The executive summary

GEORG Promoting the brand and advertising is very important. TV advertising had a bit of a comeback with the emergence of mobile technology and that is why we have launched our series of LJHooker.com TV advertisements. But it is important to remember you don’t only promote the brand through advertising but also through the way in which agents interact within their office. These two components form the basis of the advertising, and that is where the difference in our brand lies.

ANDREW Last year we did a social media-focused advertisement campaign and we took that approach because it is the most effective key to engage with every customer, regardless of where they are. I think that is the key to promoting and pushing your brand.

TV is a great vehicle, but you need to have a fairly significant budget to get that cut-through to really make a difference. I think social media is the way of the future for brand advertising.

NIGEL We just did some research in Melbourne across eight different regions where we are present, asking this very question. The surprise for us was the move towards brands and away from individuals. We thought people would follow individuals but there is trend towards people following brands. You can divide our industry into chains and independents, and then into aggressive and passive. hockingstuart is sitting in the group brand and probably more aggressive than most, but we try to differentiate ourselves by personality, we try to have an intelligent humour behind our brand.

The debate around portal listing costs has flared again recently, with many principals expressing increasing dissent towards the major listing websites.

What is your position on this debate and how should principals manage the increasing costs of the popular real estate property portals?

DOUG For me, this is the single biggest issue facing the industry at the moment. I think the Real Estate Business Principal Roundtable really emphasised this. I ask people across the traps what affects them at the moment and more often than not the answer is online portal advertising. I think the big thing is how much online costs have risen over the last couple of years – I mean a 20 to 25 per cent increase over the last two and a half to three years. I think something has to happen, soon.

For me, it is about dialogue not monologue; this isn’t us going after REA or Domain, but wanting to sit down with them and relay our concerns.

None of us around this table write the cheques. It is the people we represent who write those cheques and we all have a responsibility to be able to be say to the big organisations that our people are hurting and something needs to be done soon. If not us, then who? And if not now, then when? I want to see the industry enter into a conversation.

CHARLES The industry is not going to do anything about it. Almost 10 years ago, LJ Hooker, Ray White, Raine&Horne and CENTURY 21 put together websites to protect ourselves from what is happening today. We had meetings 10 years ago, but ranks were broken by one of those four.

PETER If we were all members of the Real Estate Institute of Australia (REIA), they could govern the whole country and we might have a chance. If you look at the United States, their National Association of Realtors (NAR) is the third strongest lobbying group in North America, as an industry. The reason they have this strength is because of a unified leadership at the top level. We can’t escape from this; it’s going to be a major problem in the long term if we don’t address it. It’s a problem and the only way we can deal with it is if we’re a member of one industry association for the whole country.

GEORG I do believe that sooner or later there’ll be a new form of social media, which will make the traditional forms of portal obsolete. The way a portal works is not very intelligent: you type in a street name and you get a long list, and it doesn’t necessarily match your criteria. I do believe that with the changes of the market, social media will be a much stronger focus for smaller areas and niche markets. The line of advertising is always around being the biggest portal in Australia, but if I’m looking for property in St Ives, Lane Cove or anywhere in the country, I don’t really care if it’s on the biggest portal in Australia – there’s a big opportunity here.

ANDREW There are a couple of things that are going on all at the same time. Obviously, the whole process and the structure of the portals have become a very large monolithic beast. As the costs continue to rise, other alternatives will become available. I think in the interim, we still have agents out there who are having to deal with this on a day-to-day basis. The real issue for us is helping them to understand what the appropriate mix of utilisation of these portals is.

GEOFF I had an informal meal with the founding fathers about the website. It seems like 15 years ago and he said, “Wouldn’t it be interesting if you had a website where the public went to the site to sell their home and if they weren’t able to do that through the resources that were made available to them, agents could compete for the listing.” So instead of us going to the public, we’re going to a real estate website saying, ‘Yes we’d like to put in a bid for that listing’. It’s a dangerous situation, but this is going back about 12 years. You can’t tell me these kinds of thoughts have gone away; this company has got bigger and bolder.

DOUG They’re are a business and they’re answerable to shareholders – let’s not forget that. That’s the crux of the matter. We’re almost like Doctor Frankenstein – we’ve created a monster. The problem is that we overly rely on them. But they overly rely on us because we’re the hand that feeds them. So if you look around this table, we represent 10 to 15 per cent , or more, of the entire marketplace. If we’re not the architects, if we’re not the people who can do something about this, then I don’t know who we are?

GEOFF I think an industry-run portal is the key, but the entity would need to make a profit. I think that’s extremely important. However, where that profit goes is the issue. If we had a truly cooperative side of the industry, the profit would go back to the shareholders, and those shareholders would be real estate agents.

How is your group showing your franchisees the importance of a strong property management arm?

NIGEL Whatever we do in sales, we do in our property management business – prospecting, listing, leasing, database management and so on. We try and equalise sales and property management training. But the most powerful thing is bringing together all the most senior property managers.

We do that every couple of months and they exchange ideas, and that’s where the best concepts are thrown around.

PETER Property management is a very important part of our business – we have a specialist coach who works with our property managers. We really try to encourage principals who are not really involved in property management to get the right expert property manager in to run that part of the business. If our principals are great salespeople, we want them to focus on that and find the right person to compliment the property management side of the business.

DOUG A lot of principals view their property management business as almost like a retirement fund, but if you look at a lot of businesses at the moment, the net profit margin of property management is actually greater than the net profit margin for sales.

We have seen many of the major groups diversify their business into finance. Is this a viable strategy and where else do you see the major groups diversifying?

CHARLES I think all groups have attempted to diversify, with finance being the first point. If you go back as far in the industry as I’ve been, real estate agents used to sell insurance. They also had travel agents in their businesses. They were already diversifying. Somewhere along the line, we moved away from that but today it’s got to be more than just selling home loans.

ANDREW I think one of the things you need to look at is what the customers’ current expectations are. And there’s a demand there for a higher level of integrated professional services, and the real estate transaction is just one part of that. If you look at what’s happening internationally, there is a trend towards a suite of professionally provided services that have been made available. The mistake that has been made in the past is a lot of these add-on services are just bolted on rather than being integrated into the actual business.

LEANNE It is also interesting to note that most of the agents that actually do use mortgage brokers do so not so much to get the extra revenue stream but so they can rely on them to get the deal across the line if things get a little bit complicated.

NIGEL The shift away from a small team of people selling real estate has to happen. If you look at the motor vehicle industry, for example, most of their profits were in the sale of new cars, as well as the trade-up and mark-up of used cars. Fast forward to today, where they make no money in new cars and very little money in used, but they make a fair margin in service and finance insurance. So there’s a whole shift in that industry towards different needs-based lines that help the customer facilitate the transaction.

CHARLES When you let a customer go to another broker outside of your business, another insurance company or another conveyancer, you’ve just let that person go to a whole bunch of other areas. Unless our industry actually starts to get the best out of every transaction and follow it all the way through, how can we truly offer a good service?

Agents continue to be at the bottom of various ‘most trusted’ lists. How can the industry as a whole improve this image?

GEOFF I think it’s a self-fulfilling prophecy: We are the ones who are most responsible for our reputation. If you want to quickly find people who say bad things about real estate agents, just go to a real estate agency. While we continue to participate in conversations with the public that degrade our competition, you can’t blame the public for agreeing with us – and there stands our problem. Until we protect our reputation and actually see ourselves as professionals, nothing is going to change.

PETER It is an issue. What we do is have every single person who is involved in a transaction with us surveyed by a third party company. So not only are our people aware of that accountability and that responsibility, they’re now getting detailed feedback on their service proposition. I’ve seen a very significant change in the attitude of all the staff, whether it’s front desk, administrators, property managers, new business managers or salespeople.

GEORG Accountability is the key word. As is educating our agents and our property managers that when a transaction is over, it’s not over yet because we should be focusing on a ‘customers for life’ concept. Therefore, these after-sales surveys are extremely powerful in identifying the experience.

DOUG There’s a seismic shift there in what Peter has done because for so long the industry has always fished for testimonials and compliments. Someone once said to me that a complaint should be seen as an opportunity, not a problem. That’s what you’ve done there – you’ve moved away from the testimonial-driven business to find out the hard facts. While they can be sobering, at least you actually have them and you tackle them and do something about them, and that makes a big difference to the business.

NIGEL Accountability is paramount – we need to have every salesperson and every property manager accountable for their services. I think, fundamentally, if you look at the five layers of trust and credibility at an individual level, the third layer of trust is about aligning your systems. I fear that we can do all this stuff – testimonials and third party surveys – but whilst we have a fee-for-success model in real estate, the sales agent doesn’t get paid until the property is sold, so there’s always going to be that challenge around trust in our profession. For the trust issue to be overcome beyond accountability, there’ll have to be a shift away from a fee-for-success and a fee-for-service model, which would have to happen some point in the future.

LEANNE I also think part of the problem we’ve got as an industry is it’s too easy to become a real estate agent. These days, you don’t have to have any experience to actually open a business, and you’ve got a really short amount of training to become a licensed agent and look after a trust account – it’s beyond belief. I don’t understand why the training is becoming less and less.

What will the future of real estate look like?

NIGEL I think we’ll see five trends. Trend one is a polarisation of the market: in 10 years’ time, the growing trend will be consumers looking to outsource everything or take parts of the chain, so that’s where fee for service becomes important. The second trend we’ll see is around the aged and Asian influence of the marketplace. The third would be the cost pressures within the real estate industry and therefore scale becomes more and more important over time. The fourth will be unaffordability within the whole of Australia, so that means property management becomes more important, sales becomes less important. The fifth trend would be the growth of brands in real estate.

PETER I see that you’re either going to be a brand or you’re going to be cheap. If you look at every form of retail that’s in the marketplace, the Chinese market in particular, if it’s not a brand, it has got to be dirt cheap. Within the real estate industry, unless you have control over your brand, marketing and people, it’s going to be a problem.

ANDREW I think the real estate industry is going to be far more systems-based than is currently the case. I think you’re right, Peter. There’s going to be fewer operators within the integrated business, service offering is going to be demanded by the marketplace, and I think that’s really where the industry is going to be heading over the next 10 years.

Is gender and/or racial equality a major focus for your business and how does your group ensure equality between men and women in positions of authority?

NIGEL It’s a real challenge because factually, 95 per cent of our staff in property management are women and 80 per cent of sales in our staff are men. And of our directors, only seven per cent are female. They’re the facts. So to change that over time without forcing it is a real challenge. For us, it’s around consistency in making decisions, so getting the right people into the right job for the right reasons; if we try to force it for the wrong reasons, it won’t work.

If we’re consistent in the applications and what we’re doing, then hopefully we attract the right people. Making sure there’s no ‘boys’ club’ mentality in our business is important, as an example, and making sure opportunities are based on merits. I’d love to rebalance the equation over time and get more females than we have. From a corporate perspective, half the team is female and half are male, so it balances at that level.

However, getting that balance out to the field is a tougher challenge.

LEANNE You can just look around the table; you don’t have to look very far, do you.

CHARLES The most prominent people in my business are females. The ladies head up property management and it’s not a small business. I had one male and he just wasn’t good enough. I find that our most successful people in sales are female. Our number one sales person is a female.

LEANNE Our number one sales person is also a woman.

ANDREW I agree with Charles. I’ve worked in a lot of different industries in my professional life and I think real estate is probably a bit more balanced in terms of offering opportunities for all genders. At the end of the day, if you’re good at what you do, it doesn’t matter if you’re male or female. I think that’s one of the real highlights and real benefits of the industry.

GEOFF On that subject, I think there’s a danger in having this conscious focus on gender and race and so forth. Sometimes there’s a tendency for us to think it’s an obligation to look outside the merit-based system and instead we appear [to embrace] ‘tokenism’ rather than really looking for who’s the best person for the job. In our business we have a focus on getting the best person in the position, regardless of who they are.

CHARLES We have ‘women in real estate’ functions and none of the guys are allowed to go, so I’m not sure about the equality side – it’s not balanced our way as much as you think.

LEANNE I do absolutely believe in merit-based promotion, but as so many of the decisions are made by men, they do need to be forced – at board level in particular – to consider the women that are applying for the roles. Quite often, the women are every bit as good as the men but don’t necessarily get the opportunities they should. It is a very difficult balance.

How do you manage and support your network? What do franchisEes tell you are the most important reasons for being with your network?

LEANNE We’ve actually just surveyed all of our offices and the fact that we are a relatively small group and they have got the ability to communicate with people who make decisions is what they most like. We have also had a coaching program for nearly nine years. We have a business coach on our team, so we’ve found that has been a point of difference for a long time and because he’s been part of the team for so long, he understands the individual businesses. So it’s really important to have a personal touch, and a personal standing of what works in different areas for different people.

ANDREW The key focus for our franchise group is really making sure we provide services to them that actually help them be more profitable.

Ultimately, we’ve got a fairly diverse and very experienced network and a lot of those agents have been in the industry for a very long time. Their major focus is not teaching them the one-on-one training but how we can provide value and business services to them and their business that they don’t necessarily have in-house. We’ve taken a very specific view and we’ve been engaging specialists in different areas so that we can have experts assisting our network, rather than having a cookie cutter approach to franchise support.

Are you seeing a shift in the type of franchisee wanting to join your network?

PETER I think in this marketplace it’s very important principals are ex-sales agents and they are able to take up a position of being a market leader before they become a team leader. I think too many people in this industry who aren’t proficient enough as an agent become principals. So for me, I’m certainly recruiting people who I believe can be market-relevant and can lead in a market sense before they become a team leader. I like the fact people who are coming into the business as franchisees understand the business because I think they can be educated and leveraged to be a really balanced business person in the long term.

GEOFF My approach to it is that it is much easier to take a proven leader with a business background and turn them into a real estate agent than it is to make a real estate salesperson into a proven leader with a business background. I think most principals come from the ranks of the real estate people – you’ve got to walk the walk, and all of those old clichés. Having said that, I’ve seen some terrific examples of people coming from other countries into our country saying, ‘I’m going to buy a franchise and I’m going to run it as a business’, and sometimes it is refreshing to see how they approach it.

GEORG If I look at the best principals we have in our business, unfortunately there are no clear answers. We have a couple of people who came from the industry and worked their way up but at the same time, we also have people who were in a fundamentally different industry beforehand. In the end, from my perspective, there are no clear profiles.

DOUG I think the saying is ‘A great chef doesn’t necessarily make a good restaurant owner’, and I think it’s very important to understand the cultural shift that comes with moving from being a great sales agent to being a head of business.