By Marylyn B. Schwartz
RISMEDIA, June 24, 2008-Why, today, is there seemingly endless angst in the real estate community relative to recruiting and finding agents to add to the team? Is it the shaky market conditions? Fear of making a mistake? Well, in the words of S. Holmes, “That’s elementary, my dear readers.” There is a void in the understanding of just how wonderful a time it is to build one’s team. We’ve not had such a bonanza of opportunity in several decades.
Oh, there go the naysayers. Bless that dear chorus of doubters convinced that it’s “slim pickin’s” when it comes to choosing. It’s other companies’ headaches or headaches waiting to happen. Doubters wonder, “Don’t we already have enough moaning and wailing in the ranks without increasing the volume? Perhaps we should leave things as they are and wait for better times to grow our team?”
A dear friend for many years and one of the industry’s foremost recruiting experts, Judy La Deur of Judy La Deur International (email@example.com,) and I put our collective heads together to sort out the fool’s gold from the real thing for those seeking opportunities.
Marylyn B. Schwartz: What’s going on now in the heads of brokers/managers when it comes to growth through recruiting?
Judy La Deur: They are operating in panic mode and afraid that no decision is better than the wrong one. NAR indicated that 87% of all agents have been in the business less than 15 years and 59% less than five. Malaise is already apparent with many agents; therefore management is just too worried about jeopardizing whatever team synergy exists. Brokers are looking at the last two years of agents’ production and deciding if those agents have merit as recruits. It’s a poor way to view agents in general as these last two years have been difficult for the best of agents let alone a newer marginal agent. It makes sense to look back at what a particular agent did when the market was strong, then ask how effective was the leadership and accountability in that agent’s office? Can you improve on those and thus create opportunity for improved production?
MBS: We both agree that standing still is worthless. No agent or company ever got anywhere with that approach. Yet going about recruiting the right way has never been more crucial. Let’s cut to the chase. Is there an all important question brokers need to ask a potential recruit and, if so, why?
JL: No doubt about it. ‘How much do you want to earn?’ is the question and his/her answer will lead the recruiter through the crucial part of the process. Agents are asking themselves these questions. How bad is it out there and will it turn around by changing companies? Can I get a better deal i.e. lower fees or a higher split? What is the culture of the office and the involvement of management? Agents are seeking ‘security guarantees’ in the form of administrative support, leadership to whom they can turn, engaged brokers, education and skills for working in this or any market, for that matter. It is the recruiter’s job to debunk the fallacy that higher splits or lower fees is the panacea that will result in increased revenue. It is such short-term-perspective thinking for an agent who wants to grow exponentially without artificial constraints imposed by limits of any kind. What matters in the end is the potential for unlimited transactions generated by the company’s advantages.
MBS: When the broker or person responsible is sitting across from a prospect is hit with the higher splits argument, walk us through what should happen.
JL: Get out the calculator and show them how commission really breaks out. Let’s suppose the agent is presently on a 60% split with his/her present company and earned approximately $2,000,000 gross closed transactions. At 60%, that agent will earn $36,000 (6% commission assumed.) Same scenario at 80%; that agent’s income increases to $48,000. So, in actuality, even at the top end of splits available out there, that agent earns the equivalent of two additional transactions. That is nothing to brag about long-term. In reality, it is a dead end if that is all the agent gains by changing companies. Every 10% commission increase equals approximately one transaction’s worth of revenue. On the other hand, when the recruiter is able to articulate the company’s ‘value proposition’ by linking the company’s advantages to real transaction-growth opportunity, the prospect who is willing to work the systems and use all of the company’s advantages will become excited and energized by the potential.
MBS: I often think of that as the donut versus the hole analogy. If all you are focused on is the hole, that is to say, what is in front of you at the moment, it is easy to miss the negative consequences of ignoring the big picture. Sure, take that higher split but remember, nothing from nothing will always equal nothing. The talented sales professional knows that they must work for a company where the culture supports ongoing growth, is solution, not problem, focused and will not tolerate team members who do not produce.
JL: That is very true, and the issue of reduced fees as a recruiting hook is just another side of the coin. Let’s suppose the agent is able to reduce his/her monthly fees by $500 a month X 12 months = $6,000. We’re back to one transaction’s worth of revenue by lowering or eliminating fees. Companies that are trying to lure agents with promises of reduced fees or increased commissions are missing the big picture, and in the long run it never works. Ask a productive agent, ‘What’s your close ratio?” Suppose he/she answers 3 out of 4. You then know that agent has great skills. That is not the agent one approaches with mumbo-jumbo promises. This is the agent who wants to know, How will you get me in front of more people so I can close them?
MBS: Seems apparent that agents may be ‘shopping’ companies for the wrong reasons or under misguided thinking.
JL: Exactly. Good companies won’t be able to accommodate those agents based on lowered fees and/or higher splits. Those companies’ very survival depends on their ability to articulate their full-range of advantages designed to generate a constant stream of opportunity. Generating opportunity is expensive and, if all resources are spent on ridiculous fee splits, where does the revenue come from for growth?
MBS: If the sought-after agent cannot see that the company they are considering will effectively get them in front of more people so that they can use their skills to increase production, they will keep shopping. Speaking of that sought-after agent, there are those brokers who adopt the position that they will not recruit from their competitors. I have found this to be a sensitive topic when it surfaces in my recruiting seminars. What advice do you have for your clients?
JL: Yes, it is a sensitive topic, but one that is unavoidable. In 1980 NAR removed from the Code of Ethics any restrictions on competitive recruiting. Agents deserve to know what is out there and what other companies offer. This is the best time to recruit, so why not look at the best of the best in your marketplaces as part of your search parameters? Let’s face it. If all you are going to recruit are new agents, then you are training your future competition. If the broker or manager is unable to do the actual recruiting from other companies, then they should hire a recruiter to do so.
MBS: It stands to reason that once a ‘newbie’ is up, running and producing, they become prey for other companies. Like it or not, it is the cycle of life in real estate and shows no signs of abating.
JL: Let me be clear on a point. The interview doesn’t ensure that you hire the candidate. Some recruiters think that if they are in front of them, they’ve got to bring them aboard. First, consider how that person will fit into your team, work with you and others and serve your culture. Even a good producer who really upsides the apple cart is worthless. I believe strongly in ‘partnership agreements’ drafted in order help agents joining a new company to get a head start or to get a flagging career back on track. The agreement remains in force until an agreed upon level of production is reached (dollars or units.) The agreement outlines initiatives required of the agent in order that success is ensured. The power of these agreements hinges on the strict adherence to what is agreed upon. Low standards that are enforced are better than high standards that are not.
MBS: Running a company on a ‘policy’ of exceptions is a foolproof formula for failure. Yet, finding a company that truly walks the talk is tough. Many have created road maps for success and then have ignored the warning signals that they are off-road along the way. Consistency is the most cost effective way to ensure that there is no favoritism or unfair treatment of anyone.
JL: Yes, every new-to-the-company agent should sign a partnership agreement, and any agent who is not producing up to standards must sign one to re-start his/her business. It is important to remember that a company can never be all things to all people. Think of the diner analogy. Diners serve just about everything one could have an urge to eat, and at any hour that urge makes itself known. However, diners are far from culinary masters at any cuisine. Brokers who know who they are and what they do best create companies that represent those strengths and look for the right fit of agents for his/her model. Not the other way around.
MBS: Great advice for a beleaguered industry!
Marylyn B. Schwartz, CSP, is an expert in real estate and corporate sales training/management and team development. She is president of Teamweavers and a trainer for Leader’s Choice.
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