There is no doubt access to reliable data equips a business owner to be more successful, but that’s only one part of the equation. Combine reliable data with insightful interpretation and you’ll arrive at wisdom.
The application of wisdom is what separates high performing organizations from low performing competitors.
Game Changers, a new book recently authored by Steve Murray, Lorne Wallace, and Lon Welsh, is a treasure chest of wisdom for those in the real estate industry. If you have not ordered a copy of this important book, do so before your competitors get it and apply what’s contained in its pages.
Game Changers addresses a number of strategic topics that are far beyond the scope of the WorkPuzzle charter. However, there are a number of insights that do apply (or can be applied) to recruiting.
In the next couple of WorkPuzzles, I’ll share a few of the insights that I found most interesting and applicable to those focused on improving their recruiting game.
You don’t have to get far into the book (page 2) before the reader is presented with the following chart:
The authors make the following observations concerning this data:
Historically, sales agents productivity has been distributed in typical bell-curve proportions. Most agents sat in the middle of the curve with seven to ten deals, while few low-producing sales agents (< 3 sides per year) and high-producing sales agents (> than 25 deals) made up the tail distributions.
In 2013, the average productivity was 8.5 transactions per sales agent per year—not a departure from historical numbers. But in recent years, the bell curve has flattened—and in fact, is not a bell curve at all….
Since the downturn, more agents have achieved limited or no volume. In addition, the number of high-volume agents and teams has increased. There are fewer agents in the middle achieving moderate amount of volume.
(Note: The chart shows distribution for the Denver metropolitan area. The authors state that other data suggests that this distribution is common in other metro areas across the country).
Game Changers takes this data and more research highlighted in the first chapter to make the point that a segmentation of the agent population has taken place. There are a low number of very high performing “counselors” who do 20+ transactions/year and a high number of “facilitators” who pick up the crumbs left by the high performers and self-educated real estate consumers.
Reading and digesting this concept is worth the time and money of buying the book, but I want to focus the rest of our discussion on recruiting. More specifically…
What does this data tell us about real estate recruiting?
The new status quo is not very profitable. For years, owners and real estate leaders have told me the most profitable agents are “B” and “C” performers. While it is obvious why “D” performers are undesirable, it can also be problematic to have a few “A” performers producing a lot of volume.
For example, it’s more profitable to have five agents each completing 10 sides/year than one super-performer completing 50 sides/year. In addition to lower margins, high performers are risky. If one leaves the organization, they have a larger impact on overall volume.
In essence, the profitability of many real estate companies depends upon the bell curve that no longer exists.
Age demographics will continue to put pressure on real estate companies. Game Changers notes: The median age of a Realtor is 55+. A large proportion of the high-volume agents are those in their last decade of working before retirement (often their more productive years).
The fact that about 60% of the agent populations are nonperformers (< 2 sides/year) and many of the remaining 40% are going to retire or lose energy towards the business in the next 10 years is a concern.
The attrition of high performers will happen and their production will need to be replaced.
Recruiting alone will not solve all your problems.
Recruiting new agents under the reality of the Game Changers data outlined above is a losing proposition. It’s tough to make the math work in this equation and produce a profit.
The solution? Of course, improving recruiting methodologies is a must. Talented individuals from outside the industry must be identified and engaged more successfully. Recruiting systems must be upgraded to improve the raw material entering the system.
However, Game Changers suggests this is only part of the solution. New talent must be introduced to systems and training that reflect the segmented nature of the agent population. Not everyone has the capacity to be a high producing agent (“Counselor”) and training everyone as if they do, is a mistake.
Summary: There are difficult and complex problems to be solved in the next decade. Those owners, brokers, and agents who solve them will be rewarded and experience much prosperity. Those who keep doing the same things they’ve always done will likely find themselves in (as Game Changers puts it) a death spiral.
BenHessPic2011Editor’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.
