Last week (1,2), I suggested that you will need to become proficient at competing for new talented agents in the months and years ahead. Your competitors are not so much other real estate companies, rather, they are other traditional companies who have a difficult time offering work environments that employees find engaging. This is a major competitive advantage that very few real estate companies use to their advantage.
As we discuss this topic, the elephant in the room that I know many of you are thinking about is traditional pay and benefits — Most “normal” companies offer this nicety, while most real estate companies do not. Granted, 78% of the global workforce is dissatisfied or disengaged in their jobs, but at least they are getting a paycheck!
For years, real estate companies have chided people for this behavior. In fact, I can think of numerous discussions with owners and managers where candidates were mocked (typically behind their backs) for not having the “guts” to step out of their comfort zone and assume the risks of full commission work in the real estate industry.
This bravado attracts some when the risk to reward ratio is in balance, but as the “reward” part of equation has started to diminish and become significantly less probable, the “make it big in real estate” engine that drives recruiting success has stalled. The traditional real estate compensation paradigm is on life support and the prognosis for future success is not good. It has obviously been strained because of economic circumstances in the last couple of years, but there is also a generational component that is adding to its demise.
Here’s the generational component that most real estate companies are missing:
Many young people are willing to exchange a high income (or the potential at earning a high income) for job opportunities that offer flexibility, mental/social engagement, adventure, and a little bit of security.
Let me share a story that illustrates how this reality is playing itself out in industry today. A few weeks ago, I met with the general manager of a large auto dealer on the east coast. During the discussion, I asked him how their recruiting process has changed in the last couple of years. To my surprise, here’s what he said:
"We used to have a lot of success with offering people a way to make $200K per year if they were willing to work 80 to 90 hour weeks. We have a sales formula that reliably produces this level of income if a person has a reasonable amount of sales talent and is willing to put in this level of effort.
Problem is…no one wants to do the work anymore! I can’t get young people to engage this value proposition. They’ll often say, 'How about you give me a way to earn $40K a year, and I’ll put in 30 hours per week. I only need $40K because my girlfriend earns about that much and that’s enough money. I don’t want to give up my personal activities and flexibility for more money.' "
This general manager went on to confirm that this happens so frequently that he has given up trying to hire the $200K producers. Instead, he hires more of the $40K producers (which he probably earns better margins on). He has learned to embrace the generational trend, rather than putting energy into trying to recruit the increasingly few people who match his previous hiring framework.
This is not an isolated case. I’ve seen this trend mentioned and documented in numerous research studies and articles I’ve read over the last five years. Many projected that difficult economic times would reverse this trend, but it hasn’t happened.
So, how can you make changes to the way you hire in order to align yourself with this generational trend? Here are some ideas.
- Highlight flexibility in your hiring value proposition. It’s not uncommon to see real estate companies highlight flexible hours and work conditions in recruitment ads, but it is usually alongside phrases such as “Unlimited Earning Potential!” and “Be Your Own Boss!” If candidates are skeptical about any portion of the recruiting message, they discount it all. It is more effective to construct ads that convey nothing but flexibility. If you need to say something more, talk about how highly efficient and competent individuals thrive in a flexible work environment.
- Replace the “all or nothing” compensation framework with something that offers a small amount of security. I know that I’m treading on sacred ground by mentioning this, but it is worth putting some thought into this idea. The auto dealer example demonstrates this principle: Many very talented people will exchange money (i.e. work for much less than they can get working for other employers) for flexibility. But, when you also ask them to take all the risk in the employment arrangement (full commission), it becomes too much. I believe it is worth investigating a modified employment model where a modest commitment (such as $2,500) is made to a talented prospective agent with the expectation of receiving a return on that investment.
- Learn how to truly offer engagement and adventure as an organization. This is where things get really exciting because most traditional companies and teams are not adept at addressing this issue. I’ll elaborate on this topic and wrap up this series in my next discussion.
Editor's Note: This article was written by Ben Hess. Ben is the Founding Partner and Managing Director of Tidemark, Inc. and a regular contributor to WorkPuzzle. Comments or questions are welcome. If you're an email subscriber, reply to this WorkPuzzle email. If you read the blog directly from the web, you can click the "comments" link below.
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