A group of top earners, market center owners and regional leaders are pushing for significant changes to Keller Williams’ profit share model by removing associates from the company’s lifelong revenue program when they jump to a competitor.
The program, which a Keller Williams spokesperson called a “cornerstone” of Keller Williams’ culture, currently allows agents – which the company calls associates – to vest for life once they’ve notched three years or more with the company.
Both current and former Keller Williams associates confirmed to Inman that the debate was sparked within the company at a meeting in Austin last week. A source familiar with the discussions said the proposal may continue to be tweaked and that no clear timeline has been set for a decision.
“With regard to the ‘proposal’ in question, this was not a proposal put forth by [Keller Williams Realty International],” Keller Williams CEO Gary Keller told Inman. “This was an idea brought forth by a small group of KW’s top profit share earners, market center owners and regions.”
It’s unclear if, under the proposed policy, profit sharing would be cut off retroactively to agents who have already departed Keller Williams or only future defectors.
Inman has reached out to legal experts to discuss considerations Keller Williams may face in changing its plan for current and future agents. We will update as we learn more.
A competing associate is defined, in the document, as, “any current or former licensed associate, staff member or employee of an affiliated company that competes with Keller Williams Realty.”
Through Keller Williams current profit sharing model, associates who are with the company for more than three years receive a portion of their former market center’s profit for life. Market centers take slightly more than 50 percent of their profit, then sponsored associates split up the rest.
The model works like a pyramid, with each associate taking 50 percent of that profit, then the rest being split among their sponsoring associate, and that associate’s sponsoring associate and so on, up to seven levels.
“Each of these programs are set in motion when an associate joins a Keller Williams office and names one person as the individual primarily responsible for bringing them to the company,” a white paper from Keller Williams describing the model states. “It may not have been the first person or the last person they talked to about Keller Williams.
“It may be someone from their Market Center, or it could be someone from another region, province, or country,” the paper continues. “It is the person who was most impactful on their decision to join the company.”
Since 1997, Keller Williams has dispensed more than $1 billion in profit sharing revenue, according to a company spokesperson.
Keller told Inman the company’s associates have complete control of the profit share system and it’s under the purview of the International Associate Leadership Council (IALC).
“On an annual basis, multiple proposals are brought forth to a vote at one of two annual IALC meetings,” Keller told Inman. “We invite and expect high-minded, vigorous debate, and know it’s critical in order to maintain the transparency our company is rooted in and the open-books commitment we make to our associates.”
“Any potential changes to the system must be submitted as an official proposal and voted on by members of the IALC,” Keller added. “If our profit share system is to change, our agents will decide. No changes to the system will be made without the approval of our associates, via a vote of the IALC.”
This is not the first time members of the company have sought to address former agents, now with competitors, raking in company money. At Inman Connect in San Francisco in July 2018, Keller Williams CEO Gary Keller challenged all eXp Realty agents formerly with Keller Williams – and eXp World Holdings CEO Glenn Sanford – to give back the $1 million in profit sharing they’ve received from the company.
“Gary [Keller] for years, I can’t tell you how many times I was in a room with him when he said we would never do anything like this because it would totally break the integrity of profit share and the commitment they made,” Kauffman told Inman on Monday.
“It’s going to anger a lot of people who have been there a long time who feel like they were made a promise that has been revoked,” Kaufman added.
Kauffman said he believes Keller sees it as a way to put his franchisees at ease, as there’s been a lot of pressure to lower caps and become more profitable.
“I think this is a way that Gary sees he can put some money back in the owner’s pockets,” Kauffman said.
Kauffman echoed Keller’s sentiments that any changes would need to come from the IALC, but added a caveat.
“Those [votes] always seem to go the way the company wants them to go somehow,” Kauffman said.
Keller Williams is still the nation’s largest franchisor by agent count – with an estimated 159,447 associates in the U.S. and Canada according to its year-end results – but that number has dipped recently. The company purged its rolls and lost nearly 11,000 agents from the end of the third quarter of 2018 to the end of 2018.
Still, removing the draw of a lifetime of profit sharing revenue could have two immediate consequences: helping the company retain its current agents, but also making agent recruitment more difficult. It remains to be seen if it’s a road the company will ultimately travel.