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It’s a pivotal time right now for Compass and for Greg Hart.
Hart first joined Compass as chief product officer in 2020 after spending more than two decades in leadership positions at Amazon. Over an ensuing couple of years, he must have been doing something right because earlier this year a leadership shakeup saw him promoted to the position of chief operating officer.
At the same time Hart has been rising in the ranks, Compass itself has been the focus of intense scrutiny in the real estate world. In part that has to do with the company’s size and rapid growth; earlier this year Compass dethroned Anywhere atop the prestigious Mega 1000 ranking of real estate brokerages by sales volume.
But the firm has also continued to lose money and in its most recent earnings report outlined several cost-savings measures that are meant to create positive cash flow by next year.
All of which is to say, there’s never been more attention and more pressure on Compass than there is right now.
In that context, Hart recently sat down for a chat with Inman to discuss where the company is and where it’s headed. The conversation focused largely on technology, and the takeaway was that Hart sees Compass’ platform as a major and critical differentiator for the brokerage.
Check out what Hart had to say via a version of the conversation below that has been edited for length and clarity:
Inman: So for starters, talk to me generally about what most excites you. What are the big things you’re working on right now?
Hart: We talked about on our [second-quarter earnings] call that despite the fact the market overall is going through a bit of a downturn with industry transactions falling 10 percent in Q2, Compass was able to grow transactions 2 percent. And I think that’s really a testament to the power of our agents, we have amazing agents, and the power of our platform lets them be even more effective.
All of that is a backdrop to us making sure that we’re taking the right steps as a company on our path toward profitability. So making sure we’re looking at all our costs really closely and streamlining our operations to get more efficient.
I firmly believe that in a downturn the companies that are the strongest are in the best position to survive. I think our platform is a massive asset for Compass because it helps us be more proactive, it attracts agents to Compass and it helps agents stay at Compass. We have 90-plus percent agent retention. And it helps them run and grow their business better.
How exactly does the platform do those things? How is it helping agents run their businesses better?
First and foremost it is a single integrated end-to-end platform. So an agent can take a contact from the first point of contact all the way through to close a transaction, all in one place with one set of tools. They don’t have to use a [customer relationship manager] here and marketing tools with some other company there and then use something else for the transaction. It’s all in one place, so it’s much, much simpler.
Also because it’s all in one place and because of our ability to enable agents to see clients at every single stage of the relationship, they can easily stay on top of what they have to do. They can set up action plans and checklists. They can set up their CRM. They can send out emails and text messages and really enable themselves to stay in contact with all of their business.
And then finally we’re able to do things that other companies really can’t do. With things like Likely to Sell, where we make recommendations to our agents about clients that they have in their contact database that we think have a higher likelihood of selling. And we see agents reach out to them. The clients appreciate the outreach. It leads to sales. It leads to referrals. So there are a lot of things that sort of self-reinforce each other because the platform is one integrated solution.
What’s adoption like for the platform? I know other companies also have platforms but sometimes struggle to get agents to actually use them. Is that an issue for Compass?
It’s not an issue for us. The majority of agents use it on a very regular basis.
We see really strong adoption and it’s a massive driver for agents joining Compass as well. It’s one of the things that our strategic growth team, talking about the benefits it has, that really resonates strongly. Agents will say, ‘wow my brokerage doesn’t have anything like this. My brokerage says we have these tools, but when I see the tools you actually have they blow everything that we have away.’ And that’s a regular refrain we hear from agents who join Compass.
Some agents already have their workflows in place. Can agents at Compass continue using the tools they already like? And can Compass’ platform integrate with any other systems?
We certainly don’t prevent agents from using any system that they want.
We don’t have integrations within our platform for external systems for the most part. We have a couple small examples here and there, but generally, it’s its own integrated end-to-end solution. But there’s nothing that stops an agent from using something. Sometimes agents use another CRM. They’ve been using it for years, they’re used to it, they’re familiar with it. That’s fine.
With the executive shake-up that recently happened, I got a sort of “mission accomplished” vibe from Compass regarding technology. Is that right? What do you have left to do?
Well, I don’t think you’re ever done. But we are reaching a major milestone, which is the completion of all of the pieces of the end-to-end platform. The final pieces are around the end-to-end transaction management which is rolling out this month. And so that is a big milestone for us.
But we’re not hanging up our caps and going home. We’re going to continue to invest in improving the platform. Our agents are constantly providing us with ideas on how to improve and that’s the primary thing we use to drive our roadmap. So that’ll continue to be a source of focus going forward.
What kinds of things are you hearing in that feedback? What are agents asking for?
There’s something we’re rolling out in Florida right now. And it’s something we’ll roll out in the rest of the country over the coming months that we call Compass Services. So it’s a very simple way for agents to connect with all of the services that historically we’ve done in a non-integrated way. So, if an agent wants help with a listing or help with marketing services, or if they want to have a contract to close transaction coordination, historically they would do that by calling or emailing somebody.
But one of the things that agents have been saying is, “I’m not sure who I should call.” So the goal of Compass Services is to bring all of that together in one place on the platform. One front door, effectively, that they can go through to get help with any of those things.
I was listening to the last earnings call and you guys talked a lot about moving toward positive cash flow in 2023. What does that mean for your technology?
We believe we can moderate our investment in technology given all the investment we’ve made and the state of the platform. It by no means indicates we’re going to stop investing in technology. We believe that’s a differentiator for Compass and will remain a differentiator for Compass.
We also believe that even while we moderate our investment in technology, we’ll still have a larger tech team and be able to accomplish more than any other brokerage out there. We believe that right now we’re the leaders from a technology perspective and will continue to be the leaders.
I also believe our technology is one of the things that will help us on our path to profitability. Obviously, we can develop features that help our agents drive more business. And we can develop features that help our brokerage operate more efficiently.
Another part of this pivot toward profitability was pausing geographic expansion. How long will that last and do you see Compass eventually moving into more markets?
I think like every company in the space right now seeing what’s happening, we have to make sure we are being appropriately cautious about what we do. We firmly believe that the investment we’ve made in the platform is best leveraged by the more places that we have agents and the more locations that we serve. We only serve 50 percent of the U.S. population today.
We want to continue to expand. We just think right now isn’t the most prudent time to do that. But as the market improves I’d expect that we will continue to expand our footprint and bring the platform to agents in locations that we don’t currently serve.
Our time is basically up but share with me your parting thoughts. What else should people know?
I think Compass has received its fair share of criticism over the years and particularly more recently. So I would leave with a couple closing thoughts. Number one, one of the reasons we’ve received that criticism is that in 10 short years we’ve risen to be the number one brokerage. And number two, a lot of people talk about Compass and its cash position, whether we’ll achieve profitability, whether we’ll go out of business.
As we said on the Q2 call, [we have] $431 million in cash. That’s more than any of the other competing brokerages to my knowledge. And we’re firmly committed to our path to profitability. We believe that our technology platform is absolutely a differentiating asset for us both in growing and attracting agents. And all of those things will be critical to us on that path to profitability. We think we’re well-positioned to weather any downturn that the market continues to see.