey

    Rob, very interesting model sent it off to a corporate speaker/coach of mine that works on team building–I thought there is some good insight he might appreciate.

    one issue though, you spoke only of online marketing focus, my 7 years experience on PPC/SEO/Social Networking and their respective ROI strongly suggests online marketing is a part of the package, but in no way a majority of the marketing focus.

    jeffrey

  • Droid

    Here’s a point that franchisors, owner/brokers, and managers miss….

    The folks who come to offices to buy or sell a property are customers, but the TRUE customer is the sales associate.

    In Rob’s example, “Joanie Smith” demanded something of CB and got it. If CB did not give their CUSTOMER what she wanted, she would “buy” her services elsewhere.

    Although from a legal standpoint a commission is earned by the BROKER ENTITY and shared with the ASSOCIATE… the associate feels that he/she is the one taking the clients out, doing CMAs, etc, and is sharing HIS commission with the BROKER.

    As long as this is the case, the agent is the customer of the agency.

    Like it or not.

  • Droid

    Here’s a point that franchisors, owner/brokers, and managers miss….

    The folks who come to offices to buy or sell a property are customers, but the TRUE customer is the sales associate.

    In Rob’s example, “Joanie Smith” demanded something of CB and got it. If CB did not give their CUSTOMER what she wanted, she would “buy” her services elsewhere.

    Although from a legal standpoint a commission is earned by the BROKER ENTITY and shared with the ASSOCIATE… the associate feels that he/she is the one taking the clients out, doing CMAs, etc, and is sharing HIS commission with the BROKER.

    As long as this is the case, the agent is the customer of the agency.

    Like it or not.

  • Pingback: Who Does Lead Generation Work For Anyway?()