Quick disclaimer on this discussion—I’m going to address some issues that are unique to the real estate industry today. (This is the arena where the majority of our clients reside.) Those of you who read and subscribe to WorkPuzzle who are outside the real estate industry may have to cut through a little jargon and real estate framework to grab the concepts today. But, I encourage you to hang in there, the core ideas do apply to all industries.
Convincing someone to become a real estate agent is a tough sale in today’s environment. The value proposition for years has been that almost anyone can earn a substantial amount of money by selling real estate. Granted, realty rarely met the hope of that value proposition (even during good times, 80% of new real estate agents left the career field within one year of starting), but there was always a small group of new agents who were successful.
And some of them were wildly successful. These are the people whom real estate companies commonly tout during recruitment marketing and presentations. As a result, a consistent influx of new agents would consistently engage real estate companies with the hope of making it big.
Not sure if you’ve noticed, but this way of recruiting is dead. I regularly talk with real estate owners in all parts of the country, and I hear the same thing: Very few people are attracted to the real estate industry in today’s economic environment. Why? The traditional real estate value proposition for new agents is no longer resonating with people. Big new agent successes are increasingly rare and the media is relentless at painting a dreary real estate industry landscape.
Many companies have resigned themselves to this reality and have changed their primary focus to recruiting experienced agents away from their competitors. While this is not a new idea, the intensity of this practice has increased. And, with many more companies focusing on this strategy, a new realty is quickly becoming established. In essence, real estate companies (particularly in large metropolitan areas) are now competing for their share of a very limited pool of candidates (productive agents). In many companies, this type of recruiting has become their exclusive focus, and they’ve given up completely on new agent recruiting.
As you can imagine, this strategy has some limitations... The first limitation is that the pool is constantly getting smaller. There has been a significant amount of attrition over the last three to four years because the easy money dried up. (Many of these individuals probably should have never been real estate agents in the first place.) The second limitation is that the remaining productive agents in the industry now have the upper hand with regard to negotiations. These agents know they can negotiate better deals if they’re willing to change companies. Of course, this drives margins down for the companies who are doing the hiring.
So to summarize, new agents are difficult to recruit because the traditional real estate value proposition no longer makes sense. Experienced agents (who are working for a competitor) are also becoming increasingly difficult to recruit because the pool of potentials is limited. And even if a company is able to have success in that arena, the profitability of that success is diminished.
Do you feel like jumping off a bridge about now? Well don’t…at least not quite yet. The challenges are significant, but they’re not insurmountable. And, by working to find a viable solution, the real estate industry will start to fix one of its most limiting deficiencies—a workforce that is generally unproductive (as measured on a transaction/agent basis).
How do we get there? I believe the following things need to be considered:
1. Cutting off new agent recruiting is a mistake.
The real estate companies who figure out how to recruit young, talented individuals into their companies will soon out-perform those who only focus only on experienced agent recruiting. No matter how you look at the scenario, it is difficult to get the demographics to predict a different outcome. Focusing on experienced agent recruiting only results in more and more work with a diminishing return.
2. The traditional “get rich selling real estate” message is dead.
The housing bubble produced all sorts of odd behavior in our society. Not the least of which was the notion that someone with limited resources, education, and competencies could generate large sums of money by standing around taking housing orders. Yes, that happened in some places and to some individuals, but it’s probably not going to happen again. Betting on things "returning to normal" in this regard is really a bet that things will return to abnormal.
3. The real estate industry needs a new recruiting message.
Seriously ask yourself this question: Why would someone with good resources, education, and competencies want work in your company or office, knowing that they have limited (not necessarily poor) income potential? Your recruiting message needs to answer this question. But, before you answer this question in your recruiting message, your company or office needs to live up to this reality.
So, here's the WorkPuzzle manifesto: Create a unique and compelling work environment where individuals working on the team find engagement in their day-to-day tasks.
In our next two discussions, we'll cover how to create an environment like this, and then how to tell your story to the candidates who will become the future of your company.
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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