Expert John Aaroe is not afraid to ask the hard questions. Brokers need to step up and ensure the survival of the company. How much are they willing to invest to make company culture work to save their business?

New markets require new approaches and tactics. Experts and industry leaders take the stage at Inman Connect New York in January to help navigate the market shift — and prepare for the next one. Meet the moment and join us. Register here

Markets driven by emotion rather than solid economic stability tend to distressingly stop on a dime. Now that we’ve said goodbye to yesterday’s roaring, emotionally fueled market, it’s time for a waiting game.

When will an environment of stability emerge, one that’s strong enough to allow the market to find its true bottom? We’re not approaching that moment yet.

Culture clash

While companies busy themselves comparing market cap, agent count, company dollar, unit sales, gross revenue, affiliate contributions and other key metrics, they’re paying too little attention to a critical variable: Company culture.

If a company’s culture isn’t authentic and agent-centric, with integrity behind the brand, none of the other benchmarks have a leg to stand on. The next market will test whether agents believe their company has true core principles and sticks to them, whether their leadership has been transparent, and whether it’s dealt with integrity.

With that critical factor in place, cash flow can be very forgiving. In 1990, I was General Manager of the Jon Douglas Company, one of the largest residential companies in Los Angeles at the time.

Changing to charge ahead

Bashed by a weak economy, the Persian Gulf Crisis and declining consumer confidence, the market fizzled and prices dropped. Our leadership team made a commitment to remaining debt free, with enough liquidity to accelerate growth when the market stabilized.

Doing that meant increasing the company dollar by 2.5 percent immediately. No exceptions. 

We communicated this to our agent population in a completely transparent way. We explained that at that moment, the capture rate of all affiliates could well determine our ability to survive.

Profits aren’t made in dollars but in nickels and dimes. Not only did we openly discuss our burn rate, we shared our commitment to being in a position of financial solvency during a weak market. 

New growth

In deciding to tell all, we were testing the company culture right to the core. We were asking agents whether they believed in the enterprise strongly enough to be partners in it.

To step up and ensure the survival of the company. We were asking them whether they believed the enterprise was a value-added commodity for them, or if our competitors looked equally attractive.

We got our answer quickly. Within months, the company moved into the black, and we increased our agent count by 30 percent. It was a crystal-clear (and very rewarding) example of the power of company culture during challenging times. 

Management can’t back into credibility. The partnership between the agent and company must be rooted in mutual respect from the hiring of the first agent. If it’s not, all the cutbacks, rollbacks, layoffs and other modifications in the world won’t work. 

As yet another market shift looms, that’s a timeless lesson to remember.

John Aaroe was one of the leading estate agents in Beverly Hills, representing Cher, Diana Ross, Neil Simon, Joan Rivers and countless others. He worked with Nancy Reagan, studio CEOs, business leaders and prominent politicians. Aaroe owned two of the most successful and productive real estate companies in the Beverly Hills/Los Angeles marketplace. 

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