A group of top Keller Williams earners, market center owners and regional leaders have gotten their way: As of April 1, 2020, KW associates that jump ship to a competitor will no longer be able to receive profit shares from the company’s lifelong revenue program.
The policy is not retroactive and will only apply to associates that join on or after April 1.
Keller Williams’ International Associate Leadership Council (IALC) made the change Feb. 15 at the franchisor’s Family Reunion conference in Dallas, Texas. The council also increased the profit sharing vesting period, which is how long a KW associate has to be with the company before lifetime profit share benefits are unconditionally bestowed, to seven consecutive years, up from three consecutive years.
The policy changes are mandatory and must be implemented by April 1, a company spokesperson told Inman via email.
The new policies appear geared to reward company loyalists and prevent competitors from 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.
Keller Williams declined to comment on the rationale behind the changes and on whether they would affect agent recruiting. The company has 159,372 agents in the U.S. and Canada and a total of 169,317 agents worldwide, as of Dec. 31, 2019. The company has lost agents in four consecutive months.
A letter to KW leaders outlining the changes mentions the IALC vote took place “[f]ollowing a presentation of findings from a year-long profit share task force.” The company declined to comment on the composition and duties of the task force or its findings.
The IALC represents Keller Williams associates, market centers and regions in the U.S. and Canada, according to the company. Its chairperson is the vice chairman of the board of Keller Williams Realty International, Mo Anderson.
Regional councils elect leadership and associate representatives to serve on the international council and regional directors or operating principals from each regional council also serve on the IALC. The company declined to comment on how many members the IALC has.
“As Gary [Keller], our CEO has mentioned prior, our associates have complete control of the profit share system and it’s under the purview of the International Associate Leadership Council (IALC),” company spokesperson Darryl Frost told Inman. “As our IALC has spoken, our leaders at the brand level of Keller Williams are now set on implementing those voted-on policy changes to profit share.”
“We will not be releasing any further details at this time while we move forward,” he added.
Frost added that the company continues to stand behind comments Gary Keller made last year when the idea of changing the profit-share program was first floated. At the time, Keller said, “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.”
Kevin Kauffman, a former market center co-owner, has previously said he believed Gary Keller saw the proposed change to the profit-share program 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 last year.
At the time, 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.
Through Keller Williams’ current profit sharing model, associates who are with the company for more than three years (soon to be increased to seven 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.”
From 1997 through Jan. 31, 2020, Keller Williams has dispensed $1.4 billion in profit share, according to Frost.
“Keller Williams Co-Founder and Chairman Gary Keller and early company leaders created the profit share program to ensure the goals of the company’s owners and agents remain permanently aligned,” Frost said.
“Profit share remains a cornerstone of our unique culture,” he added.
Read the full letter:
This afternoon, the biannual meeting of the International Associate Leadership Council (IALC) took place at Family Reunion. A group of KW delegates representing associates, market centers and regions met to hold a thorough and thoughtful discussion on two motions brought forth from the field related to policies core to our profit share program.
Following a presentation of findings from a year-long profit share task force, a debate of the motions commenced, and ended in two votes with the following outcomes:
Amend the profit share vesting period from three consecutive years (current policy) to seven consecutive years. PASSED
Amend the terms of lifetime profit sharing. When a vested associate makes the business decision to move to a competing brand, their profit share no longer follows. PASSED
These changes are proposed to go into effect on or after April 1, 2020, and will NOT affect current associates or those who join before this date.
Be assured that any changes to the program, now or in the future, are determined entirely by our Keller Williams family through the IALC. Pragmatic and aligned with the WI4C2TS, profit share remains a cornerstone of the KW culture.
This historic vote faithfully represents the integrity of our culture instilled by Gary Keller in collaboration with the first IALC at the company’s inception over 37 years ago. A reflection of our interdependent model and transparency at the highest level, we stand together with our owners and associates in true partnership.
We thank all who participated today and will now begin working in close partnership with the task force to determine the fine details that make these changes a win-win for all. As these developments unfold, we are committed to keeping you informed.
Your KWRI Executive Team