Editor’s note: We’ve called upon our readers to explore a path forward for the real estate industry through the Roadmap to Recovery editorial project. Click here for details. The following essay is a guest contribution by real estate consultant Catherine S. Read.
By CATHERINE S. READ
There is no question the real estate industry will contract as a result of this current global financial crisis. That won’t be a bad thing. Unlike the talk from U.S. automakers, we are not in danger of losing an industry.
Fewer agents, managing brokers and real estate companies might very well serve the overarching necessity of reinventing the current real estate model. Our partner in this endeavor will be the consumer, who will exercise his or her right to choose who they do business with and what that experience will look like.
Larger brokers face the issue of staggering corporate infrastructure and a model of doing business that has been largely focused on market share, number of agents, number of offices and those much advertised annual revenues. Many are now trying to shrink, cut and consolidate their way out of a negative cash flow.
In the "new world order," brokers need to be focused on profit, quality of agents and managers, implementation of virtual services and less square footage, better training that meets the needs of the best agents, and a compensation structure that rewards and retains the high performers among agents, managers and employees. There needs to be a corporate vision that everyone in the organization understands and can align with. That vision needs to differentiate one brokerage from another, meet the consumer’s needs, and be clearly understood by the public.
Jack Welch introduced the concept of differentiation decades ago at General Electric: Reward your top performers, cultivate your mid-producers to reach the next level, and routinely cull your bottom 10 percent. In real estate, the bar of entry has been low and the focus on body count high. Those brokers who have lumped their people together and either treated them all the same, or conversely treated everyone differently with no clear standard or metric of measure, will now have the painful task of separating the wheat from the chaff in their shrinking organizations.
For those real estate companies bold enough to take the drastic measures necessary for survival, there will be opportunities in this industry shakeup. Brokers need to create the company, the environment, and the vision that meets the needs of those who are consistently and demonstrably successful at what they do. Those with confidence, who are not afraid of change and are willing to learn something new, will follow the leadership that demonstrates they can deliver a believable future.
Catherine S. Read is founder of Creative Read Inc., which offers real estate consulting services.
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