Reengineering the Real Estate Agency:
Some `thought starters'

Introduction

Here, in two short pages, is a handful of ideas relating to possible improvement opportunities for the real estate agency.  These ideas are designed only to be thought starters.

Situation

The modern real estate agency is little more than a loose collection of real estate agents.

Unlike other industries, there have been few attempts to exploit the potential for economies of scale that inevitably appear when individuals form firms.

This is, perhaps, because real estate is a sales-centric enterprise.  Of course, the sales process is the very last corner of the enterprise to which scientific management methods have been applied.

The symptoms

Real estate executives often complain about the following undesirable effects:

1.       There's no scalable process for the acquisition of listings

2.       Good salespeople are hard to find, hard to manage and hard to keep

3.       It's hard for an agency to meaningfully differentiate itself from its competitors

4.       Customers are generally distrustful of real estate agents

5.       Other than the rent-roll, there is negligible (saleable) goodwill associated with even the most successful agencies

The root cause

We would suggest that the root cause of these (and many other) undesirable effects is a lack of formal process and (importantly) a lack of scalable infrastructure.

Because these are two of the prerequisites for the development of economies of scale, real estate executives typically find that their firms become less efficient, less differentiated and harder to manage as they grow.

The solution

In order to eliminate this problem, executives must first recognise the finite capacity of their most valuable resources (real estate agents).

Because real estate agents are a scarce resource, the allocation of their time to any particular activity is performed at the expense of a number of other activities.

For this reason, it is more appropriate to consider what tasks a real estate agent does not perform than it is to consider what tasks he or she does perform!

This notion is particularly relevant when you consider that lower contributing tasks (the urgent) have a tendency to crowd-out higher contributing tasks (the important).

With this thought in mind, what we must now do is find a way to institutionalise lower contributing tasks and populate agents' diaries with those highest value activities.

Obviously, the highest value task in a real estate agency is the negotiation (and sale) of a listing (a sole-agency agreement).

The sixty-four-dollar question, then, is: how can we institutionalise all other tasks without damaging the integrity of critical processes?

Infrastructure

The idea of delegating the greater majority of tasks is an anathema to a typical real estate agent.

Fortunately, in fields other than sales (particularly manufacturing and project management), managers have spent the last 50 years figuring-out how to apply division of labour and automation to even the most complex processes.

The results (think Dell or Toyota) have been nothing short of spectacular.

The key is to:

1.       Standardise processes

2.       Automate repetitive tasks

3.       Separate the responsibility for scheduling resources from the responsibility for performing process-related tasks

4.       Build a management information system to monitor process flows (the flow of money through the organisation)

Practical implications

It's likely that this line of reasoning will result in the following (radical) changes to a typical real estate agency:

1.       Agents (senior staff) focus exclusively on negotiating listing opportunities.

2.       Opportunities are generated using direct marketing methods (particularly events).

3.       Clients are sold a formal process — where automation is pitched as a competitive advantage (the primary benefit of which is speed).

4.       The (property) sales function is performed by a dedicated team (most likely consisting of one or two field agents, supported by an internal telephone-based team).

5.       Automated (e-mail and sms) systems are used to communicate daily with clients.  These communications show project progress relative to a pre-agreed project plan.

6.       The process of negotiating the gap between buy and sell prices is automated (so it becomes purely objective).

Next steps

History suggests that the real estate industry will eventually become institutionalised.  It's a matter of when, not if.  Certainly, the same has happened (or is happening) in fields like stockbroking, financial planning, recruitment and (in the USA) automobile sales.