The Potential Perils of Being Out of Control

Screen Shot 2015-07-17 at 9.12.57 AMThe American residential real estate industry is currently going through a quiet but particularly dramatic phase of its contemporary history. Brought about by the now almost two year old announcement by the Consumer Financial Protection Bureau that, effective August 1, 2015, it would be developing and enforcing a new set of lender mortgage disclosure and RESPA audit rules the various segments of the industry are demonstrating a number of reactions and responses.

Over the past two years the mortgage and title sectors invested significant energies and resources into creating processes and procedures that will ensure that its business practices will be in compliance with the new rules. Both deserve a hero’s medal for the millions of dollars and human resources that they have invested into making sure that the return of regulation to the industry is accomplished with as little disruption as possible.

The fourth player in this historic drama, the real estate services or brokerage sector, has also executed on a number of significant reactions and responses. Instead of acknowledging the new rules and doing their best to comply, by and large the brokerage sector has elected to effect a combination of ignoring the rules and denying any potential impact or liability.

In its defense the brokerage sector was, to some extent, relying upon representations by its advisors in organized real estate that nothing in the Dodd Frank consumer protection act of 2010 applied to them. For much of period since July of 2013 brokerage sector inquires were met with an absolute assurance that there was a specific provision and a political promise that nothing in the CFPB program was relevant to brokerages and agents.

This convenient reality remained in place until early spring of this year when inquiring minds began to realize the significance and probable impact of the new regulations and altered RESPA procedures. By early April the alarm had been sounded and, while even then the majority of the brokerage sector refused to consider the ramifications of the new regulatory threat, significant numbers of firms undertook to respond to the threat posed by the Bureau’s efforts to protect the real estate consumer.

What became relevant at this point was the internal experience of the brokerages that made the decision to respond to the new CFPB rules as they undertook to protect their consumers, agents and stockholders against the very significant downside of interacting with a regulator that is (1) consistently demonstrated over the past 48 months its commitment to make all elements of the real estate transaction safe for the American consumer (2) following an unfaltering course of notice and focus in that direction and (3) armed with both enabling legislation and a demonstrated willingness to use its ability to levy significant financial sanctions ($5,000 per day per file fines) against offending and non-complying parties.

Screen Shot 2015-07-17 at 9.40.19 AMIt is sufficient to say that as brokerages have attempted to affect some level of control over their transactional operations they have discovered what many have always known. After decades of deferring command and control, they now find themselves almost totally unable to exercise even the most minimal impact over they’re most basic processes and procedures. Even when faced with the certainty of failed audits, immense fines by an agency who gets to eat significant amounts of what it kills and the high potential of lawsuits from engaged consumers whose lives become disrupted because of non-complying transactions, the internal constituencies of many brokerages refused to submit to even the most basic of best practices and transactional safeguards. It would appear that the industry’s traditional adage that “I don’t need no stinking boss” has risen to become its nemesis and “Achilles heel.”

For many brokerages going through the process, the findings have been nothing short of horrifying. The broker’s almost total lack of control coupled with the refusal of agents and, in many cases, managers, to comply with management systems and internal rules has been alarming. One of the more classic examples was a firm that discovered that the local MLS records reflected over 500 listings attributed to the firm that it didn’t know existed.

What makes these brokerage experiences even more alarming was the recent release (May 15, 2015) of the courageous NAR DANGER report. This document, commissioned by NAR and totally unrelated to the CFPB and its current initiative, the first of its kind in the industry, skillfully documents the concerns of dozens of top industry executives and decision makers that this very thing might happen.

Many within the industry saw the recent CFPB decision to defer rule enforcement by 90 days as some manner of political or strategic victory. Those who are most familiar with what is happening here realize that the delay will only serve to amplify the existing circumstances. The bureau will be that much more prepared to execute on its mandate, the mortgage and title sectors will be that much more competent in their compliance and the brokerage sector will be that much more unprepared to protect itself and its consumers.

What then can a brokerage that has not undertaken or been able to effect actions to protect itself do at this late moment with only 90 days remaining in the countdown? The simple answer is due diligence.

One morning or afternoon on a date after Saturday, October 3rd, your receptionistScreen Shot 2015-07-17 at 9.17.06 AM may look up to see one or more individuals introducing themselves as being from the Consumer Financial Protection Bureau. They may announce that they are present to conduct a TTILA/RESPA audit.

What happens from this point forward may have everything to do with the size of the fine that will ultimately be levied on your brokerage. This moment in time compares rather nicely with being pulled over for a traffic violation. Why do some drivers receive citations while others depart with a warning? As any officer will tell you it has everything to do with the driver’s respect and common sense. Enforcement discretion is never awarded to jerks.

Just as a significant percentage of drivers pulled over elect to respond by being hostile, argumentative and even combative so will a like percentage of brokerages fall into the same trap. The operative assumption on the part of auditors is that the treatment they receive is very likely to be the same treatment that the brokerage will give to a consumer with a problem.

Screen Shot 2015-07-17 at 9.22.58 AMGiven these circumstances how should the brokerage respond? Leaving CFPB personnel standing in the lobby while contacting the broker, calling legal counsel, asking for a search warrant or demonstrating a belligerent attitude is not the right answer. The first contact, and all subsequent contacts within the brokerage, whether they have been there for ten-years or just happen to be walking by, should respond as if the brokerage is prepared for such an audit. To a great extent the auditors will judge the brokerage on the basis of what due diligence is in effect.

If the auditors’ request to see the firm’s TILA/RESPA Audit procedures file and the response is that “there is no such file,” what does one imagine will be the response? Does, “Oh, no sweat, we will come back next week” sound correct? If the brokerage doesn’t respect the law or the consumer enough to have such a file then there is really nothing to discuss, it is now just a matter of how much the fine is going to be.

What should be in this magic file(s) is the evidence of what efforts the brokerage has made to comply with the new rules. This effort is referred to as “due diligence.” It is the sum total of the efforts made by the brokerage to prepare for an audit. One doesn’t have to be an expert on fires to prepare for a possible fire. Initial due diligence is nothing more than common sense and respect. It is time for the industry to demonstrate these qualities. We can do this.

 

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The Fine Art of Due Diligence

Screen Shot 2015-06-30 at 5.10.43 PMOn June 24th of this year the Consumer Financial Protection Bureau (CFPB) proposed a two-month extension of the effective date of its “Know Before You Owe” mortgage rules. The proposal, if approved by the agency’s internal processes, will extent the effective date of the rules to Saturday, October 3rd. The rules, also known as the TILA-RESPA Integrated Disclosure rules, require easier-to-use mortgage disclosure forms that clearly lay out the terms of a mortgage for a homebuyer. The RESPA rules (circa 1974) speak for themselves.

The news of the extension was met by the real estate industry with a number of responses. A significant segment within the industry didn’t notice it at all choosing to ignore the rules as they have done from their initiation some two years ago. Another segment within the industry simple elected to ignore the notice. Finally there is that segment that realizes that these rules will have a significant impact upon their businesses but are, as of yet, uncertain what actions to take.

This piece is directed to this last group. If, after all of the information, commentary and “wake up” calls that have been distributed, a brokerage firm or its management team still believe that the new rules will have no impact, then the foundations of one amazing surprise have been laid. Try not to gasp when you see the amount of the fine.

The following information is provided for those brokerage executives and managers who recognize that they must take some action, and soon, to avoid a regulatory catastrophe.

Lets set the stage first. One morning or afternoon on a date after Saturday, October 3rd, your receptionist (hereinafter referred to as your first line of defense) will look up from her or his desk to see one or more individuals introducing themselves as being from the Consumer Financial Protection Bureau. They will not be in uniform but they will produce acceptable identification. They may announce that they are present to conduct a TILA/RESPA audit. They will request to be provided with a space from which to conduct their work. They will further request that certain files be produced.

What happens from this point forward may have everything to do with the size of the fine that will ultimately be levied on your brokerage. The likelihood of a fine is almost a certainty since few brokerages, regardless of size or management sophistication, have recently gone through either a TILA or a RESPA audit. In 2014 such fines against brokerages ranged from $10,000 to hundreds of thousands of dollars.

At this point in the process one could compare what is about to happen with being pulled over for a traffic violation. Why do some drivers receive citations while others depart with a warning? As any officer will tell you it has everything to do with the driver’s respect and common sense. Enforcement discretion is never awarded to jerks.

Just as a significant percentage of drivers pulled over elect to respond by being hostile, argumentative and even combative, so will a like percentage of brokerages fall into the same trap. The operative assumption on the part of auditors is that the treatment they receive is very likely to be the same treatment that the brokerage will give to a consumer with a problem.

Given these circumstances how should the first point of contact respond? Leaving the CFPB personnel standing in the lobby while we contact the broker, calling the brokerage legal counsel, asking if the Bureau has a warrant or demonstrating a generally belligerent attitude or bearing are not the right answers.

The correct answer is that the person of first contact, and all subsequent contacts within the brokerage, whether they have been there five minutes, one day, ten-years or just happen to be walking by, should respond as if the brokerage is prepared for such an audit. The auditors, who will, for the first few months or so, understand that the brokerage is likely not fully prepared, judge the brokerage on the basis of what due diligence is in effect.

If the auditors’ request to see the firm’s TILA/RESPA Audit procedures file and the response is that “there is no such file” what does one imagine will be the response? Does, “Oh, no sweat, we will come back next week” sound correct? If the brokerage doesn’t respect the law or the consumer enough to have such a file then there is really nothing to discuss, it is now just a matter of how much the fine is going to be.

What should be in this magic file(s) is the evidence of what efforts the Screen Shot 2015-06-30 at 5.13.10 PMbrokerage has made to date to comply with the new rules. This effort is referred to as “due diligence.” It is the sum total of the efforts made by the brokerage to prepare for an audit. One doesn’t have to be an expert on fires to prepare for a possible fire. Initial due diligence is nothing more than common sense and respect. The file might contain evidence that the firm has undertaken the following:

  • To be aware of the new TILA rules and existing RESPA regulations and be committed to protecting clients and consumers to the fullest extent
  • To inform its staff and agents that these rules and regulations exist and to have evidence of their agreement to comply
  • To provide competent orientation, training and coaching on the new rules and existing regulations for all responsible parties, staff and agents
  • To establish competent policies and procedure that inform and protect customers and clients regarding the new rules and existing regulations
  • To designate specific individuals to be responsible for various elements of its compliance program
  • To initiate specific procedures to monitor compliance and respond to possible violations including written warnings and appropriate sanctions
  • To monitor the CFPB website for new developments

Screen Shot 2015-06-30 at 5.14.12 PMThe creation of the file doesn’t require lawyers, experts or days of work, nor does it guarantee that there won’t be a fine. These are common sense steps that any reasonably competent executive or manager should be able to complete. There will be plenty of time for bureaucratic complexities. As the Bureau and the industry experience with these matters grows so, will the file and the programs it supports.

In the mean time the sage advice is to “show you give a darn and DO SOMETHING!”

Stand By For Position RPR Verification

Last month we reviewed the down to earth business intelligence and guidance provided to the brokerage community by a recent series of industry conferences renown for the depth of their research and the accuracy of their presentations. In preparation for this month’s information you are requested to immediately climb to 55,000 feet for a more extended view of the circumstances that will be impacting, if not controlling, your businesses and marketplace moving forward.

The events of Saturday, May 16th will, in all likelihood, impact the operation of your business more than any other single day in recent history. This is, of course, a reference to the National Association of REALTORS® Board of Directors meeting held in Washington, D.C. and the positive vote taken in support of NAR’s partnership with Project Upstream as well as the funding of both Project Upstream and AMP (Advanced Multi-List Platform).

The following comments benefit generously from comments made by Dale Ross, the uber gifted RPR CEO. The partnership between NAR and UpstreamRE, LLC will leverage the RPR technology platform to develop a new data management service for brokers known as Project Upstream. The events of May 16th culminated several months of extensive discussions between the leaders of many of the nation’s largest brokerages, franchise networks and NAR. They created a significant opportunity for the industry to leverage and take advantage of RPR’s five-year investment in data and technology.

In light of the importance of these events additional clarification may be necessary. It is common knowledge within the industry that NAR, through its wholly owned subsidiary, the REALTOR® Property Resource, has, over the past five years, invested millions of dollars into what may be the finest real estate database ever created. It is also widely known in the industry that RPR’s first attempt, in 2010, to bring the benefits of this database to its REALTOR® constituents was something less than successful. Even today, five years later, our ever-present industry observers, many of whom have no claim to creativity or innovation, continue to rave on about this early shortfall.

Well, that nonsense can now be silenced forever. Because of the courage, resilience, insight and leadership of Dale Stinton and Dale Ross, NAR and RPR were, with the assistance of some of the brightest minds in the industry and in the midst of one of the most intense conflicts in the industry’s history, able to bring the lessons learned, experience and assets created by that investment into the arena to bring the parties together and allow them to move forward on common ground, not bifurcated turf.

Lets bang on that drum one more time. The RPR investment will now take its place in history as one of the smartest business strategies ever orchestrated by organized real estate. At the very moment that circumstances suggested a violent separation of organized real estate and big business, the RPR investment stepped forward to make the difference.

With this event in place a number of philosophical and business issues arise. Consider the following.

  • Will those industry personalities who fancy themselves permanent critics now transition to support this epic opportunity or will they continue to wallow in an historic mud bath and confusion?
  • Will those talented minds that were able to bring peace and a whole new standard of quality to the industry demonstrate an equal level of talent by lending themselves to the difficult task of development and implementation that lies ahead. Success over the next eighteen months will require honesty, collaboration and faith. Unfortunately the path ahead will also be vulnerable to the actions and words of those who have no real stake in the game and relish ambushing the process as a form of intellectual entertainment.
  • Finally, and perhaps most importantly, will a critical mass of brokerages and agents rise to the opportunity created by this agreement to create a true future focus? These are exciting times, but only for those who elect to be participants rather than spectators.

What does all this mean to millions of productive REALTORS® and successful brokerage firms? Project Upstream will be built on RPR’s Advanced Multi-list Platform™ (AMP™). AMP provides a new technology foundation for MLSs to serve brokers and agents. This unified platform will have two distinct servicing components. Upstream will be a single point of listing entry, management, and distribution for brokerages. AMP is parcel-centric database to power MLS services.

If you are a broker you are about to have a data experience that will allow you to “call the shots” and customize that experience like never before. If you are an agent you are about the experience the excitement of working with a system that has the strength and universality of attract hundreds of new features and functionalities.

Recall how excited you were when you bought your first smart phone and visited the “app store.” That wonderment was possible because of the stability and predictability of the basic platform (your phone). The same dynamic will, in the near term future, be available to the industry MLS subscribers.

The beneficiaries of this new way of doing business will be many. Brokerages will now be able to design profitability and unique consumer and agent data based experiences into their systems and procedures. Agents will be able to celebrate individuality by designing and implementing data related services that are unique to their market, professional talents and personalities.

The most important beneficiary of this new world will be competitiveness. A whole new generation of agents will be engaged in “doing it their way” within the constructive structure of rules and roles that that are ethical, profitable and consumer centric.

Now is the time for brokerages and REALTORS® to begin the process of preparing for the new world. Don’t wait. As always the early adopters will gain the upper hand.

Please return to your regular altitude and prepare to file a new flight plan. We hope you have enjoyed the view ahead.

Is Your Firm Engaging The New Status Quo?

Like many business, cultural, sporting, academic, and social activities there is a season for real estate industry update and status conferences. During the disclosure season each of these events adds just a bit more clarity to the ultimate question; what is new regarding real estate brokerage and marketing operations?

Screen Shot 2015-05-19 at 2.49.25 PMWith the adjournment of last week’s National Association of REALTORS® Legislative Meetings & Trade Expo (AKA Midyear Meetings) in Washington, D.C. the industry’s 2015 update season came to a close. During the past 90 days a plethora of meetings including, but not limited to Inman Connect, T3, Gathering of Eagles and last week’s NAR meetings provided the industry with a glimpse into the current status of a brokerage business and operations environment that has found itself mightily impacted by a wide range of trends, directions, and forces.

There can be no doubt that each of the hundreds of observers, who participated, attended and/or evaluated these events, came away with a slightly different impression. The industry media, over the next ninety days, will be awash with impressions and opinions. Be that as it may, there are a number of conclusions that are high enough up the intellectual pole to be universal. The objective of this piece is to attempt to present these new foundational realities.

The following five statements are nominated to head the “most impactive” list.

  • Various presentations by senior industry (as opposed to organized real estate) leaders contributed to an overall understanding that moving forward brokerage operations in many ways will end up farther afield from the traditional model that previously imagined. This in turn leaves a sense that current efforts are in the nature of “getting ready” for the ultimate rather than being the ultimate.
  • There is an increased understanding at the highest levels that the industry is not maximizing its profit potentials.
  • The current record level of public ownership of industry infrastructure and its demands and expectations regarding profitability is impacting virtually every aspect of the industry.
  • Increased levels of direct and intense consumer interaction are forcing the industry to meet new levels of interactive and experiential demands and expectations.
  • The value propositions of the franchise, brokerage and agent sectors are loosing traction in the eyes of their respective customers.

How then are these four factors influencing the current industry environment? First of all it is important to note that while in some cases they are operating severally or individually, in the majority of cases they are converging with each other to impact jointly or in combination with one another or lessor factors.

Screen Shot 2015-05-19 at 2.52.01 PMThe traditional brokerage business model has evolved to focus on profitability. This transformation is driven by a growing sense that if it doesn’t get its profitability act together two probable results will occur. The first is that Wall Street will withdraw its support of the current business model, and the second is that forces currently outside the industry will introduce a new business model that will combine new factors and functionalities that will render the current business model irrelevant and even more ineffectual.

The industry appears to have gained a more complete understanding relative to the effective use of agents. The industry is shifting its focus away from the traditional idea of sending thousands of misdirected and underprepared agents out to fish by themselves every morning, and hoping for the best. In its place are a number of new strategies that call for maximizing agent effectiveness through agent teams, standards, best practices, accountability and metrics driven management.

The industry is developing a whole new approach to the concept of the “lead.” Gone are the days when firms view leads as agent generated business opportunities that may or may not be pursued based upon an agent’s mood or attitude on any particular day. In this new brokerage world every lead is presumed to have profit potential if it is being engaged by appropriate and timely attention. One major firm provides agents with five minutes in which to respond to a lead before other options and company resources come into play with a maximum of seven minutes to direct contact.

The role of agent teams is shifting from gang-like entities to very sophisticated and highly managed groups of agents operating in close coordination with other brokerage assets and resources under the terms of carefully designed and negotiated written agreements. Agent teams are transitioning from profit wasters to profit generators.

The two developments cited above have come together to require much more sophisticated agent recruiting procedures. Profiling and other psychology based procedures are providing a much higher probability of success not just from a productivity or financial perspective but even more importantly relative to the would be agent’s ability to engage brokerage standards and best practices, respond to brokerage supervision and collaborate with other members of the brokerage team. These developments clearly signal the end of the agent centric era.

As the brokerage environment has moved forward to incorporate these new factors a parallel understanding has emerged regarding the need for classic leadership skillsets and competencies on the brokerage’s management team. Here again the traditional “keep agents happy” at any cost philosophy is transitioning into a sense that brokerage management systems, not agent attitudes, must set the brokerage’s pace, tone and impact.

One of the most interesting developments of this new brokerage Screen Shot 2015-05-19 at 2.47.30 PMbusiness model has been the discovery that the brokerage’s corporate culture may be one of its most valuable assets. More and more firms are now incorporating the ideas originated by Patrick Lencioni that creating a “smart” company (One that uses strategies, marketing, finance and technologies to drive success) is good, but nowhere near as effective as also creating a “healthy” company designation (adding minimal politics, minimal confusion, high morale, high productivity and low turnover to the “Smart” mix.

All of these factors come together to merge with what appears to be the most challenging issue facing today’s real estate industry. This of course is meeting the needs, expectations and demands of the contemporary real estate consumer. Perhaps more than any other operational statistic, the fact that 44% of consumers are currently finding the property they ultimately purchase without agent assistance, set the tone here. Today’s consumer is nearing a point of believing they can do the deal without agent assistance.

Whether this is true or not isn’t really an issue for the brokerage. The point of conflict occurs during the discussion of service pricing. Even those consumers who recognize the need to use an agent (still the vast majority) are not clear relative to the value proposition. From the brokerage perspective if the consumer doesn’t believe there is value in the agent, they are highly unlikely to find value in the brokerage. There is a growing understanding that the agent sector is basically unwilling or unable to carry their part of the value proposition argument. Thus it becomes increasingly clear that the brokerage may have to carry both.

These observations leave us at the edge of where the conversations of the past few months have dared to extend.

There is a new brokerage business status quo out there. But wait, there is more! Even before industry travelers had a chance to pack their tents and head home, Move.com had already announced a new REALTOR.com promotional campaign that appears to have the potential of stimulating a whole new round of change and transition within the portal sector.

Track industry developments closely. This new future has your name written all over it.

Experiencing the Real Estate Master’s Event

The “Master’s” golf tournament held each year in early April is, without doubt, the premier golfing event of the year. Its legacy and traditions in many ways define the very game of golf.

RealTrends Gathering of EaglesThe American residential real estate industry also sponsors a defining “Master’s” level event. It is known as the “Gathering of Eagles” (Sometimes just the “Gathering”). The responsibility for hosting this event belongs to the now twenty-nine year old Real Trends organization that hosted the 2015 edition of the Gathering Eagles event in mid April at the Four Seasons Hotel in Denver.

Over the past few years the rate of change and transition within the American residential real estate industry has been nothing short of historic. Virtually every element of the industry, the marketplace, its demographic and its transaction has been or are being recast and repositioned. Accordingly, perhaps more than every before, the task and challenge of defining the parameters of the contemporary industry through the eyes of the “Gathering” event approached herculean.

Without question Steve Murray and his impressive Real Trends cast of thousands (actually just 14 in number) rose to the challenge. The 2015 edition of the Gathering of the Eagles event did indeed provide attendees with a finely tuned and spectacularly accurate portrait of the leading edge of today’s industry environment.

The event was launched with a presentation by national award winning Director of Marketing for Coldwell Banker International, Sean Blankenship, who established the fact that defining the industry in 2015 meant taking another look at the configuration of the housing inventory, especially as it relates to the ideas of the “smart” or (for the cool set) the conscious structure. Sean’s comments set the stage for a Coldwell Banker produced seminar on that same subject that took place later that day.

The Gathering next delivered an excellent panel on the subject of recruiting competent people to manage the new real estate enterprise. The panel included a number of participants who can take credit for having invented the new brokerage business model: Jeremy Lambert from Your Castle Real Estate, Larry Matos from Century 21 M&M Associates, David Osborn from Keller Williams Realty and Thad Wong from @Properties in Chicago. These are the “young Turks” of today’s industry and in an amazing number of ways they have redefined the art of recruiting and managing sales associates in a manner that ensures the long-term success of the enterprise.

Much of what this group was sharing had to do with adding substance and strength to the brokerage value proposition. Techniques for adding spirit and viability to the firm in the eyes of its agents were another value point. Issues regarding space allocation were given priority. The panel spent a great deal of time articulating the attributes of a great recruiter but in the final analysis it seemed to be all about “making the calls” over and over again.

Once again demonstrating his inordinate skill for creating the “big picture,” Steve’s interview of RE/MAX founder Dave Liniger probed 40 years of innovation, competitiveness and courage to establish the point that some elements of greatness never change. Mr. Liniger’s comments and recollections not only provided a connection of relevance between tradition and the leading edge but also reminded everyone that there aren’t many classic pioneers left in the industry culture.

The appearance and presentation of prolific business author and innovator Patrick Lencioni was another of the Gathering’s high points. Mr. Lencioni’s expertise revolves around the benefits of developing, encouraging and promoting great company cultures. In Patrick’s world, company cultures are the foundations of effective value propositions. His comments served to frame the definition and value of the “healthy” company. He prioritized the four disciplines of a healthy organization. He spent considerable time talking about how to create a cohesive management team fueled by trust. If the Gathering provided an opportunity for its participants to think at an MBA level this was that opportunity. Amazing substance and an impressive learning experience.

The Gathering program next tapped into another asset of leading real estate firms, “Building Great Agent Teams.” For many attendees this panel provided the answer regarding why agent teams are such a “big deal” and how they can contribute to both overall productivity and profitability. Participants included such agent team super stars as Lisa Burridge of Burridge and Associates, Mike McCann of BHHS Fox and Roach and Mark Spain from Keller Williams.

The agent team segment was especially interesting in terms of its point of reference with the brokerage. It established that an agent team does not operate free of management control or influence. The critical point that was made during this program element was that, yes, agent teams can be very effective and can contribute to the overall success, productivity and profitability of the brokerage. However, only if they exist and operate under the terms of very clear brokerage policies and practices. If the right agreements are in place agent teams are in everyone’s best interests. This is all about using new management techniques to meet the expectations and needs of all involved.

The Gathering’s continuing exploration of the contemporary brokerage business model next explored the role of leadership in the new environment. This panel featured some of the most effective executive leaders in the industry. Sherry Chris from Better Homes and Gardens, Brian Fair from Keller Williams Atlanta Partners, Todd Hetherington from Century 21 New Millennium and Merle Whitehead from RealtyUSA brought to the Gathering an amazing level of knowledge and experience regarding how to make leadership an effective and differentiating force within the brokerage.

Among the Gathering attendees there was near universal agreement that leadership is the single most important factor in determining the value of a brokerage. It is similarly agreed that leadership is more than a feeling or an effect. It must be a measurable and focused quality and value. Each of the above experts had developed within their respective companies unique leadership identification, development and integration practices. Each spoke in concise and easy to understand terms how they use leadership applications and practices to move their firms forward. Most have adopted basic leadership qualities from a third party expert such as Patrick Lencioni or John Maxwell.

The appearance of Peyton Manning at this year’s Gathering can only be described as a gift. This gentleman is an athlete and is obviously involved in professional sports. But to use either of these points of reference to define him would be foolhardy. Peyton Manning presents himself more like a Fortune 500 CEO than a sports hero. He was articulate and visionary in his comments and observations regarding an impressive range of contemporary leadership environments and issues. Most impressive was how the audience responded to both his presence and his contributions. If one had known absolutely nothing about him from the onset, the initial impression would nevertheless have been overwhelming. On behalf of all of those who were present for this amazing experience; Thanks Steve.

From the Manning appearance the program morphed into the art-of-the-possible, thanks to the generosity of Coldwell Banker who had imported a panel of young experts to talk about the idea of “conscious” structures (They are no longer called smart houses). This program provided insider knowledge about enhancing one’s life and career success with the modern magic of Tesla automobiles, LG appliances, Lutron switches, CNET magazine and Sengled smart lighting switches. Each of these items has the capacity to fundamentally expand the quality of life. Together they demonstrated an ability to create a whole new life style. Imagine this, all of these features can be added without impacting or modifying the actual structure.

For the last morning of the conference the Real Trends team provided an absolute treat. Scheduled at a time that one would have thought would limit participation, the expanded Real Trends team provided ninety minutes of pure unadulterated knowledge regarding the current state of valuations, mergers and acquisitions. If limited attendance was part of the scheduling strategy it failed. Even at an early hour the room filled long before the program started and spilled out into the hallway. Everyone knew that this would be the “Gold of the Gathering.” This was the opportunity to share the expertise that has always been at the foundation of the Real Trend’s power and influence. No one was disappointed and more than just a few would be nursing their sprained hands from note taking. More than just information, this program element was made even more impressive by the cool and professional way in which the Real Trends team delivered their expertise through a complex series of questions and challenges. They were terrific. Steve has created the ultimate team here.

Fact: The real estate industry does support a “Masters” level tournament of knowledge, management skills and productive excellence. It is called the Gathering of Eagles and once again, for 2015, it delivered on its promise to be the premiere industry brokerage event of the year. This impressive achievement left all who participated much more prepared to meet the challenges of the coming year.

T-3 Summit: Another Swanepoel Masterpiece

Screen Shot 2015-04-17 at 1.03.41 PMAs everyone knows there is a plethora of industry conferences these days. Some serve as open markets for industry programs, products and services, while others serve as cultural gatherings for specific industry communities and yet others serve as destinations for those whose annual budgets provide for a wide range of discretionary travel. Each services the needs of a specific industry constituency.

Over the past three years Stefan Swanepoel has become the Michelangelo of the real estate Screen Shot 2015-04-17 at 1.05.08 PMconference circuit and his T3 Summit has become its Sistine Chapel ceiling event. Swanepoel has achieved this status through innovative program design, quality production, the right attendance mix and attention to detail.

This author has had an opportunity to be involved in the production of all three T3 events and is in an excellent position to share the wonderment of the “inside track” that makes T3 an astounding experience.

Anyone who has ever experienced a Swanepoel presentation, publication or analysis can testify to the thoroughness and expertise that goes into its design and substance. The T3 Summit is the flagship of this standard. Swanepoel and his team spend months designing the T3 experience. By way of example, going into the initial planning for the 2015 event last fall the Swanepoel team was tracking 23 specific and unique game changing issues. Over the three days of the 2015 T3 Summit at the Four Seasons Hotel and Resort in Las Vegas participants and attendees had an opportunity to gain in-depth knowledge about the historic basis of each of these issues, plus another five that didn’t even exist six months ago, their up-to-the-minute status and their likely destination over the next year. Each of these discussions incorporated the expertise of its own “recognized” industry thought leader(s), from a cast of 29 such experts, as well as the benefits of a superb facilitator who was responsible for the full range of each subject being developed.

But it is not the mere substance of the program that is the centerpiece of the T3 Summit but, rather, the insights of its participants. The 2015 experience was shared with 288 registrants, the vast majority of which were both recognized industry thought leaders as well as leading industry “C” level executives. The T3 experience is commercial free, without the pressures of sales pitches. The CEOs invited to participate don’t tell stories about what they have heard about specific events or give their canned speeches you hear everywhere else. Rather they share their actual personal views because they were there, they were the decision makers and they caused the events to happen. No format, short of sitting in these executives’ offices and conference rooms, could duplicate the quality and depth of the knowledge and information imparted during the conference. A few more examples;

  • Screen Shot 2015-04-17 at 1.06.54 PMZillow is, at this moment in time, arguably the most impactive force in the North American real estate marketplace. Stefan’s interview of Zillow CEO Spencer Rascoff provided a treasure trove of invaluable information for those who will be sharing a market and/or competing with Zillow over the next year. How does it matter that Spencer’s father spent his career as the CPA for the Rolling Stones? What is the relationship between Ivy League schools like Harvard and the Wall Street institutions? What is a “Wiggle” and what does that have to do with Zillow? The interview started with Spencer as a disrupter and ended with him as a genuinely nice guy. Only Stefan can do that. Perhaps most important of all, what will it mean to the industry when consumers have the ability to “triage” listings. Stefan got Spencer to tell us how Zillow will impact the future role of the real estate agent.
  • Screen Shot 2015-04-17 at 1.09.21 PMAlex Perriello, CEO of the Realogy Franchise Group, shared a very recent and horrifying story about a head-on crash with an ammunition filled truck being chased by police including being in exploding vehicles, experiencing live ammunition “cooking off” and a hospital confrontation. That was only the first ten minutes! Then things settled down and the discussion ranged from his grandfather the barber who always wore a three-piece suit and taught him about customer service, to what current events are shaping the future of the residential real estate brokerage. Stefan is then able to masterfully bring relevancy to these stories and show how Alex’s work is shaping the future role of the real estate agents. Most interesting was Alex’s discussion regarding the similarities between Zillow and Realogy, go figure! How will NRT and its upcoming Zap store impact the industry? What three cycles does he see as being responsible for the industry’s future? Alex’s comments about the immediate future of the real estate brokerage were an experience in and of themselves.
  • Screen Shot 2015-04-17 at 1.10.57 PMBudge Huskey, CEO of Coldwell Banker International gave a Stanford Business School quality presentation about the realities of the current real estate franchise world. He discussed the changing world of the real estate brokerage and the challenges of operating within a global frame of reference. Budge’s comments were nothing short of amazing as he identified the current status and future challenges of the real estate franchise sector.
  • Screen Shot 2015-04-17 at 1.11.51 PMNAR President and CEO, Dale Stinton, brought the audience to the edge of both their seats and collective consciousness with his discussion about NAR’s soon to be released A.N.G.E.R Report (Definitive Analysis of Negative Game Changers Emerging in Real Estate). Imagine retaining, without restraints, industry chronicler and custodian Stefan Swanepoel to candidly interview some 100 contemporary industry leaders about what they see as the significant risks, threats and dangers facing the residential real estate industry moving forward? Imagine putting all of these comments regarding agents, brokerages, MLSs and associations (Yes, even NAR) into a detailed 160-page report that will be presented later this spring, with no censorship. It is the closest the industry has ever come to an industry audit of itself. Stinton also made a number of very pointed comments about NAR’s Core Standards program and the very real possibilities that “failure to comply” could result in REALTOR® associations losing their charters.
  • Screen Shot 2015-04-17 at 1.13.23 PMPam O’Conner, CEO of Leading Real Estate Companies of the World, provided an in-depth view of the realities of the independent real estate brokerage operation including insight into the probability of a new order of roles regarding brokers, management and agents. Always the insightful leader and executive, Pam brought to the attendees a much need “reality” gained from the lessons her members have learned over the last few years. It is not our parent’s real estate marketplace and it will not be a parental solution that takes it to its next level.

On and on it went. Hour after hour of amazing substance and new industry realities.

  • Glenn Kelman, the new business model innovator and emerging genius of the Redfin model, talked about agents as employees.
  • The battle scared wisdom and new insights of Errol Samuelson.
  • Marvin Stone and Jared Conaway prepared the attendees for the upcoming and probable “epic” struggle with the CFPB.
  • Matt Krebsbach, Director and Analyst at Bazaarvoice, brought agent rating and ranking alive with information regarding what it really means and how to use it effectively.
  • Move’s new CEO Ryan O’Hara discussed his first 100 days in office and set the stage for how he will bring REALTOR.com to the forefront.
  • A brilliant panel of “under 40” industry CEO’s demonstrated how they not only think differently, but lead differently.

Screen Shot 2015-04-17 at 1.14.26 PMStefan Swanepoel was in Las Vegas last week to meet with 288 of the real estate industry’s highest leaders. It was CEO nirvana and he has become the industry’s de facto facilitator and diplomat. Even by Las Vegas standards, T3 was astounding. For those who were there, real estate wisdom now has a new definition.

Step One On the New Organizational Journey Is The Talent Search

One of the most encouraging aspects of today’s real estate industry environment is that after years of denial regarding change and transition there is now a universal agreement regarding the fact that virtually every aspect of the residential real estate industry is set to transition in some way over the next eighteen to twenty-four months.   Having crossed this bridge of consciousness the industry can now get about the task of determining what manner of internal and external relationships will be necessary and appropriate for success in this new environment moving forward.

While some debate continues with respect to when these new elements will have to be in place it is likely that many of these decisions will be determined by when the new industry infrastructure is completed. Across the industry dozens of new technical and management structures are being created by franchises, brokerages, portals, associations, MLSs and even agent groups. Project Upstream, the Broker Public Portal Project, Flanker, and Property Management are just a few of these new functionalities.

With respect to the prioritization process the leading players seem to be examining a wide range of options. Within the franchise sector the paramount issues seems to be setting the nature of the franchisor/franchisee relationship moving forward, deciding what role the franchise should play relative to lead generation and processing and what value to assign to that forever illusive issue of the brand value proposition.

Within the brokerage sector key issue status appears to have been awarded to re-visioning profitability, re-engineering the brokerage agent relationship and moving to introduce new tools such as standards, accountability and best practices.

A close examination of the current dynamic within the agent sector discloses that significant energy is being invested in an effort to avoid the efforts of both franchises and brokerages to reestablish effective command and control capabilities. That bumper sticker emblazoned with “I don’t need no stinking boss” appears to be ready to present its ugly face in yet another chapter of the industry’s history.

With all of these trends, forces and dynamics occurring within such a limited operational and time decisions relative to prioritization are likely to be especially difficult. The purpose of these comments are to support a recommendation that recruiting the appropriate talent to manage and inspire the new business model ought to be job one. A strong argument can be made to support the proposition that the single most important word in the industry vocabulary is going to be T-A-L-E-N-T.

The talent-centered drumbeat is not unique to the real estate industry. This theme is currently constant and compelling across every industry, in the North American Economy. Success in today’s business world has become all about surviving digital disruption (It is now being carried out at epidemic levels within the real estate space), adopting responsive business models and finding new talent that is relevant to the mission, appropriate to the challenge and up to the new standards. Whether the center of attention is Madison Avenue, the securities exchange, the automotive giants, the commodities market or the Silicon Valley the buzz is the same. New talent and competencies are an absolute.

The talent discussion is collecting around several key areas of focus. The first has to do with understanding the fact that even medium level changes in the business operations and corporate culture can cause unexplainable losses of balance, equilibrium and profitability. Underestimating the ramifications of these changes has become a major source of distress.

Another delicate subject arises when companies assume that those long-standing senior employees are capable of rising to the new situation. The current wisdom is quite the opposite. Not only are old style veterans demonstrating that they can’t (More likely won’t) rise to the occasion, but, more to the point, recent research has disclosed that they are often quick to become ringleaders and decedents willing to sabotage change. It is not a matter of loyalty to existing members of the team rather a new reality that the old dogs generally can’t learn new tricks especially if they are in a totally different culture and language

Understanding what new skill sets and competencies will be required to engage the new business model is turning out to be the challenge. Companies often assume that the key-recruiting element will be an extensive knowledge of the real estate space. Early evidence suggests that this may turn out to be a myth. Many companies are discovering that it is easier to cross train a subject matter expert with “out of industry” experience than is it so teach a real estate veteran new competencies and skill sets. This concept becomes much clearer when one understands that the real estate business that will emerge from these changes will have more to do with where its going than where it has been. In other words 30 years of experience in how it has always been done may not be as valuable as 30 days of training someone who is bringing in the new skill sets.

These changes will also bring a host of new relationships many of which are antithetical to those that have been in existence for a number of years. Classic among are relationships involving sales personnel. A recent edition of Ad Age featured a story about how new professional sales relationships are rendering traditional interaction ineffective. A return of Death of a Salesman if you will. Individuals entering into new relationships convinced that old techniques will work are likely to be the source of extensive review when the obvious dysfunctions appear.

Both employers and would be employees are learning to deal with changing expectations relative to the role of employment is a satisfying life. Trial based employment is becoming a popular option that allows the truth and reality of the proposed employment relationship to fully disclose themselves while there is still time to reverse the decision. Compensation is also evolving to meet the new environment. The new talent may be less interested in salary and more interested in career. Not taking the first thing that comes along and not rolling the dice to see if it is going to work out. It can no longer be assumed that both sides will do what they have to do to make things work. Lets try it for six months and see if everyone is committed to doing what has to be done. It isn’t any longer about that super person who can do it all on their own because they can’t.

American businesses are developing whole new approaches to performance review and enhancement. The real estate industry is now moving to make agent coaching mandatory. Within a short period of time it will be adding executives and managers to those who will benefit from coaching. The world is discovering that reviewing what one did last week is not nearly as important as impacting what they are going to do next week.

In conclusion, of all the changes that are currently being developed by the industry it is likely to turn out that the single defining challenge will be all matters regarding talent. Regardless of what big projects firms are working on they should start by asking; how will this new aspect impact our operations and culture, who is going to manage it and what competencies and skill sets are they going to have to bring to the table on day one. Recruiting the right talent has become job one.

What’s in a Portmanteau?

It has been 90 days or so since Spencer Rascoff and Stan Humphries of the Zillow Group released their Screen Shot 2015-03-10 at 10.02.14 AMbook; Zillow Talk. Published by Grand Central Publishing, the volume carries the subtitle The New Rules of Real Estate. One cannot help but observe that there has been a lack of buzz and discussion across the industry regarding the book’s unique and highly relevant contents. This compelling collection of knowledge, discovery and insight should have the potential to change how the industry thinks about the new realities of its various markets and how it judges properties as being appropriate for consideration for purchases or rental. Moreover, it might also drive industry reconsideration relative to the role of respect in its interactions with the consumer.

As a starting point the book offers the proverbial 100,000-foot view of the changed (and changing) role of research, statistics and information across the entirety of our culture including the real estate sector. The authors talk in reasonably humble terms about having created a collection of technologies that use a million valuation models to process 3.2 terabytes of data each day. They don’t suggest that is the ultimate technology. For Zillow Talk technology is a mere supporting actor. This is not a book about technology or mining gold. This is a book about what one, anyone, can do with the crown jewels of an expanded, innovative and creative real estate related information system. That’s all.

While it is difficult to nail down which of book’s many salient points are the most compelling, a particularly strong argument can be made for the concept of replacing myths with facts. The authors gently point out that for much of the past fifty years real estate related decisions by consumers, and even institutions and investors, have been made on the basis of cultural myths, many of which were created and propagated by real estate service providers.

Here again, avoiding a more conflictive and combative approach, the authors generously don’t suggest that these myths never had a basis in fact. Rather they choose to suggest that if the myths were true fifty years ago there is data available today that proves they are no longer true. The only question is whether real estate service providers have enough respect for their clients to make such information the basis of their value proposition.

A bit of advice for would be readers. If you don’t believe that virtually every aspect of your life, profession and business have, over the past nine years, changed in some significant manner then by all means don’t read Zillow Talk, it will just confuse you.

If you don’t believe that over the past nine years virtually every aspect of the real estate industry and marketplace has changed then don’t read Zillow Talk, just continue to confuse your clients and customers with myths and misconceptions.

Finally, if you don’t believe that the significance, ramifications and evidentiary value of information, data and documented experience is the single most important determinant of your value and survival proposition as an agent, a broker and even a consumer then don’t read Zillow Talk. Better you spend your time considering another industry or occupation, because it is increasingly clear that the world has discovered your intransigence and is in the process of acting on it to your detriment.

This is not to suggest that Zillow Talk represents any manner of ultimate truth or Holy Grail, because it clearly doesn’t. It represents a change of direction relative to how we, as a culture, think about real estate. It is the beginning of a new road that will offer many new directions over the next several years.

Zillow Talk is an excellent read. My sense is that the subtitle title won’t do the book any favors, especially given Zillow’s still controversial role in the current real estate industry. Interestingly enough the book has little to do with Zillow other than providing an opportunity for the author’s to share their story (the very purpose of books) and to highlight the intellectual and statistical import and relevance of research and the consumer real estate experience. Had Harvard University published the same book it might have been entitled “The History of the Future of the Real Estate Marketplace” or “The Story of Real Estate Moving Forward.” Declaring one’s work as being the “new rules of real estate” isn’t exactly the path to popularity, but then again power is as power does.

Screen Shot 2015-03-10 at 10.11.50 AMSpeaking of rules it does seem that Zillow Talk might establish one new rule. For the past decade the decision leaders of the industry have waged a historic battle over the ownership and control of data not unlike the California miner of the 1800’s relationship with gold, lots of activity but little or no end user functionality. Zillow Talk takes a giant step forward by talking about information as the key commodity of the transaction, and by driving the discussion of what one can do with it in the context of a real estate experience.

Zillow Talk is a must read book for anyone who considers themself a true student of the industry rather than a utility outfielder in the marketplace. There is little doubt that it will become mandatory reading for any individual who aspires to be a serious participant in the real estate industry.

The authors have been exceedingly kind in their treatment and lack of judgment regarding the traditional real estate service provider. There were many points along the way that criticism regarding traditional practices could have been extended. No such treatment was given.

Zillow Talk will likely also serve to define the difference between the two agent groups in today’s Screen Shot 2015-03-10 at 10.13.36 AMmarketplace. The traditional real estate service provider’s efforts are all too often focus on controlling and processing the consumer or client. The more contemporary service provider moving forward will support a value proposition focused on the facts and circumstances of the inventory and marketplace. This second provider will emphasize that market behaviors and statistics actually have a lot to say about determining what manner of experience and outcome the consumer will garner out of their real estate experience.

Before concluding we return to the title of this article. What’s in a Portmanteau? The Merriam-Webster dictionary defines portmanteau as a word or morpheme whose form and meaning are derived from a blending of two or more distinct forms (as smog from smoke and fog). The term Zillow is such a creation drawn from the word “zillions” and the word “pillow.” So now you know. It’s a Harvard thing.

Screen Shot 2015-03-10 at 10.16.43 AMThe rules of discourse have also changed. Those who read Zillow Talk for the purpose of being a critic, offering criticism or sustaining the status quo should know from the start that merely rolling one’s jaundiced eyes, shrugging one’s wimpy shoulders or waving one’s arrogant arms will not suffice here. Through Zillow Talk Rascoff and Humphries have laid down a serious piece of research. Any critical response with less intellectual authority will simply make the respondent a fool by comparison.

Ownership and control of data is no longer the essence of greatness. Moving forward that distinction will belong to those who understand how to use data to make excellent real estate related decisions and drive profitability.

Warren Buffet is a Great Read

The explosive developments within the American real estate industry over the past several years have produced remarkable opportunities, some significant threats, exciting new directions, astounding knowledge, and some really impressive insights. These developments have been brought into the industry by some remarkably competent minds that have, to our everlasting benefit, undertaken to share their experiences, inspirations and efforts through a number of especially impressive publications and presentations.

History is certainly one of the treasures that make life rewarding. However, being able to observe current events by accessing the thoughts of those who are actually creating them takes the power to observe to an even more exciting level. One of the things that makes being part of our industry during this “high impact” era so exciting is the opportunity to share the knowledge and experiences of key industry thought leaders while they are still engaged in their achievements. Over the past several weeks three of these unique experiences have presented themselves and deserve special notice. They will be the subject of this and next month’s column.

The industry leaders whose thoughts have contributed to the following observations are Warren Buffet of Berkshire Hathaway, Mo Anderson of Keller Williams and Spencer Rascoff (along with Stan Humphries) of the Zillow Group.

Mo has chronicled her experiences and wisdom in a volume entitled A Joy Filled Life. As one of the primary architects and advocates of the powerful corporate culture created for the company that currently leads the industry with the most agents, Keller Williams, her thoughts are especially relevant as the industry continues its journey from being a “people business” to an automated and “Wall Street” driven business model. Mo’s thoughts will be discussed in next month’s article.

Spencer Rascoff and Stan Humphries have encapsulated their thoughts and experiences into a volume called The New Rules of Real Estate. Given the significant impact that portals are currently having on the entire industry, this work is not only highly relevant but also highly insightful. Spencer’s thoughts and efforts will be discussed next month.

Screen Shot 2015-03-06 at 1.53.00 PMThat leaves us with Warren Buffet who is the subject of this month’s observations and comments. Mr. Buffet’s thoughts as reported here where not taken from a leather bound collectors volume, but rather from the very recently issued (last week) 2014 Annual Report of Berkshire Hathaway, Inc; his iconic corporate masterpiece. Perhaps no greater compliment could be paid to any business leader than to recommend his annual report (such documents are famous for being mind numbing and irrelevant) as a source of knowledge, insight and, yes, entertainment.

So, yes, I am actually recommending that readers download the Berkshire Hathaway, Inc. annual report (http://www.berkshirehathaway.com/2014ar/2014ar.pdf) and spend a couple of hours (actually 3.5) hours learning about a unique business model, a phenomenally successful mindset and a quality individual with whom we should be proud to share an industry.

Special attention should be given to the following elements.

  • Unless you are fortunate enough to own Berkshire Hathaway stock don’t feel compelled to read the financial and accounting information in the report. The universal value proposition inherent in the document can be found in discussions relating to leadership, management and just plain respect.
  • This is not a document solely prepared by a CPA to broadcast financial details to shareholders or regulators. Very quickly into this read one is captured by the spell cast by a man who is writing about something that he loves, something that he has created, almost an art form and something that he believes makes the world a better place.
  • Page 19: The story of the annual shareholder meeting, AKA “the Capitalist Woodstock.” May all of you be this gracious with your business partners.
  • Page 19: The story of Carrie Sova reminds us that everyone on a great team makes a contribution.
  • Page 24: “Berkshire – Past, Present and Future” – An amazing story of mistakes, more mistakes and lessons learned. Keep this one on your desk as a lasting example of the true test of experience and partnership.
  • Page 30: Lessons learned about those who have been on the ground for too long. Highly relevant to our industry’s current challenges.
  • Page 34: The value and function of cash.
  • Page 36: The importance of recognizing and taking care of one’s stakeholders. Something we forget on occasion.
  • Page 36: The attributes of a great CEO and the transition process. With hundreds of senior real estate industry executives poised for retirement or replacement these are lessons best learned vicariously.
  • Page 45: Berkshire’s business activities. Imagine the innovation and creativity that was required to put this conglomerate together.
  • Page 117: a statement of business values that has lasted since the company founding. Some things in business do not change regardless of personalities, economic times or business cycles.

Ordinarily it would be considered bad form to share the outcome of a novel one is reviewing. However, in this case, nothing could provide as appropriate a closing comment as Mr. Buffet’s own words. Near the end of the report and after a very inspirational discussion of the future he offers the following insight.

            Lest we end on a morbid note, I also want to assure you that I have never            

felt better. I love running Berkshire, and if enjoying life promotes           

longevity, Methuselah’s record is in jeopardy.

May each of you be able to say the same.

Your Business Plan Should Be A Strategic Spring Board, Not a Dynamic Anchor

Today’s real estate industry is awash in new strategies. Franchises, brokerages, Multiple Listing Services and professional associations are all using “strategic’ as their new magic word. Some of these strategies represent bold and innovative steps into a new and exciting future. Others unfortunately are just updates and recasts of what their sponsoring organization has always done in the past.

Fortunately more and more of these organizations are opting to seek outside expertise with their strategic plan document. The key differentiating factor here is the difference between acquiring assistance (an amateur commodity) and acquiring expertise, the commodity that is really needed. Not so fortunately, many brokerage executives are electing to align their future potentials with individuals who have little or no experience with the concepts of strategy or are already aligned with a larger philosophical entity (e.g. a franchise) to which them have already pledged their allegiance.

Many of these plan documents suffer from substance abuse. This is what occurs when the individual selected by the organization or company to facilitate their planning experience (rather than process), casually asks everyone in the organization what they think should happen, then gathers the leaders and executives together for a more intimate view, and then moves the organizational pieces forward in incremental steps so that, when executed, the organization will look exactly like it has always looked, just a year or two older. In other words, Substance Abuse in planning is what happens when the plan document reflects where the company or organization has been rather than where it wants to go. Substance Abuse is what happens when a strategic plan becomes a task list rather than an expression of strategic intent.

But interestingly enough as great a hardship as identifying an appropriate planning professional, creating an effective planning process and giving birth to an innovative business plan has become the ultimate challenge accomplishing a successful implementation process.

What are the most common oversights that brokerages and other entities make when attempting to implement their business plan? There are seven deadly crises that will terminate an effective business planning process:

  • The first implementation crisis comes when the plan document itself is a task list rather than a statement of strategic intent. Task lists by their very nature do not encourage collaboration nor require synergy within the organizational team. In fact quite the opposite. Tasks lists end up being personal performances between two or three individuals on a team with little or no thought being given to the efforts or objectives of others in the process. Strategic intent driven business plans require collaboration between a wide range of implementers, leaders, executives and staff.
  • The second implementation crisis comes when the company or organization hasn’t prioritized the implementation function. If the governing board doesn’t care enough about the plan to sponsor it, the decision regarding its success has already been made. When an un-prioritized business plan arrives at a CEO’s desk with no credentials, priorities or credible sponsorship the real message is received and it is immediately placed at the bottom of the pile.
  • The third implementation crisis comes when the company or organization hasn’t funded the implementation function or coordinated it with the annual budget. When this occurs the same response happens. The plan goes to the bottom of the pile.
  • The fourth implementation crisis occurs when the planning process hasn’t included sufficient time for the implementation process to mature to completion. The reason many companies and organizations are not successful with their implementation processes is that an implementation dream without funding, sponsorship or sufficient time, will always be DOA. This scenario often pleases the senior team players because all the boxes are checked, the organization can brag that it is progressive, yet nothing will change.
  • The fifth implementation crisis occurs when those involved at one level of implementation or another equate implementation with absolute obedience to the specifics of the plan. The fact is that the business plan sets a direction not a course. In today’s fast moving real estate industry, firms and organizations must have and exercise the freedom to execute tactics that may not appear to be consistent with those set forth in the plan. The plan brings a strategic intent and direction to the table. What is actually being served may well vary depending upon a wide range of factors and circumstances.
  • The sixth implementation crisis occurs when those in charge of the process fail to capture the difference between the act of communicating the organization’s strategic intent throughout the company, and the challenge of effectively implanting an understanding of the strategic intent in the minds of a company’s important executive and staff players. Implementation must be more than merely pushing the firm in a new direction. It must effectively capture the minds, imaginations and innovative spirits of all involved. Anything else is just a rote memory exercise with only the ability to evoke short-term change.
  • The seventh implementation crisis occurs when a new Chief Elected Officer, Chief Executive Officer, or officer in charge of planning comes into power with no requirement or commitment to the Company’s strategic intent as reflected in the plan. This is a very common and highly damaging planning mistake. It immediately severs the commitments of all who have been involved in the planning and/or implementation process. Those who didn’t like the strategic intent adopted by the organization can now align with the new personality. Those who have worked hard to make implementation happen are now at risk from both an emotional and a career perspective.

The seven implementation crises discussed above occur with a level of frequency that makes them almost inevitable but not avoidable. That being the case why aren’t strategic business plans being replaced with less toxic options. The fact is that the procedures which give rise to the best practices in strategic intent driven business planning are still among the most effective available to the average brokerage or organization. They still generate far more positive than negative results.

In its best iteration business plan implementation is all about marching an army towards a predetermined objective while, at the same time, taking advantage of opportunities that appear along the way to feed the troops and make the journey either less exhausting or more rewarding. The optimum success of implementation comes when everyone involved in the process understands, and at least appreciates, if not respects, the objectives and is driven to share in their success. We can do this.

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