3 agency structures that will change your real estate business [article]

Regardless of size or scope, many real estate agencies are managed similarly, with processes and procedures based on a combination of tradition and regulatory adherence. But what if the way you manage your agency is undermining your customer service, over-complicating your practices and stifling your growth?

In this Management Series deep dive, we explore the traditional agency structure verses pod, specialist and consultancy structures, giving you some of the most important pros and cons for each.

In almost every industry, there seems to be a standard or acceptable approach to running a business… until that approach is challenged and people see the opportunities that arise from trying something just a little bit different.

In real estate, ‘the way we’ve always done things’ plays a big part in how many offices are managed, but is it still the best way to run your business?

The traditional real estate agency structure

Many agencies in real estate still operate under similar conditions: a director at the top (usually a sales person), a sales team of agents who each support their own clients, a property manager(s) and team who look after designated managements, and an admin team.

Within these roles, many people wear several hats. A sales person does not just build relationships and negotiate successful sales. They also plan and deliver integrated traditional and digital marketing, produce advertising copy, moonlight as a photographer, feel like a sometimes-lawyer and try to navigate challenging online administration systems.

And let’s not even get started on the many and varied roles of a property manager!

For decades (or longer!) this traditional structure, or something very similar to it has worked. With the right combination of people, a good market and some intelligent thinking, agencies using this model scrape by, chug along, or better, become incredibly successful, turning over tens or hundreds of millions of dollars.

On a positive note, for those operating under the traditional system:

  • Agents know what they are doing, even if they move to a new agency.
  • Clients have one point of contact, their agent, and can develop strong relationships.
  • Agents can develop a deep understanding of a client because that client is ‘theirs’.
  • Targets and accountability for performance can be clearly set and assessed.

Not so positively:

  • Every agent has to wear so many hats that achieving balance or having down time is challenging.
  • Every agent is expected to have multiple specialisations, though for many areas, they actually have limited training (for example, in strategic marketing).
  • Agents operate in silos — so if they leave, become ill or go on holidays, clients may choose not to work with the agency unless they return.
  • More-and-more is expected of each agent as markets, technology, the law and consumer demands change.
  • Some people do quite a lot of work on a sale or management (for example, an admin person) but don’t see the same rewards as others.

Agents who work in pods

One of the most common ways agencies have evolved their operational approach, especially medium-to-large agencies, is by introducing a pod structure, whereby a senior agent works exclusively with a few junior agents on listings they win or are designated by a director. This structure has been adopted consistently through some larger real estate groups, but remains rare in independent agencies.

The senior agent trains the juniors, showing them the ropes, and the juniors are exposed to the complete sales process, getting involved in everything from admin and enquiry response to negotiation.

The commission structure varies from agency-to-agency that uses this structure, but can have a trickle-down effect, with most commission landing at the top, and juniors also picking up some percentage of reward.

Eventually juniors are experienced enough to start winning and managing their own listings and so they can start their own pod.

3 pros to pods:

  • This is great succession planning, internal training and mentoring, ensuring knowledge isn’t completely held in silos, or lost if one agent leaves.
  • Different tasks commensurate with experience are allocated to different people and the level of challenge can grow as experience does.
  • A client may have several points of contact that know their particular sale, so feel more serviced and communicated with.

3 cons to pods:

  • Agents are still expected to undertake tasks for which they have received minimal training, like integrated digital marketing or copywriting.
  • While the silos are bigger, they still exist, meaning if a pod all decides to move on and start their own business, clients and knowledge may be lost.
  • Juniors can become disenfranchised if they do a lot of work but the senior gets the credit (like in academics).

Agents who work in specialist teams

An emerging approach to real estate structure is to do away with the one-agent-one-client approach and the pod approach and instead operate the business more like an advertising agency. Different employees offer different specialisations that mean they interact with the client at different points of the process.

As an example, a ‘property consultant’ (the client contact and sales person) and a marketing specialist (someone solely qualified and experienced in strategic marketing) may meet a client for a pitch.

Once the listing is won, a staff photographer will takes the photos, a copywriter will produce ad content and the marketer will plan a custom, multi-channel campaign and implement, evaluate and refine over time. The property consultant will receive enquiries and negotiate the sale, an admin specialist will organise paperwork and walk the client through this stage.

Agencies already employing this or a similar approach, do it in different ways with a different number of specialists, but are seeing very promising results.

3 specialist team pros:

  • The service is high-quality and based on specialist knowledge, expertise and qualifications, right now, a real point of differentiation.
  • The specialist has the time and passion to keep up with emerging trends and practices in their field so they can continually evolve service.
  • The service doesn’t bottle neck as one person tries to do everything for every client, so the agency can actually manage more clients/listings at once.

3 specialist team cons:

  • This removes the centrality around ‘the agent’ which fundamentally changes the industry (we see this as a potential positive, but others will not).
  • Commission may need to be shared more widely, or specialist employees, like marketing experts who are usually university-qualified, will expect competitive salaries.
  • Bringing agents from an agency using an older model to an agency using this model would take more training, meaning a slower introduction to active sales.

Agents who charge per hour

Traditionally, industries that offer consultation or share expertise, are most likely to charge by the hour — so why not agents?

This option is not widely used in Australia, in fact, examples are few and far between, but the approach is popping up more overseas. One agent in New Zealand, Kim Franklin, has his sights set on building a new agency group in the country based on this unique approach.

According to stuff.co.nz, Franklin considers himself a highly skilled professional, just like any other consultant, and charges for his time, not for the sale. While his hourly is quite high, he has shown the fee equates to less than the standard commission when the sale is complete.

3 pros for agents who are consultants:

  • It can be easier to justify fees and show exactly what the client has paid for.
  • Agents get paid steadily each week, regardless of sales, which is a big positive in a tough market.
  • Agencies have the opportunity to be more transparent and build up more credibility and trust industry-wide.

3 cons for agents who are consultants:

  • Agents still suffer the same challenges as the traditional model with many hats (now they get paid hourly for them) and knowledge silos.
  • Convincing clients of a high hourly rate may be difficult, though evidence showing it equates to less in the end will help.
  • Agents will need to ensure they are up-to-date with all emerging trends as their service needs to be truly expert and reflective of a professional in other fields.

Each model of operation offers different pros and cons, but with progressive agencies transitioning out of the traditional approach and into systems like pods or specialist teams that mirror successful operational structures in other industries, can you afford not to reconsider your approach and assess if it still provides you, your business and your client everything that is needed?

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