This fall parts I & II of people as our most important assets have appeared. Both prior articles discussed non-real estate businesses. Starbucks Coffee and In-N-Out Burger credit their success in the recruiting and training of their people and not their ultimate products. They have both achieved significant brand awareness as well as success in retaining employees, having repeat customers and generating profits. Not much different form we as brokers are striving to achieve.

This month’s concluding article is targeted on the “training” aspect of other businesses and what we might apply to the real estate business. We have worked for years under the false assumption that should someone come to us that has or is obtaining a real estate license that with some further application of sales techniques they will be ready to go forth in the world and assist buyers and sellers in their largest life purchase. To this end we have inconsistent success and worked under today’s reality that the success to failure ratio of agents is what it is; mediocre at best. We have also concluded that the average productivity of agents is really a fixed number that can’t be changed.

As brokers searching for other forms of revenue and a continuum of service to the consumer we have also added “primary’ services of mortgage, title, escrow, warranty, concierge, connections and more with some moderate “buy-in” on the agent’s part but usually with only average capture rates. We assumed, probably wrongly, that the agent would have the same motivation as us for service to the client with a firm understanding of the benefit to the bottom line.

In the 2003 Top Performing Company Study published by REAL Trends the average company in the study spent a little more than .5% of their Gross Commission Income on training. The study did not spell out if this was for new agents, managers or others. This compared to 4.4% for advertising, or nearly 9times that spent on training. This raises the curious question of what would sell more houses? More advertising or better trained agents and managers? It makes one further evaluate what our respective companies are doing in our training departments, assuming we have one? Or, have we relied on others (outsourced, franchisor provided) to do what we believe we need but can’t provide? This same 2003 Top Performing Companies Study showed a direct correlation between profitability and productivity. Companies with higher per person productivity simply had higher profits as a percent of gross commission income.

Have we simply become complacent about raising per agent productivity? The past ten years of the REAL Trends Big Broker report reflects little if any growth in closed revenue sides per agent. In fact the trend has headed down. Those companies breaking away from the pack, however, have seen their profit percentages increase while their agents have generated more closed transactions and their respective incomes have increased proportionately.

Let’s start with the managers:
What are the expectations of the branch managers? What are their functions and as owners how are we supporting them? If their function is to recruit, train, coach and play psychologist then we need to design or find a program that can accomplish this. Most managers though spend their time as “deal doctors” diagnosing what is going wrong with transactions and then doing whatever they can to hold them together for their agents. At the end of the day they are out of energy and time and have done little to recruit, coach and grow their offices. If their compensation is tied to profitability they often find that their income at the end of the year is where it was last year.

The training of our managers has really not existed or has focused on “things” instead of skill development that will improve the operation of the office. Interviewing skills and techniques need higher priority. Coaching people to achieve more in life and attain more of their potential needs to be a requisite. Organizing the talent pool of staff to optimize the office and agents should be added to the curricula. Leadership skills, problem solving, communication skills along with how to understand a profit and loss statement are all essential to building a management team. Comprehending the corporate cultural philosophy is essential if the company is to have all management team members striving to implement the strategies of their office and company. Getting people to work together as a team is essential to long term success.

These programs do not necessarily need to be developed and operated by our respective companies. Local colleges and universities probably have greater resources and components so why not contact them or contract with them as providers. Have you got a colleague that has an outstanding manager in another part of the country? Consider an internship program for your manager for a week or two. The key is to develop and implement an ongoing long term training program for managers based on their composite strengths and weaknesses in order to meet the strategies of the company.

In the last 12-18 months several of the national franchisors have begun to implement long term training programs for new and experienced managers for their affiliates. High accountability is a major element. Other independent companies are seeing the benefits of these programs as well. REAL Trends having had numerous requests, has instituted a 6 month high accountability program with it’s Management Institute. The pendulum is moving in the right direction but needs to remain flexible and gain more momentum.

New Agent Training:
We have become so concerned about the element of time and new agent training our goal has become “how quick can we get these new agents out the door so they can achieve some success and earn money.” Training programs have been compressed into a few days or maybe one or two weeks with days interspersed applying what they have learned. Are we really doing them and our respective companies justice with such programs? Once they leave the protective confines of the training room can we ever really get them back?

The interview and hiring process should discuss in very direct terms what the expectations are. This communication deals with not only productivity in listings and sales but attendance at future training programs, use of company primary services and how the customer is to be treated. Corporate culture and philosophy needs to covered here and during the training program. Creating and managing expectations after the training program is too late.

As past students when we started each school year instructors presented information on the first day (or even ahead of that) on how grades would be based. They covered what the reading assignments would be, when tests were scheduled and what one had to do for the semester. Reading assignments, projects, even behavior and other things were put into writing or thoroughly discussed. The expectations were know before the class really even started. Surprises were minimal. This became habit. Somehow we have lost this when we hire agents. How can we really hold people accountable for their actions if we never articulated the expectations?

When hired by Starbucks Coffee there is a two week training program as well as assignment to a store where the training continues. This is to sell coffee and not a $200,000 house! What have we done to encourage the learning process with our agents. Role playing, legal aspects on such things as disclosure, how to really make sales, ethics, corporate philosophy as well as the importance of using relocation services, company owned mortgage and other primary services and other expectations are frequently not covered because of time.

Revamping our training programs for agents may sound like an expensive proposition but when you consider the failure rate of agents in the business how can we not invest more time and energy in training? Like Starbuck, is it really about the coffee or the houses or is it about the people and what we can do as leaders to maximize the potential of our most important assets.

Experienced Agents:
Hiring experienced agents in most cases still is based on the “fog the mirror” approach. If they are breathing we hire them. We rarely cover company or office expectations because we might offend these well traveled warriors. Training for experienced agents is nearly extinct. Why?

If the goal is to raise the productivity of all of our agents why should we treat experienced agents differently? If we have primary services and expectations of what the usage is to be then this needs to be communicated and trained for up front. The Independent Contractor Agreement may need to be amended accordingly as well. Further, what is wrong with required training for experienced agents? If a new Starbucks employee worked at one of the competitors stores they still go through the 2 week training. Perhaps if an experienced agent is balking at our training we need to re-consider the hiring process. But, if the goal is to raise productivity in all aspects of our business with the best people then the educational part of the career path needs to be embellished if not completely re-worked.

Conclusion:
We need to take some lessons from the financial service sectors of business and consider what strategies we can implement to increase the efficiency of our operations. It starts with re-thinking and evaluating what our long term goals are and the function of education in our companies. If the goal is to remain the same then what change is really necessary? If we wish to “raise the bar” for our companies and our agents then doing the same will not get us there. We need to better understand, develop and institute major overhauls of our training and educational programs. A commitment to this change and the prospect of re-allocating dollars to achieve this end can provide enormous rewards. It may also provide the significant differentiation between your company and the competition as well as long term survival.