Compass CEO Robert Reffkin highlighted the trials and tribulations of a watershed year of expansion — one that saw massive growth despite some acknowledged missteps — in a candid end-of-year email sent to staff and agents this week, which Inman obtained and is re-publishing in full below.
“We launched some technology without testing it thoroughly with agents — and learned we can move too fast,” Reffkin writes in the note. “To hit deadlines, we released new software before it was ready. The new tools were designed to simplify agents’ lives, but bugs in the technology made agents’ lives more complicated instead.”
The CEO, who has previously compared Compass to Apple’s iPhone, goes on to state: “We’ve heard your feedback and are working hard to fix the things you’ve told us to…while I continue to believe passionately that speed is one of our greatest advantages, I’ve learned that moving too fast with tools that our agents use every day can be just as dangerous as moving too slowly.”
The admission highlights Compass’s struggles to scale its technology as it grows its agent count and expands into new markets.
Tech issues aside, 2018 was a year of massive growth for the New York City-headquartered brokerage, through opening offices in new markets and acquiring rivals across the country. In total, according to Reffkin, Compass surged from 37 markets at the beginning of 2018 to 122 while expanding from 62 offices to 238, according to the email and confirmed by a spokesperson on Thursday.
Meanwhile, the company went from raising $755 million to $1.2 billion by the end of the year while earning approximately $900 million in revenue, up from $370 million. Sales volume also shot up from $15 billion to more than $35 billion, according to the email and confirmed by the Compass spokesperson.
Those sales numbers would place Compass third among brokerages nationwide, according to data culled by Real Trends 500, behind NRT and HomeServices of America. The company was ranked sixth by Real Trends last year.
Further, Reffkin says that Compass is “ahead of schedule” on its stated quest to reach 20 percent market share in real estate transaction volume in the top 20 metropolitan markets in America by 2020, its so-called “20/20 by 2020” plan.
But Compass made several other errors in 2018, Reffkin acknowledges in the email.
Reffkin admits the company’s acquisition of the major California brokerage Pacific Union was “rocky,” after news of the deal leaked to Inman in August 2018, prior to its official announcement, and lamented the rollout of Powered by Compass, an initiative unveiled in July 2018 at Inman Connect San Francisco to license Compass technology out to other independent brokerages, but which was ended before it even officially started, after being swiftly critiqued by Compass agents.
Read Reffkin’s email in full below:
I’ve always tried to reach out to everyone important in my life at the end of the year. I used to write over a thousand holiday cards every year — by hand — to show people how much I cared about them and valued our relationship. It mattered enough to me that I dedicated eight full weekends to it every year.
It is with that same spirit that I’m writing this email to all of you today. Sometimes I am so focused on moving fast and dreaming about the future that I don’t — in the moment — take the time to recognize, to thank, and to celebrate those around me. That’s why I use these days every year to really pause and reflect on the year and the people who made it great. I care about every member of the Compass family. You inspire me. You challenge me. You help me learn new things all the time. And so, as this incredible year comes to a close, I wanted to take a transparent look back together.
Sitting here with my laptop while my wife and daughters are asleep, it strikes me that there are two big, different stories to tell about this year — and they’re both true. The first story is one of incredible progress and growth, beating goal after goal that everyone thought was impossible. The second story is one of how we learned and developed as people and as a company faster than I could have imagined. As we moved incredibly fast through 2018, we made mistakes and faced challenges, but it was those experiences that helped us learn and improve most.
And they set up a third story: the story of 2019, our seventh year as a company. I’m very excited about that story. But let me start with the first story first.
The first story of 2018: Incredible progress and growth
2018 was a year of rapid growth. We dreamed bigger than ever before this year, obsessing about every opportunity to maximize our strengths. While the numbers were impressive, there were amazing accomplishments across every part of our company, from talented new people joining Compass, enhancing our offerings to agents and a continued focus on strengthening our culture. I’ll start with the numbers. Compass grew…
From 37 to 122 markets
From being in 10 to all 20 of the Top 20 markets in the country
From 62 to 238 offices
From $755 million to $1.2 billion dollars raised
From $370 million to ~$900 million in revenue
From $15 billion to over $35 billion in sales volume
From 6th to 3rd largest brokerage in America, and becoming the largest independent brokerage in the country per Wall Street Journal Real Trends
Our 20/20 by 2020 vision is demonstrating why dreaming big matters. The idea of earning 20% market share in the top 20 cities in America by 2020 seemed impossible when we announced it, but we’re actually now ahead of schedule. Why? Because a huge, exciting goal attracts people who like turning dreams into reality. In this case, our 20/20 vision inspired both investors to support us with capital, as well as an incredible number of talented agents and employees to join us on this journey, supporting us with their careers.
We joined forces with some of the most impressive and inspiring brokerages in America. This year, we merged with phenomenal firms, including Pacific Union, Paragon, and P.S. Platinum in California; Platinum Drive in Westchester; Conlon and The Hudson Company in Chicago; Avenue Properties and NWG in Seattle; Wydler Brothers in Washington, D.C.; The Collective in Dallas; and Bushari in Boston. And while the experience has been challenging, as I’ll talk more about in the section below, as one company we can better serve our clients and communities across the country, and, together we have the strength and resources to ensure the future of this industry is in the hands of the agents.
We welcomed nearly 7,000 new, amazing people to the Compass family in a single year. We grew from 2,100 to about 8,000 agents this year, and from 477 to almost 1,500 employees. And we did it all while continuing to be extremely selective: 132,000 people applied for jobs as Compass employees this year and we hired only 1,020. That’s a 0.8% acceptance rate, which means it’s harder to get a job at Compass than it is to get into Harvard. If you know someone terrific who ought to work here, please send them this link to the roles we’re hiring for right now.
We hired truly world-class leaders. Kristen Ankerbrandt, who led global technology investing at the Carlyle Group after working at Amazon and Goldman Sachs, joined to be our Chief Financial Officer. Joseph Sirosh, who was Chief Technology Officer of Artificial Intelligence at Microsoft and Chief Technology Officer of Amazon’s Consumer Business, joined as our Chief Technology Officer. Chloe Drew who served as a senior political appointee in the NYC Mayor’s office, ran a nonprofit and led a corporate foundation, agreed to come aboard as President of Compass Philanthropy and Community Impact. Khurrum Malik, our Chief Marketing Officer, ran global product marketing for Spotify and before that was a senior leader at Facebook. Matt Rosenberg, our Chief Revenue Officer, served the same role at Eventbrite in the run-up to their initial public offering. Neda Navab, taking on the Chief of Staff role after working at Google and McKinsey & Company. Michael Coscetta came from Square, where he helped over 2 million small business owners deploy technology that changed their businesses, to be our Chief Sales Strategy Officer where he is focusing exclusively on how to help our agents grow their businesses. We also hired 55 sales managers and local real estate leaders whose deep knowledge of the industry will help inform our decision-making and priorities.
We made huge strides toward building the first end-to-end platform in the industry. We launched the first pillars of our CRM (Contacts and Deals); Digital Ads for Facebook (25x faster to create and launch, 35% cheaper, and nets 10x more views); Compass Coming Soons (only available on Compass.com); Email in Marketing Center (still one of the most powerful marketing channels there is); the innovative Compass Sign (customizable, connected, intelligent); and so much more. We launched all these new products so that you can use the Compass platform as a key part of your business, and with the Compass Data Pledge we made the commitment that all the data belongs to you (we will never contact your clients, you can take your data with you if you leave, and you can access the CRM if you leave).
Inspired by your generosity, we launched Compass Cares. Agents already give back to their communities in so many ways. With Compass Cares, 100% of the time an agent helps someone buy or sell a home, Compass will make a contribution to a nonprofit in their community. In 2019, we expect to be able to give away approximately $10 million to local nonprofits — and as we grow, we will be able to give more.
We committed $250 million to grow agents’ businesses. We launched Agent as CEO, Compass Concierge and the Agent Betterment Fund. We announced the Agent COO business consulting program, Compass Bridge Loans, and the Compass Black Card.
We continued to invest in our culture, even as we grew. We made strides on gender equality at every level of the company: the majority of our employees are women, the majority of our promotions were earned by women in 2018, and nearly half (46%) of our managers are women. Camp Compass, our summer-camp-themed offsite for employees, was a delightful display of Compass culture. Individuals independently created and nurtured a number of important communities, such as OUT at Compass, Women of Compass, and Agents Of Color, facilitating insightful conversations and hosting incredible events. We also continued to hold each other to a high bar and asked agents that were bad for culture to leave the company. While this is never easy, it’s incredibly important to continue to do as we grow.
We rallied around our company values in 2018. For me, one of the biggest moments of the year was introducing the Compass Entrepreneurship Principles in May. These eight principles — Dream Big, Move Fast, Learn From Reality, Be Solutions-Driven, Obsess About Opportunity, Collaborate Without Ego, Maximize Your Strengths, and Bounce Back With Passion — are the key to understanding how we make decisions as a company, how we decide whether people fit the Compass culture, and how we work together. If our OKRs (objectives and key results) define what we do and our mission defines why we do it, our principles define how we do it. I often tell new agents and employees to not just think of these as our company values, but to think of them as a roadmap for success at Compass. If you are living these values every day then there is not a doubt in my mind you will be successful and inspire those around you.
The second story of 2018: Real struggles and lessons
Now, let me shift to the second story of 2018 that’s focused on what we learned from the challenges and setbacks we faced and how we used them as opportunities to develop. I believe that the greatest competitive advantage that people or companies have is the pace at which they can learn. So while there were areas where we fell short and I wished we could have avoided them, I still see them as valuable lessons. While we are not always perfect, we improve as fast as anyone else and these experiences will help us continue to move fast, learn from reality and bounce back with passion in 2019.
We launched some technology without testing it thoroughly with agents — and learned we can move too fast. To hit deadlines, we released new software before it was ready. The new tools were designed to simplify agents’ lives, but bugs in the technology made agents’ lives more complicated instead. We are 100% committed to solving this problem. Maëlle has shown tremendous leadership here, pledging to improve our current tools before launching anything new. We’ve heard your feedback and are working hard to fix the things you’ve told us to: Search, Collections, Data Quality, the mobile app, and more. While I continue to believe passionately that speed is one of our greatest advantages, I’ve learned that moving too fast with tools that our agents use every day can be just as dangerous as moving too slowly. Again, I’m sorry for the bugs that have impacted your lives and I thank you for your patience. You have my word that we are absolutely going to fix this in early 2019.
We underestimated the complexity of merging brokerages, both operationally and culturally. It’s a huge challenge to integrate two terrific, independent companies into a single combined company with a shared culture and mission. Doing multiple mergers in a single year put strain on our employees, our culture — and unfortunately, the incoming agents felt and saw those cracks. Asking people to get on board with a new brand, new technology, new colleagues, new everything is a big ask. It takes time. We know that there is still a lot of work to be done here, and we’ll remain laser-focused on listening, learning, and solving remaining issues promptly in the new year. We’ve even hired a team that’s fully dedicated to merger integration going forward to reduce the disruptions for both new and existing Compass agents and employees.
We had a really rocky start to our biggest merger of the year. As I was arriving at Camp Compass, our merger with Pacific Union leaked. Thousands of people on both sides of the deal learned about it from the press — not their managers, not their colleagues, not me. We have made great strides in our integration, but still have a lot of work to do and many areas were we need to quickly improve. The entire team is committed to doing that work and will not rest until the experience for everyone involved is nothing short of world class.
Because we didn’t speak to the right people ahead of time, we hired (and later had to let go) some agents and managers who were bad for culture. Compass agents set a very high bar in terms of character, culture, compassion, and quality that we respect and will always maintain, no matter how much we grow. Sometimes that means we have to say goodbye to good people who are simply not great fits for Compass. But our network of high-integrity agents is our biggest asset in evaluating potential agents, and in several cases this year we could have avoided unwise hires in the first place if we’d asked around a little further — and not put people through that painful experience.
Some of our marketing and advertising language earlier this year was distasteful — and I wish I’d recognized that earlier. It was more arrogant than inspiring. We were talking too much about winning, about being the best, about being everywhere. That’s not who I am as a person and that’s not who we are as a company. We can have massive ambitions — our mission is to help everyone find their place in the world, after all — while still embracing a spirit of community over competition.
Some agents who wanted health insurance were unable to get covered through our program. Although we launched a healthcare offering that saved some of our agents up to $24,000, just over 10% of people who applied were either not approved by the 3rd party provider we partnered with or weren’t able to find a plan that worked for them, which made a lot of people angry and hurt. To be clear, it was the insurance provider — not Compass — who decided not to grant coverage to some people. However, that does not make it excusable and we are going to work hard to find a solution to this problem. I have a list of the people that got turned down on my desk and I look at it every week as a reminder that we need to solve this problem for everyone, which I hope to do in early 2019.
We went about licensing our software in the wrong way and the wrong time. When you’re obsessed with opportunity, it’s easy to see it everywhere — and there are some opportunities that are better to wait on, or let pass entirely. I think that’s where we went wrong with Powered By Compass, our short-lived experiment in licensing our software to non-Compass teams and brokerages. It was not popular with Compass agents, to say the least. I’m grateful to the Boston team in particular for giving us such clear feedback on how this affected them and making it very easy for us to decide that it isn’t the right path for us at this time.
The story of 2019
The year ahead is going to be monumental for Compass. 2018 was incredible — and incredibly hard. But I believe the things we’ll accomplish together in 2019 will make 2018 feel totally and completely worth it.
2019 is going to be the year where we focus on going deep rather than wide — deepening our roots in our existing markets and strengthening the foundations of our current technology.
The year we emerge from the challenges of post-merger integration and stand strong as an energized, unified, nationwide Compass family.
The year our agents see their businesses grow as they benefit from our $250M investment in them.
The year the majority of agents happily choose to operate their businesses on Compass technology. And the year that sellers and buyers fall in love with our tech, too.
The year we make big market share gains that put us well on our way toward 20% market share in each of the Top 20 markets by 2020.
The year where people come to understand that if you’re not working with Compass agents or not searching Compass.com, you’re not seeing the market, because Compass has so much unique inventory.
The year we break $1 billion in revenue — only one year behind Amazon and Google, at the same pace as Facebook, three years faster than Airbnb and four years faster than Salesforce or Netflix.
The year that we give back to our communities (both financially and through volunteering) with the same ambition, focus, and passion that we bring to everything else around here. The year we prove that bigger doesn’t have to mean bad — it can actually mean that we’re able to do more good in the world.
The year that virtually everyone at Compass says that they’re working with the best people they’ve ever worked with in their lives.
Let’s get ready for a year that none of us will ever forget.
On a personal note
My dream for Compass has always been to create a community that makes people feel like they belong. People spend more time working than doing anything else, and if all I did was help create a community that challenges and inspires its members at work, then I would feel fully content. I’ve always been touched by how much the people in our community care about my well-being. How I’m personally doing, how my family is doing, whether I’m happy and fulfilled. Because so many of you have told me you care, I wanted to share something personal.
This year was the hardest that I’ve ever worked, and I know that’s the same for many of you as well. The most difficult part for me has been being away from my daughters so much with travel. As my girls have gotten older, and with a third child on the way, I’ve developed a deeper appreciation for the struggles so many agents and employees here face as they balance work and family life.
In fact, my older daughter Raia recently asked me to make a promise: that in 2019, I’ll only travel two days per week going forward. It’s a big change, honestly — I just finished going to 17 holiday parties in 14 cities in 16 days — but one that I committed to. As I have thought more about it, I think this change will not only help me personally, but professionally it will allow me to focus more time on the future of our business and work closely with our team to make sure we are creating the world’s greatest agent experience.
We’ve all been running hard this year. And while Compass isn’t going to slow down any time soon, I’m using these days over the holiday to look for ways to continue to operate at my peak in a more sustainable way in the year ahead — and I encourage every one of you to do the same. Because you can’t truly maximize your strengths unless you know your own limits and know what you need to succeed.
Thank you for a record-breaking 2018. Here’s to a truly historic 2019!