The Three Deadly Brokerage Sins

What are the attributes of consistently high-performing realty organizations? And, what are the threats?

by Steve Murray, publisher

In 2006, REAL Trends conducted research into the attributes that cause a brokerage to excel over a long period. The research studied over 800 brokerage firms over a 10-year period and interviewed nearly 170 agents with the top-performing firms. The result of this research was published in our 2006 booklet called “People Still Matter.”

What we found was that sales associates joined and stayed with a firm where they trusted the leadership and management. Words such as vision, transparency, communication, discipline, community and accountability were repeatedly heard in the interviews with these sales associates—not technology, marketing, facilities or commission plans. The sales associates noted that while these were important characteristics of their firm, and that others likely offered something similar, it was the intangibles of interpersonal relationships that mattered more

High Performing Realty Organizations

We think this list needs updating. There are three other attributes of consistently high-performing realty organizations that need comment. A few years back, we were asked, “What are the greatest threats or challenges facing our firm?” In fact, we’ve asked that more than a few times since. Our observations lead us to conclude that for every realty firm of any size or scale, the answer is the same. The three biggest threats are not technological change or regulatory threats, but rather the three deadly sins: complacency, hubris and where leaders value financial results more than they do the culture of the organization. These are, in our opinion, the three biggest threats to the health of any realty organization.

In our 2006 research interviews, we asked the question, “Do you think your owner cares more about the people of the company or the financial results?” Virtually every sales associate we asked said that, while it was close, they felt strongly that their owner cared more about their people than their profit. Whether this was true for each firm or not, their sales associates perceived that it was the case. Clearly, these firms communicated, through words and actions, that while profitability was important, the care and concern for the people of the firm were slightly more important.

Preparing for a Correction?

Complacency might be a challenge today. The market has had five solid years of recovery from the 2006-2010 downturn. Sales volumes are up, profits are up and, while there are pressures on commission rates and splits, business is very positive.

When we visit with brokerage CEOs, it is clear that most are taking nothing for granted. Most ask about where the market is headed and how many years of good markets are still ahead. There is a great deal of caution in the minds of most leaders of realty firms. Most leaders think we are in for a slowdown but not a decline. Nonetheless, they are preparing as if such a correction is in the works. Complacency does not appear to be an issue right now.

Hubris can be simply described as the state where you start believing you can’t be wrong. I am right; therefore, I must be right. It is a step above confidence into a realm where huge mistakes are made because one can’t conceive there is someone or some group of people who can’t have a more informed opinion. This frequently happens when one seeks advice only from those who will agree with one’s point of view.

Interestingly, we don’t hear much of that thinking right now. The market has weeded these brokers out for the most part. Today’s leading realty firms are headed mostly by those who know better, having learned the hard way about predicting the market in the future. Most leaders today spend more time asking questions than granting opinions. This is also a good sign.

Lastly, watch out for the sin of when you, in some shape or fashion, communicate in any number of ways that the financial returns or performance of the realty organization is more important than the health and performance of the people of the company. The latter confirmed by the “People Still Matter” study of better long-term performance. The former leads to stagnation in both people and financial returns. We have observed too many realty firms where the leadership let it be known that financial performance mattered more than how their people were doing.

Balance of Profits and People

Over a long time, the firms that can balance this critical relationship will tend to outperform those that can’t. And, it will ultimately show up in the financial performance of the organization. Again, most realty firms that we observe closely are not afflicted with this disease, but it is an area that requires constant vigilance.

Yes, firms must earn a return. Yes, it is also good that profit is growing steadily. Neither; however, is good for the long-term health of an organization where the body thinks that it is all about the money. It may not affect short-term results, but it will affect the long term. All one has to do is look at the news today to confirm that.

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This article originally appeared in the November 2016 issue of the REAL Trends Newsletter and is reprinted with permission of REAL Trends Inc. Copyright 2016

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