Notorious R.O.B.

In the comments to this post, I’m getting some rather interesting thoughts from a variety of real estate agents and brokers.  The question I asked was, “Why should I, as a consumer, care if you’re tech-savvy or not?”  The most popular answer was along the lines of, “Because tech-savvy agents have speed and ease of communications.”

This comment from Candice Donofrio was fairly typical of the responses:

Communication – ease and speed – are what make the tech savvy REALTOR the best choice from the beginning to end of the transaction:

Luddy’s transaction manager won’t be able to quell an emotional meltdown or provide a due diligence resource ‘off hours’ if Luddy’s not near the office phone–that client will have to wait for a return call ‘the next business day’. The client will DM Mara on Twitter, find her on 4SQ or simply text her to get an immediate response.

If one assumes that technology enables faster and more efficient communications, then the tech-savvy agent does indeed provide greater value to the consumer.  Question is, what technology are we talking about here?

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Few months ago, I asked “What Makes an Agent Good?” and triggered a bit of a conversation.  I was after an objective standard of quality by which a particular real estate agent can be measured, but ended up in a discussion (which is still ongoing one way or another) about professionalism, understanding technology, perspectives, and viewpoints, and so on.

Marc Davison, of 1000watt, even wrote a post somewhat in response and concluded:

A bad Realtor is one whose marketing effort for a six figure listing pales in comparison to a seven-year old’s playful regard for his $11.95 pet dinosaur.

A good agent is one who says “no problem, I’ll take care of that” when asked to compensate for the bad agents job.

As much as I like that colorful description, it still raised more questions than it answered and didn’t provide a framework for analysis.  In what way does a bad Realtor’s effort pale in comparison?  If comparing two Realtors with each other, does the one who puts out more effort automatically trump the one who doesn’t?  Would the agent who hires a skywriting airplane be “better” than the one who doesn’t?

Over the weeks, I’ve been turning the question over in my head.  Then I found the answer today.

What Makes A Realtor Good: Ease of Use

The answer came from a law blog I read periodically. Dan Hull of What About Clients is one of the finest commentators on issues of client service, from a lawyer’s perspective, but other service professionals can learn much from him.

His post, Ease-of-Use for Services: Will we ever get there? is an eye-opener.  Read the whole thing.  Dan posits that companies in every sector are competing more and more on concepts of ease of use, and advocates that services companies also embrace the concept, as difficult as it is:

Law firms, of course, have always sold services. And we are a small but powerful engine in the growth of the services sector. We strategize with and guide big clients every day. While that’s all going on–day in and day out–what is it like for the client to work with you and yours? Are clients experiencing a team–or hearing and seeing isolated acts by talented but soul-less techies? Do you make reports and communications short, easy and to the point? Who gets copied openly so clients don’t have to guess about who knows what? Is it fun (yeah, we just said “fun”) to work with your firm? How are your logistics for client meetings, travel and lodging? Do you make life easier? Or harder? Are you accessible 24/7? In short, aside from the technical aspects of your service (i.e., the client “is safe”), do your clients “feel safe”?

What if law firms–or any other service provider for that matter–”thought through,” applied and constantly improved the delivery of our services and how clients really experience them?

And then competed on it…? (Emphasis added)

A lightbulb went off in my head.

Following Dan’s lead, I am ready to advocate that what makes one realtor superior to another is ease of use.  Her services are easier to use for the client than another realtor’s services.

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Lawyers — probably the most risk-averse group of human beings on the planet by training, vocation, and personality — are starting to embrace social media and web marketing principles.  There are some rather interesting lessons from that world for realestistas.

For example, this article from Lawyers USA (h/t What About Clients?) titled, “Are you overlooking your best marketing tool?”:

Many law firms are missing a marketing tool that is right in front of them: their own staff.

While all law firms believe the mantra that every staff member is an ambassador for the firm, few make it an explicit element of firm culture.

In fact, your staff is already marketing all day long – they just need to be reminded of it.

“If you really believe, as I do, that everybody is marketing from the moment they wake up to the moment they sleep – meaning that you are persuading someone as to the validity and worthiness of your idea, whether the idea is ‘Hire me,’ or the idea is selling your story to a judge or jury –then everything that involves your people and you is marketing,” said Edward Poll, founder of LawBiz Management Co. in Venice, Calif.

But lawyers and law firm management have not successfully transmitted this message, said Tom Kane, principal of Kane Consulting Inc. in Sarasota, Fla. and author of www.legalmarketingblog.com.

“Everyone needs to understand and buy into the idea that they have a significant impact on the firm’s brand,” he said.

For small firms, whose clients more often visit the office in person, it’s even more critical that everyone from the receptionist to the paralegals to the people in the copy room know that they represent the firm. [Emphasis added.]

This brings together two separate, but related, strands of something I’ve been talking about on this blog for a while.  One is the notion of a integrated real estate brokerage modeled after law firms.  The other is the idea that a broker’s brand is in the hands of the weakest, least competent agent.  Every broker, indeed every company, talks a whole lot about customer service.  You can’t read a corporate mission statement these days without hearing about how they’ll be focused on providing excellent customer service.

And yet… how many companies actually go beyond pretty words on the corporate website, or lofty phrases of the mission statement, and do something about service?  The reason, as the author of What About Clients blog points out, is that customer service is hard to do:

Client service is very hard, and most businesses don’t even know it. So they don’t build it, they don’t work hard at keeping and improving it, and they don’t enforce it.

The author is Dan Hull, a partner at a law firm in Pittsburgh, who is quoted in and written about in the article above.  I think his suggestions are something brokers might consider.  I think they can be summarized as Train, Evaluate, and Enforce.

Train

The first suggestion is to make client service an official policy of the firm, and to let your people know what is expected of them.  And if you’re training everyone to be client-centric, then you may as well let it influence your hiring decisions as well:

“Teach your staff that they are marketing the firm. Give them instructions on how to answer the phone and interact with people and the standards of care you would like to see,” said Poll.

This message should come across as early as the hiring process.

When Dan Hull, a partner with Hull McGuire PC in Pittsburgh, interviews potential employees, he introduces “The 12 Rules of Client Service,” a 30-page book of required reading created by his firm that includes such items as Rule #6: “When you work, you are marketing” and Rule #9: “Be there for clients – 24/7.”

Evaluate

Training, of course, merely sets the table; to implement it, you have to evaluate the impact and create a system of incentives and disincentives.

Employees at his firm know they will be evaluated based on their customer service skills and are encouraged to evaluate the partners on the same.

Presumably, at Hull’s firm, annual bonuses, perhaps even raises and promotions, are based at least in part on how the employee has carried out client services.

A lot of policies fail in implementation because there is no evaluation, no metrics.  No matter how great the idea, no matter how thorough the buy-in from people, if you can’t measure how someone is executing on the idea, then success is highly unlikely.

Furthermore, talking about evaluation and metrics forces you to get real.  “We’re client focused!” is easy to chant.  But it’s meaningless.  “We have 95% client satisfaction rating” is harder as a slogan, but it’s meaningful.  “I return all client emails/phone calls within 5 minutes” is pretty uninspiring, but it’s something that really can be measured for an individual.  And talking about metrics and evaluation forces the idea-guys to boil down the ideas to specific actions.

Enforce

Perhaps the most illuminating suggestion, Hull is absolutely clear and absolutely unforgiving when it comes to enforcing client service:

He bluntly tells everyone in the firm the rules are not a gimmick and anyone who doesn’t buy into them will be fired.

“The only way you can get fired in my firm is to make a joke about client services. We are dead serious about it,” said Hull, author of the blog www.whatboutclients.com.

And he has followed through on that promise, such as when he fired an employee on the spot for refusing to take a phone call from a client over a weekend when both partners were out of town.

For what it’s worth, without enforcement, it isn’t client service; it’s lip service.

It’s all just pretty words, and useless metrics, unless there’s actual enforcement.  Now, “enforcement” has a strong punitive connotation, but it really needs to be both positive incentive and negative punishment.

If an employee is doing great, performing awesome client service, then he needs to be rewarded — and the rest of the firm told how, why, and how much that reward is being given.

Of course, in contrast, if someone isn’t following the firm policy on client service, then that person needs to be punished, even terminated.  Lack of enforcement simply means that the organization understands that all the “client service” hoopla is just hype.

Medium, Meet Message

Due to some recent conversations on the topic of social media, the idea of client service really strikes me with some force.  Social media, after all, is still a channel for communication.  It does not, by itself, bring a message forward at all.

And amidst the buzzwords, the strategeries and tactics for using social media, doesn’t it sometimes feel like we’re all learning how to speak in all directions without thinking of what to say?

So here’s a thought: client service is the message.

Whether you use social media, Web 2.0, Web 1.0, telephone, U.S. Postal Service, or stone tablets, the message remains the same: client service.  Whatever that might mean, however you might measure it, and however you go about the business, at the end of the day, doesn’t the practice of real estate services come down to providing some sort of client service?  And beyond the whole small-is-beautiful or bigger-the-better, isn’t the determining factor for victory superior client service?

So ask yourself this: Is your company, your business, about client service?  Or lip service?

-rsh

Pat Kitano at Transparent Real Estate has an interesting post speculating on what the future of the real estate industry might look like, by taking a look-see at the finance world.

If one subscribes to the idea that a real estate transaction is basically matching capital with opportunity, and that the transactional process has become more transparent due to internet data, then it’s logical to see that any intermediary based transaction is also fair game.

Investment banking and venture capital is a relationship based business that matches investor bases, often institutional investors, with opportunities – stocks, bonds, M&A, start ups, etc. Like any other lucrative business model, maintaining the mystique of “high finance” and managing deals behind the scenes keeps power contained within the select few who live on Park Avenue or in Woodside.

Read the whole thing.

I think Kitano is on to something, but at the same time, his analysis doesn’t work for me. He essentially ignores what may be the most important element, either in real estate or in high finance: people.

For example, he believes that finance — whether venture capital or investment banking — is just a matter of matching capital with opportunity. Stripped to its bare essentials, that would make sense. Except that you could also say that automobiles are about getting from point A to point B. Or that sex is about combining genetic materials for the propagation of the species.

While true, in a reductive sense, once you inject people into the equation, the story changes dramatically.

Entrepreneurs don’t select VC’s simply because they offer the best term sheet. TheFunded.com, the site that Kitano mentions, is not a NASDAQ for startups matching bid-ask prices for investment — the message boards are filled with human-on-human interaction stories. Investment banking may be matching capital to need at its core, but as Jonathan Knee of The Accidental Investment Banker posits in his book, there is an enormous human element to that business as well.

Knee, a former managing director at Goldman Sachs and Morgan Stanley, talks on and on at length about how the investment banking community has lost its way, how it has abandoned the traditions of client service in search of the next kill. He seems to believe that at the heart of investment banking is being a trusted advisor to the CEO’s and CFO’s — men and women who are powerful, but lonely because of their power. Surrounded by asskissers and yes-men, these executives need someone who understands their business and isn’t afraid to tell them what they need to hear, a business confidante or sorts.

Knee left the big Wall Street banks and joined a boutique firm that specializes in the kind of handholding services that he believes clients need.

That stands in stark contrast to the future that Kitano is describing:

Now that the jig is up, investment banks need to prove another business model for 2008+, but like many of the transactional industries disintermediated by the internet – travel, real estate – the new reality will be lower fee structures distributed among more players who can provide services that were once the sole province of investment banks. For example, Kessler posits that new players will be consolidated financial powerhouses with the capital strength to provide a continuum of financial services – think Goldman Sachs merged with Citigroup.

Kitano and Kessler both seem to think that the future of investment banking will be some sort of a financial Super Wal-Mart. Presumably, for real estate, that means the future will be some sort of a real estate One-Stop-Shopping combining brokerage, buyer agency, mortgage, appraisal, title, legal, moving, home maintenance, and Home Depot to boot.

I don’t think so.

If anything, I foresee a future that splits sharply, just as retail has done. On the one hand, you’ll have the low-cost Wal-Mart types that competes on the basis of one-stop convenience combined with pricing power. Frankly, the various FSBO type companies coming up are shaping up to be these. Low-service, low-prices, low-interaction. That’s one model, and lies at the heart of Kitano’s new model for real estate.

Thing is, I just don’t believe these will be the dominant model for real estate, anymore than I believe the Super Goldman Citibank Dean Witter will be the dominant model for investment banking.

Investment banking — the buying and selling of companies, and the locating of massive amounts of capital — isn’t exactly picking up the groceries. It’s one of the most difficult, traumatic, and life-changing events in a company’s lifecycle. If you’re the CEO, do you really want to go with the lowest bidder on something like that? That’s like selecting your brain surgeon on the basis of price only. I believe investment bankers get chosen on the basis of trust. I believe the successful investment bankers of the future will go smaller and more focused, instead of bigger and more diversified.
Similarly, buying and selling a home isn’t picking out the latest CD or pair of shoes. It’s one of the most important, financially significant, and traumatic experiences a family goes through. The disconnect today isn’t that capital-finding-opportunity has been disintermediated by the Internet. The disconnect today is that the person the family turns to for advice and counsel doesn’t care. The real estate agent looks at the family as just another deal. Too many of them pretend to give a crap, but really, all they’re thinking about is the commission check. Buyers and sellers are just wallets with legs to far too many Realtors.
And that insincerity shines through in everything these brokers do.

That is what is wrong with VC’s, with investment bankers, and with Realtors: they are supposed to be selected on the basis of trust, but they do things to make sure that they are not trustworthy. Conflict of interest is so rampant in all three industries that lawyers are getting verrrrry interested in them. Mercenary behavior is the norm, not the exception.

No wonder the customers are looking to disintermediate, and boil things down to capital-matching-need. If you’ve got to deal with mercenary scumbags who only see you as a pile of cash, wouldn’t you want to minimize what you have to pay these hyenas? I would.

But here’s the bright side: If you actually found someone who is trustworthy, who is professional, who is an expert, and who actually gives a crap about you, would you really mind paying them whatever the cost for the most important financial transaction of your life? I don’t think so.

If an investment banker can really earn the client’s trust, disavow the mercenary behavior, would the client — who is buying a $10 billion competitor — really haggle over a few million here or there? I just don’t believe they will. I think those clients will gladly sign the check over knowing that they didn’t get conned, didn’t get snowjobbed, and got someone’s honest, objective, professional, best-effort assistance.

The same goes for real estate. 6% of the sale is a rather large sum of money. I would pay it without hesitation if I really felt that the agent representing me did so with no conflict, with forthright honesty, and with genuine caring about me and my family. If she really worked for me, to advance my interests, did the homework and the research, and knew the market, and knew her stuff, and got me what I think is the best price possible for my house… I’d sign that check without hesitation. I hesitate only because I don’t believe she did any of those things.

Why doesn’t the real estate industry try a much older idea: actual, fiduciary client service. Realtors talk the talk, but then try their damnedest to get ‘both sides of the deal’. Come on now!

Maybe the business model of real estate is just broken. Maybe the buyer agents need to be completely separated from sell-side brokers. Maybe both need to be paid a salary to encourage professionalism instead of mercenary hunt-and-kill mindset. Maybe the regulations surrounding Realtors need to be toughened up a bunch, and the equivalent of the Bar Exam in law needs to be instituted.

But whatever the solution, I’m convinced that at the heart of any major transaction — whether investment banking or buying a home — is the human being.

Get more human. That seems like the ‘new’ model for real estate to me.

-rsh