Differentiators: Operations & Opportunities (Part 15)

The Operations and Opportunities series will posted on Tuesdays Wednesdays, and Thursdays through the month of August 2011. A number of operational issues will be addressed in the blog. For more detail, depth or individual information and answers, please contact Soltys, Inc. Comments and questions are welcome. We will post answers and responses.

When I opened my mail about a week ago, it was from a major insurance company notifying me of survivor benefits that they thought I was entitled to claim. I did not know that anyone in the family had passed and I did not recall anyone related by that name. I called the company and suggested that they should have notified another person who shared my name. They told me that they had found me through an Internet search, assuming that I was the right person. They sent the letter immediately upon receiving a death notice from a funeral home without validating any information. While this mistake was easy for me to resolve, maybe it was not for the insurance company. It was validation of the power of online identities and confusion that is possible.

I have known for years that my husband and I share names with a lot of people. Most of these people are reputable but there have been some who achieved notoriety. We routinely search many channels personally, professionally and for the company to be aware of what might be out there and head off challenges before they occur or at minimum know how to mitigate the issues. This is protection of names, credit and of the branding of our business and practices.

A part of marketing and branding is establishing and protecting your identities and images. It is not as simple as doing a search every once in a while. It is even more important when you have others working under your name and brand. It is also about maintaining differentiation.

While names may be alike, it would be rare that the entire package of name, brand and differentiators be so easily confused. Franchised companies have adopted a name as a branded identity to give them leverage and position in the mind of the consumer. This brand extension is valuable as long as it is a differentiator in the market place. Where there are multiple franchisees in the market the consumer often assumes that they are all the same company. It is the job of the company to provide the differentiators and the branding of their company.

Providing differentiators in the individual naming of the company does not go far enough. Practices, value and a reason to do business with you are all essential. To give an example, take a look at almost any real estate company’s web site. You will most likely find a property search that gives the customer the opportunity to search and find properties of interest whether or not they are listed in the company inventory. In some cases links are embedded that take the viewer away from the original web site.

Embellishments might give a few nice pictures, tell you a little about the history of the company and you'll most likely be able to see the agents affiliated with the company along with a short profile that might not even have anything written.

Images on the site are often stiff – many people are in business profile pictures or worse yet have a generic head silhouette since they never supplied a picture. Pictures of the offices are usually lifeless street images that no self-respecting listing agent would consider displaying in the MLS portfolio. Interesting portrayals in that they have little differentiator value. This is a people-centric business but it denies its own personality.

These same sites that are the outward, web based identity of the company rarely convey value well. The basic marketing questions are rarely answered on the site and if they are there, they are difficult to find, written in antiseptic terms with little warmth, marketing direction or attractiveness.
  • Why should I engage you for business?
  • Why should I trust you?
  • Will you be able to take care of my needs?
  • Who will I be working with?
  • What does your company do to ensure that I get the services I need?
  • Why do people work in your company?
  • When and how will I hear from you if I request assistance?
  • What do you sell?
  • Why is your company different than every other company that lets me search for property or initiate other self-service?

If the insurance company had simply looked at the information in their files prior to doing an Internet search, they probably would have found the correct contact person. If they had looked beyond the name, the differentiators would have been obvious. The mistake of the insurance company was fairly simple with little harm or delay caused. Customers will be just as superficial without differentiators that set your company, services and identity apart from those who may share all or a significant part of your trade name.


Marketing & The Machine: Operations & Opportunities (Part 14)

The Operations and Opportunities series will posted on Tuesdays Wednesdays, and Thursdays through the month of August 2011. A number of operational issues will be addressed in the blog. For more detail, depth or individual information and answers, please contact Soltys, Inc. Comments and questions are welcome. We will post answers and responses.

Marketing is the energy required to run the machine of business. When a machine is running efficiently with gears meshing and processes moving forward, very little energy is required to keep it running. Starting and stopping requires significant energy and usually causes a series of business disruptions.

Businesses have been required to incorporate new methods, vehicles and relinquish some of the old standbys. It is not easy to make these changes without stops and starts. A phone call to make a very slight change in our newspaper subscription provides a great story. Like most newspapers, they are challenged with changes in readership, readership preferences and maintaining advertising dollar revenue so that the business has viability.

We have watched the shrinkage of the newspaper's size over the years and found ourselves reading the online edition more frequently than the print copy. We reduced our subscription to weekends only. Then earlier this year, they launched an app for the iPad which was much better than we had expected it to be. Easy to navigate, full articles, pictures and even full page ads in a format that continued the newspaper experience. Unlike some publications and broadcasters, the format was great. Advertising was integrated, not obnoxious pop-ups, the sections were there and even the famed political cartoons.

The call began because the customer call portal would not allow me to make the change without calling in. The gentleman with the pleasant voice on the other end wanted to be helpful. He was able to make the small change and then asked if there was anything else that he could help me with that day. I said yes as a matter of fact, we would like to convert our subscription from print to the digital edition.

His response surprised me. “I am sorry that you want to cancel your subscription.” I explained that I did not want to cancel it, simply to transfer to the digital format. He told me that he did not think that was possible and since I liked the newspaper, surely I would not want to cancel my subscription. I said no, I do not want to cancel, simply change it. He said he was glad that I did not want to cancel and would I be interested in the seven day a week subscription. I said no, I do not want to receive a print newspaper in my driveway. He then said again that he was sorry that I wanted to cancel. Third time is the charm and I told him to simply cancel the subscription.

This launched a whole new series of dialogue as his computer screen coached him through the customer response escalation ladder. After validating cancel several more times he had to transfer me to another person as he could not cancel the subscription. The lady who came on the line was from customer rescue. She was armed and wanted to tell me all the great benefits that I would not want to lose by canceling. These included the Sunday coupons, that online editions do not have all of the articles and that the app version was simply in a test stage but not ready. The big close was that I would lose my long time subscriber discounts and other benefits. I again asked for the transfer of the subscription, willing to pay for a seven day a week digital or app subscription and she told me that it could not be done moreover, I would not be happy if it could be done. She admitted that she had no idea what the online or app editions looked like.

Finally with great reluctance, she agreed to cancel the subscription pulling out a few more suggestions, Since, I was already paid for a year, just let my subscription run out or donate it. Too much time was invested. Even though I know that these two were just doing their job, I really had no interest in doing business with this department again.

The newspaper broke the marketing machine because there were no gears to make the transition and move the relationship down a different path. The result will most likely have far reaching impact starting with the person delivering the paper who lost a subscriber and a holiday gift. The app which was supposed to be ready for subscription still does not have a way to be paid for by subscribers and the online version continues to be somewhat crippled. The customer has choices – print, digital and an app. Only one makes money for the newspaper and there is no way currently to be able to reach all three groups and have them worked through the machine. More importantly, opportunities to push marketing and products are disabled without any way to even know who the digital readers might be, what they are interested in and how to keep them.

The newspaper’s machine is only set up to run for print and literally grinds to a halt for all marketing to the digital, online and app viewers. It will take tremendous cost and effort to rebuild and engage those customer relationships. A well-engineered and maintained business machine incorporates change so that customers and relationships are not just kept but expanded to seamlessly transition to new products and services.


The Handshake: Operations & Opportunities (Part 13)

The Operations and Opportunities series will posted on Tuesdays Wednesdays, and Thursdays through the month of August 2011. A number of operational issues will be addressed in the blog. For more detail, depth or individual information and answers, please contact Soltys, Inc. Comments and questions are welcome. We will post answers and responses.

Our culture has long used handshakes as a part of a greeting, confirming agreement and in many cases an implied contract. Within the exchange, there is an understanding of mutual needs and benefit to be realized. This gesture even when virtual is one cog turning another in the business machine.

I remember my Dad assessing the virtues of the person on the other end of the handshake. His assessment raised or lowered his perception of the other person’s part of the deal or relationship immediately. Dad’s evaluation system has been a good guide and the virtual elements of the handshakes, including email signatures, have been added. It works whether you are buying, selling, recruiting or creating a business relationship.

The Bone Crusher – Usually a person in a power play who may be more hot air than substance but sometimes a person who is really hiding shyness or uncertainty behind the handshake. Complete your conversation, shake hands again and re-evaluate. If the person still wants to crush your hand, most likely that will be their business style. The virtual bone crusher touts unbelievable importance with little real value often in the signature. Lots of power play language in the message.

The Delicate Hand – This person is usually not the person to offer the handshake. Dad said that unless the person is a member of royalty then you will most likely be the leader and the strength in the deal. If they are royalty, find out who you will really be working with. Email signature is often a cutesy or very personalized format of their name as if you have known them all of their life. Language is tentative and commitments vague.

The Gloved Hand – Even in the coldest of weather, Dad removed the glove from the hand he offered to another. If the other person offered only a gloved hand, he did not feel that the handshake was sincere or on even terms. He wondered if that meant that the person would also hide behind the glove or not be open in the deal. Signature seems insincere and language is couched with contingencies.

The Upper Hand – When someone turned the handshake so that their hand was on top, he looked for control issues. He also often questioned the sincerity of the person. Their signature is often in bold face and language may imply win – lose scenarios.

The Two Handed Shake - Unless it was at a time of consolation or concern, Dad always felt that this was not a good business handshake and rarely invested immediate trust in the person. The email signature appears business like but often has a tag line indicating the person’s virtues in a way that when you read it, you want to say “really???” Language is often conditional and full of promises.

The Sweaty Hand – Unless all parties were sweaty due to weather or activity or the person has a medical condition, Dad suspected that the person was nervous. He would then seek to understand whether the nerves and sweat were related to the validity of the deal or whether the person was simply timid. Email may not even have a signature or it may be inconsistent. Language does not flow smoothly but seems as if the stopped and started a lot while writing.

The Vigorous Handshake – This person likes to pump your hand vigorously as if they have had way too much caffeine. They are too ready for agreement and you get the impression that they may be a mile wide and an inch deep. Get prepared to carry the deal. Email signature often professes their prowess in quick communications. Language skims the issues and makes shallow promises.

Dad taught all of us the importance of the handshake and of readily offering a sincere, firm handshake. He was not a hugger in business and was wary of those who went for a hug when a handshake was offered. His feeling was that they put more value in the relationship than the business.

While not a perfect system, he based it on perception and was frequently correct. Dad also loved and respected good business machines and knew that they were fueled with the energy of good communications. The handshake was an important part of communications carrying the implied business and social contracts agreed with that simple gesture.


Leads, Prospects & Suspects: Operations & Opportunities (Part 12)

The Operations and Opportunities series will posted on Tuesdays Wednesdays, and Thursdays through the month of August 2011. A number of operational issues will be addressed in the blog. For more detail, depth or individual information and answers, please contact Soltys, Inc. Comments and questions are welcome. We will post answers and responses.

What is a business lead? I have had the opportunity to head, coach, consult with, observe and sell through sales organizations in many different industries and have found that perhaps one of the most used and abused terms would have to be “lead”. In reality business machines are often clogged with pseudo leads which become hiding places from accountability and efficiency.

If you think about what takes the most time, cost, effort and maintenance in business it is often lead generation, development and cultivation into a sale. Whoever wrote the line that, "nothing happens until something is sold", was probably only looking at the bottom line.

The term "lead" has become almost a sacred currency in business especially in terms of driving business from the Internet. But like any currency, there are different denominations and valuations attached. Contact lists are not worth much more than pennies in lead currency. Even though there are companies happy to sell you these with varying amounts of information, you will really have to work the list to generate any dollars. These do not even qualify as suspects when only on a list.

Suspects are a bit more valuable, perhaps a nickel. There is some reason or driver for them to be likely to do business. Whether they have identified themselves or through data mining you have determined that they belong on your target list.

A prospect is a bit more valuable like a dime. Prospects have usually identified themselves, stated a need and, in many cases, given an indication of their interest in working with you. They are not yet a lead but have a higher likelihood of becoming a lead and turning into dollars. These still require a lot of work, need definition and guidance. They will really clog the gears of the business machine if treated as a lead.

Leads, like state commemorative quarters, come in many variations. They have identified business needs, a time frame and are able to do business. Until qualified, all leads have the same value and won’t get you very far if you want to buy something. Lead qualification must be done before they are processed in the business machine as a lead. If I were to try to forecast business results on the basis of the number of leads (a KPI – Key Performance Indicator) my predictions would be worthless without qualification.

“A” leads have all three key criteria - ready, willing and able. They can usually consummate business by going to contract, agreement or sale within a very short time frame. In most businesses, this is 30 days or less.

“B” leads are missing one the three key criteria – ready, willing or able. They are often 2 – 3 times longer in the sales process than an A lead.

“C” leads are missing two of the three criteria – ready, willing or able. The time frame can be 3 times longer than an A lead to never, as they are also usually missing motivation.

“D” leads are really dead. They have either been mistaken as a lead or are a lost opportunity. A lot of time and money are wasted on these thinking that they will be future business.

No matter what type of business you are in, your sales and management processes should focus on capitalizing the “A” leads. The Baltimore study mentioned in the blog post “Knock, Knock – Who’s Here?” gave a pretty good example of lost opportunity. Knowing and managing the differences in leads, prospects and suspects makes a real bottom line difference.


Knock, Knock – Who’s Here? Operations & Opportunities (Part 11)

The Operations and Opportunities series will posted on Tuesdays Wednesdays, and Thursdays through the month of August 2011. A number of operational issues will be addressed in the blog. For more detail, depth or individual information and answers, please contact Soltys, Inc. Comments and questions are welcome. We will post answers and responses.

It is kind of interesting, if you were to walk into many real estate offices, there are very few real estate professionals there and working. Most of the people you will find are brokers and staff, an occasional agent taking up desk duty and evidence by looking at the desks that people have been there at one point.

I walked through an office with a broker not long ago. I do not think he had really done a walk through in a while where he looked at stuff. The calendar on the wall in one work area displayed a page from three years ago and marketing materials that had been purchased to be used in a company-wide campaign were sitting in a box under the desk, no longer useable due to age. Other desks showed mountains of paper and files in such disarray that it would be impossible to find anything but certainly would dissuade anyone from borrowing the desk. When we got done, this shrine to brokerage revealed little in the way of anything that really contributed to the business but a lot of cost. Yes, there were a few people actually working and in most cases, these were senior agents who had grown up differently.

Perhaps what really struck me was that it would be difficult for a client or customer to find someone to work with whether they were knocking on the door of the building, via the social media channels or on the company’s web site. It seems that there is a lot of noise and value put into the development and driving of leads to associates, but few real systems to ensure that someone is there – ready, willing and able to work the lead as well as be accountable for the lead.

Here we are in one of the longest downturns of real estate where a lead should be treated as if it was golden. If you have been around real estate you have probably heard some of the statements below:

  • "All leads that come from the Internet are junk.”
  • “I am too busy to work a lead that is not ready.”
  • “I do not need leads from the company; I work only leads from my sphere of influence.”
  • “I do not want to pay a referral fee to the company for a lead.”
  • “I expect the company to furnish me with good leads.”
  • “I do not use the company tools and systems because I am an Independent Contractor.”

Maybe my view is jaundiced. In most sales positions, the sales person is expected to develop business, work with company generated business and be accountable. This is true in other industries that utilize independent contractors to fill out their sales ranks. Real estate, unlike most businesses, requires that the consumer declare a need and find a professional. There is little if any cultivation of clientele, plan for future business or even a real expectation that business when identified will be worked.

I did a study in Baltimore, MD in which we did something very unusual. We tracked and followed leads to see what happened. We took every lead that could be identified from all sources in three different companies over a three month period. It was not all the leads by any means but was significant. We talked to the buyers and sellers we tracked, asking them about their inquiries to real estate companies and sales professionals, their experience and the final result.

Most people were happy to share the information with us. Here are some of the stats that you might find interesting.

1. Approximately 78% of the leads bought or sold property including listings still active.

2. The average person had to talk to people from eight different companies before they were working with someone.

  • Approximately 60% did not receive a call or email back in spite of promises.
  • Were told after an initial conversation that when they were ready to please call.
  • Associate was good at marketing themselves but actions and initiatives did not live up to the claims.

3. When asked if they would use the company or sales person again who was able to make the sale or take the listing, over 80% said they would. In most cases, the person never heard from the sales person again in person.

4. There were only a handful of people who were asked if they knew anyone else looking to buy or sell or if they needed any other real estate services.

Not every sales professional or company will fall into the status of passive sales but there are certainly a number who do. Unlike many other industries, the machinery is not even in place to manage leads, let alone develop future leads. Knock, knock – who’s here? It's the consumer looking for a person really interested in helping them.

This week our blogs will focus on leads within the brokerage business.


Not All Businesses Can Use The Same Machine: Operations & Opportunities (Part 10)

The Operations and Opportunities series will posted on Tuesdays Wednesdays, and Thursdays through the month of August 2011. A number of operational issues will be addressed in the blog. For more detail, depth or individual information and answers, please contact Soltys, Inc. Comments and questions are welcome. We will post answers and responses.

Recently a client asked me to help her sell her company. The challenge became obvious once we started to look at the business machine. She could not extract herself and still have a company, she was the major producer, most of the costs were built on building and maintaining her business and the other people in the company were really dependent on the spin off from her business. She has a business practice and not a company.

Just like you anticipate that a law firm has multiple practitioners, each contributing, often a law practice has a lead practitioner and in some cases a few people who support the business of the leader. While both practices and companies are businesses, they require different machinery and have very different futures. Looking at the value in a sale is a great way of defining the difference.

Most companies are built with the concept that the company will either be sold at some point or continue to produce revenue and profit regardless of the lead person. Business is generated because the machine works without having the key person serving as the machine. The machinery can be changed, upgraded or added to. Production can be increased by adding components or processing and producing greater quantities. The machine is not person dependent.

When looking at the operations and opportunities available to a business, knowing whether or not you are building a practice or a company is important in terms of the structure you put in place. In the case of the client mentioned, she had worked hard to build what she thought was a company and was very surprised when the offer she received was basically a signing bonus, generous split on her production and override for producers not on her team working primarily on the business she generated. Her disappointment came in that she had done everything that the franchisor told her to do, that her professional certification classes had suggested in terms of space, support staff and support tools and systems for producers. She thought she was selling a company and expected to have the offer calculated based on the company production, market presence and opportunities the growth would offer the buyer. After all, this would expand the buyer’s geographic foot print into a lucrative market with an already known presence. The buyer could recruit producers, put a manager in place and she would go into full production with her team. The numbers were there.

It is fine to have a business that is designed as a practice or with the machinery required to be a company. There are wonderful opportunities for both but they are not the same operationally and the opportunities both near and long term are very different.


House of Antiquities: Operations & Opportunities (Part 9)

The Operations and Opportunities series will posted on Tuesdays Wednesdays, and Thursdays through the month of August 2011. A number of operational issues will be addressed in the blog. For more detail, depth or individual information and answers, please contact Soltys, Inc. Comments and questions are welcome. We will post answers and responses.

Businesses that have been established for a number of years have, in most cases, cluttered their machine with relics from the House of Antiquities. These are practices and processes which may no longer be needed or in many cases actually slow down the machine because they are still in use. It is the job of leadership to optimize the business machine. In many cases this is not easy.

Recently while visiting a client and looking at their operational machine, we found a number of areas where optimization could have had a real impact on the company and potentially the bottom line. Yes, there was some older equipment that was still taking up space, like the fax machines in spite of the fact that all faxes now come via email in a digital format. Managers in some cases reviewed the electronic transaction files while others seemed to find comfort in stacks of paper files on their desks. When questions were asked in the accounting department, more often than not, queries and challenges alike were met with the statement – “Well that’s how we have always done it.”

It is one thing to accent the processes with individual style or expression, it is another when the individual’s impact totally changes or interrupts the processes. Gaining optimization means implementing efficiencies and consistency of process and really brings the advantage of personalization, especially in the areas that are not process driven such as relationships.

If we were to look at the recruiting part of the machine alone, the processes should:
  • Identify company and office needs
  • Identify prospects
  • Quantify risks and benefits
  • Process prospects who become candidates through the pipeline
  • Ensure that key events, items delivered and reminders are generated on a timely basis
  • Deliver reporting
  • Retain and associate communications with all parties as required
  • Ensure that once recruited, the onboarding and processes of integration are initiated.
If a manager or leader were to use the machine as a tool to their advantage, the benefit would be realized.

In our House of Antiquities, the owner was observed going through accountability reviews with the managers for recruiting. While the options were certainly in place for the business machine to deliver the information needed for the meeting, the managers had not used the tools. Consequently, there was no visibility to the real pipeline. The meeting was not very productive as the managers delivered a number of excuses for the lack of recruiting activity, including:
  • No time
  • Still working with candidates who have the right profile but have little need to move
  • No one they want in the market
  • Don’t feel competitive…

I am sure you get the picture. This was not the first such meeting or the last. While the managers should have been the lubricant for the machine, using their people skills and relationships, instead, they avoided the processes and had little to show for their efforts. They probably were also working 2 – 3 times as hard as they needed to by not letting processes work for them.

The really amazing part is that even though the owner knows exactly what they need to do in each case to optimize the machine, they do not. In most cases it is non-action driven by fear or complacency.

The owner as leader needs to step up to the job of optimizing the machine. It does not have to be all at once and does not mean a full retooling. It does start with the people in leadership modeling and using the machine. The House of Antiquities will slow down and in many cases lose opportunity. Putting the House of Antiquities into a museum must be by plan with time to implement changes. It does not take long before the value of the retooled machine erases the desire for the old ways. Kind of like the thought of hauling around MLS books and navigating with maps.


Inside the Machine: Operations & Opportunities (Part 8)

The Operations and Opportunities series will posted on Tuesdays Wednesdays, and Thursdays through the month of August 2011. A number of operational issues will be addressed in the blog. For more detail, depth or individual information and answers, please contact Soltys, Inc. Comments and questions are welcome. We will post answers and responses.
In the past two weeks, we have talked a bit about the operational machine of a company, then last week we focused on KPI’s which indicate performance and health. This week, we will look inside the machine.

If the machine is to run at optimum performance, all gears must mesh, synced to turn the next process in the machinery. All KPI indicators must be showing green. Everything is connected, nothing is isolated. While working in business development with SAP software integrators, as COO for a holding company over 159 companies, and in my consulting work with franchisors and brokerages, I have had the opportunity to see business operational machines at peak functionality and many whose gears were never designed to mesh. In each case the strength of the leadership was obvious. Those who had taken the time to design for function, process and results produced the most money. Those who started the machine based on their individual strength and then became a part of the machinery rarely realized a return much greater than the contributions of their individual efforts. In many cases, they were actually not only supporting the machine but worked so hard that all other malfunctions were hidden.

Just like many industries, most of the real estate brokerage industry needs to retool and work to build the machine that will produce the desired results of the business. So where do you start?

First, create a business map of your current business. This can be a fairly simple drawing to conceptualize the key elements. Each process should have revenue and profit as a destination. In some cases, it is easiest to work backwards from the destination. Usually the starting point of each process is driven by an identified need, opportunity or lifestyle preference. These are the raw elements fed into the machine.

Second, look at the potential for each opportunity on the map, does it meet process in a junction where the opportunity can be realized and maximized? Does this create a separate map or add a branch to the map you are working on for your company. If your company is an enterprise, it will be on the main map. If any process creates a new map, it is not integrated. Control may be lost and/or optimization potentially compromised.

Does the map show you your business and the path opportunities must travel to reach a destination? This is the design of your current machine. This is a basic view inside your business machine. When you look at the simple drawing, you see points where the process is challenged. In most cases, these points are related to people.

People are the fuel and lubricant for business machines. Fuel and lubricant must optimize the machine and are not the machine. People come and go, they change as they gain experience, age, have changed needs or desires but the machine remains. Having a business machine that will work regardless of specific people is a business that can be sold, retooled as needed and is business by design. People associated with those businesses feel the power of the machine, want to be a part of the fuel that drives the machine and appreciate the lubrication that management brings. Most importantly, the results are worthy and fuel regeneration of effort.
When we look inside the machine, we should see people fueling process, management providing the lubrication for smooth and optimized operation and leadership as the architect of the business machine, tweaking and retooling as needed.

If your look inside your own machine and business map did not show the picture you wanted, most likely, your machine is defined by people rather than process.


The Power of KPI's: Operations & Opportunities (Part 7)

The Operations and Opportunities series will posted on Tuesdays Wednesdays, and Thursdays through the month of August 2011. A number of operational issues will be addressed in the blog. For more detail, depth or individual information and answers, please contact Soltys, Inc. Comments and questions are welcome. We will post answers and responses.

The power of KPI’s (Key Performance Indicators) is not in the numbers. It is how you analyze, use and communicate the information. KPI’s are a decision making tool that cannot work without you.

Do you remember when they started putting nutritional information on food packages? We all knew that we should use the information when making grocery selections but, most likely, until either the scales or a medical professional brought it to our attention we were kind of happy with our ignorance. Once a problem arises we become more interested and might be more conscious but it usually takes more to make us proactive. It is the same in business.

My first recollection of KPI’s taught in real estate was in Operation Orbit with Dr. Dick McKenna and Ralph Williams. In those early days, the KPI’s they used were a few simple ones tracked by hand on charts. Many others also teach and use certain KPI’s but often the training does not become a part of operations after the class, but is used sporadically and primarily in areas where information resources such as MLS data deliver up reports and tracking tools. Until KPI’s become a part of the dashboard a business owner or broker sees every day when they go to work only a few will grasp and understand the power.

What kind of power do we have in using KPI information? Here is a thumbnail sketch in a number of categories. Utilizing the information brings fact based management which trumps band aid approaches every time.
  • People – While I may basically know who is productive and who is not, especially in smaller companies, within a growth company I am dependent on what managers choose to tell me and post production numbers without KPI’s. These numbers also drive recruiting initiatives for quantity, diversification and managing business at risk. These also factor in the evaluation of management and staff effectiveness, impact and efficiencies. Using these KPI’s can make a difference in compensation and utilization, which quickly impact the bottom line.
  • Production – There are many parts of production beyond the sales numbers generated when transactions are completed. These are in terms of quantifiable activities including listings taken, days on market, fall out rate, leads, lead conversion and utilization of key tools. A great example is that if I am proactively monitoring agent activities I will also have a better handle and anticipation of items such as agent receivables, where to place marketing emphasis and resources as well as training and management requirements.
  • Facilities – In the post – Bricks, Sticks and Clicks, we talked about changes impacting the need for facilities that are market and customer use driven. KPI’s give the opportunity to take those factors and make great decisions which will potentially drive changes in utilization and return on dollars per square foot. KPI’s that are often monitored include use of desks, conference rooms, administrative staff and equipment as well as add on sales of core services generated directly attributed to the facility.
  • Market and Environment – There is always 100% market share, but not all markets deliver the same return on investment and full diversification in the market is not always the best strategy. The tracking available through MLS systems is important and valuable, but the ability to make key decisions, position for opportunity and allocate resources comes from internal tracking of the KPI’s with external information. Demographics, political issues, transactions, pricing, mortgage factors and who is doing the business can dramatically change recruiting, marketing and sourcing of leads and opportunities. In many cases these also will be critical in looking for acquisitions.
  • Money – KPI’s track not only profit, loss and expenses but also the value of potential opportunity, management and recruiting decisions and investment in tools, services, people and facilities. Imagine being able to see trends and key information that will impact the company six, nine and twelve months in the future. Decisions on long term commitments change and create real bottom line results.
  • Integration of Core Services – If the company offers aligned core services, each customer and or client relationship has a greater opportunity to return dollars to the company and expand business. When the related KPI’s are analyzed, it is more than pennies that can be picked up by simple business changes that usually cost little, if any, extra dollars.
When I think back to the companies I have worked with, the divisor between those who utilize KPI’s and those that do not is measurable in many ways - profitability, market impact, growth, and ability to have an exit strategy because they have not only value but a system for business continuation in place. KPI’s and their utilization in making good decisions is power.


Management By The Numbers: Operations & Opportunities (Part 6)

The Operations and Opportunities series will posted on Tuesdays Wednesdays, and Thursdays through the month of August 2011. A number of operational issues will be addressed in the blog. For more detail, depth or individual information and answers, please contact Soltys, Inc. Comments and questions are welcome. We will post answers and responses.

What would you think if:
  • Your doctor ordered surgery without information from tests?
  • Your accountant gave you an amount to pay the IRS without any calculations?
  • Your attorney created petitions for your case without any information?
Many real estate companies are managed with limited information and a heavy dependence on “gut feeling.” While intuition is important to companies powerful insight that guides intuition comes from the numbers that drive business and should drive decisions.

When a doctor gives you a physical your pulse and blood pressure are measured and other tests are done to determine the performance of the body. KPI’s (Key Performance Indicators) are the significant numbers that management must track in a company. When monitored closely, the company can make key adjustments that will aid growth and positioning with few surprises.

KPI’s are a set of measurements that paint a picture of a company’s health. These are inter-related ratios, measuring key activities and results. KPI’s that are tracked monthly with comparative data are a favorite tool for evaluating the health and potential of companies.

Just like the rhythms of the body, the KPI’s of a company cannot be isolated to form a diagnosis. Unlike financial reports that measure only what has occurred once reportable as dollars and cents, the KPI reports also include activities, performance, market and financial data with defined relationships that allow projections, indicate changes, and can be used to model the impact of the changes.

Measurements taken should compare both monthly and year-to-date performance with ratios created against goals set and the marketplace. The ratios become a quick benchmark that can indicate well being or specific actions needed. Few companies will take the time or effort track the information or evaluate the data.

The areas of measurement for real estate companies should include the following basics:
  • Staffing - Recruiting, agent population (active and total), business at risk, employees and management.
  • Business Pipeline – Leads, repeat business, related business, transaction time line, impact factors, and sources.
  • Production – Presentations, listings, contracts written, opened business, closings, cancellations, and pendings.
  • Financial – income, expense, commissions paid, profit, reserves, and investments.
  • Market Share – agents, offices, companies, listings, pendings, closings, transaction timelines and source of business.

Each of these basic areas can be broken down into greater detail by profit center, market, or even groupings within the office. The data once accumulated and compared begins to not only tell a story but, additionally, paint a path of action.

Examples of KPI’s at Work:
  • Pendings - The number and size of deals in the” drawer” can indicate the timing factors of a market. If the ratio between the number of sides pending against the total closed for the previous year is between 35 – 40 % consistently and you are running a 60 to 90 day closing time period, your business should close stronger than the previous year. If the time period extends or shortens, it will impact the ratio needed to be healthy. Additionally, if the number falls below 20%, and the time period has not shortened to a 30 – 35 day closing period, the business may be headed for financial problems. Other measurements will also impact the analysis, including cancellations, size of transactions and distribution of business.
  • Business at Risk – The production of the top two producers in each of your offices is one of the areas that we consistently measure, called “Business At Risk.” It is not at all unusual for the effects of one’s production or lack thereof to influence the other. It is also not unusual that if one leaves the company, so does the other. Hence if 20% of the production of the office is from these two individuals, the impact of any change will be felt immediately by the company and the impact will also effect almost every other KPI in the company. Healthy companies set business objective for the production and producers needed in the company to all no more than a 10 – 12 % impact by business at risk.

It does not take long to see how a good set of KPI’s can strongly influence decisions and actions. If you are not using technology to track and calculate, start with a smaller set of KPI’s. Even a limited group of areas measured will bring insight and lead to results.

Creating a great company is a lot like keeping a body in good shape with hard work and by watching the numbers.

Soltys, Inc. offers a consulting program called Business Health Partners to help companies grow, develop and use KPI tools effectively.

Tomorrow's blog will be about the Power of KPI's and Friday we'll be introducing our new downloads section.


KPI's and Motivation: Operations & Opportunities (Part 5)

The Operations and Opportunities series will posted on Tuesdays Wednesdays, and Thursdays through the month of August 2011. A number of operational issues will be addressed in the blog. For more detail, depth or individual information and answers, please contact Soltys, Inc. Comments and questions are welcome. We will post answers and responses.

Not long after I started in real estate, I moved my license from a broker who was a sales person with a brokerage to a company where the broker really operated it like a business. Buddy Schear, the broker, made sure that everyone in the company knew exactly what it took to make the business profitable. Buddy knew that most real estate professionals were visual people, so he created some ways of getting our attention. He was treating us as business people and utilizing KPI’s (Key Performance Indicators). This was before technology enabled working virtually, people had to come to the office and there was no other way to have a business dashboard.

Each month the sales and listing boards were posted in green. The transaction posted that met goal plus a factor for fall-out rate was written in black as well as all subsequent transactions that month. We knew that profit would be achieved. If we had not made the numbers by the 20th of the month, the writing turned to red. If the numbers changed enough to meet the goals during the month, the black writing returned. If not, all transactions were written in red carrying forward into the next month until breakeven when writing became green and then changed to black when in the profit zone again.

He also had all of the names of the associates easy to see, with each month shown. You started each month with a zero and as you put listings, sales and referrals on the board, the goose egg was changed to reflect production. You cannot imagine how important it was not to have a goose egg next to your name, so everyone worked really hard to put something on the board as quickly as they could each month. Not a bad way to kick start each month. It was subtle, but since Buddy sought agents who had a passion to achieve and a bit of ego, it worked great.

He also felt it was important to know how the company was doing. Each month, a pie chart was on the wall with the major categories of expense divided out of the pie. These included all salaries and compensation for the broker and staff as well as profit and reserves. While profit and reserves are not expenses, Buddy wanted all of us to know that if those were not a part of every dollar, there was no reason for him to continue the business structure which hosted all of our businesses.

In those rare months where we did not meet the numbers, Buddy brought out a three foot foam rubber hypodermic needle which was labeled cash injection. He would explain in great theatrical detail, amusing and motivating us, how much it hurt and that he would welcome any participation in the pain of injecting cash. He then would also pull out all of the leads that he knew of that had not been converted in a bucket, dumped them on the floor and let us know the dollars for associates and the company left literally laying on the floor. These were then put in a fishbowl as open opportunities and rarely did one in the bowl go untouched that day.

Buddy managed by the numbers and not by every excuse or exception presented. Those who did not really know him only saw the business tiger. He was small in stature, less than 5’5”, but a giant in nurturing business with care, compassion and a genuine understanding of business that he transferred to each of us.

While the systems and the methods used would be considered somewhat archaic by today’s standards, the orientation to business and the numbers were critically important and built not only the company’s business but, perhaps more importantly, associates who were highly productive and business focused with an understanding that the company culture which was fun, friendly and growth oriented was first and foremost about business and profit.

Be sure to come back tomorrow for Management by the Numbers.


Diagnostics & Performance: Operations & Opportunities (Part 4)

The Operations and Opportunities series will posted on Tuesdays Wednesdays, and Thursdays through the month of August 2011. A number of operational issues will be addressed in the blog. For more detail, depth or individual information and answers, please contact Soltys, Inc. Comments and questions are welcome. We will post answers and responses.
All machines including business machines have diagnostic tools and performance measurements built-in that allow companies to not only optimize performance but to identify potential issues before they are a problem. This is also true for business machines. We call these KPI’s or Key Performance Indicators. KPI’s measure the critical areas that will impact the business in the short term, near future and even valuation of the company.

In the simplest form, KPI’s analyze the numbers necessary to achieve business goals and the variance from norms and targets. We are accustomed to looking at current profit levels against goals which is one KPI but there are many gears or other KPI’s in the business machine that must turn and meet performance levels to meet and exceed bottom line objectives. It is easy to calculate the revenue and profit anticipated if we simply count deals but if closing dates creep, commission revenue is decreased in a post contract compromise or fall through rates for change, our projections have little value. If we were able to see all of these factors as they occur in a dashboard where we could also see the impact as elements change, we would be empowered to make better business decisions. This is the value of KPI’s. KPI reporting and management gives us real time views and information with comparatives and variance from objectives.

Basic KPIs are generally a part of the reports in most back office systems but often offer only a historical view, generally at the end of a period which limits the ability to be proactive and timely. These are also rarely give insight to process, opportunities and the people factors that can change your business results before anything hits accounting. Companies using CRM systems often have a better view of activities and opportunities but not often the human factor. The best systems are those that draw information from back office, front office (often CRM) and management data.

Each business type has KPI’s identified to specifically measure the operations that produce revenue, feed related businesses in the enterprise and drive future opportunities. These are critical in companies utilizing incented and performance base compensation at both production and management levels.

In the real estate brokerage industry and small business there are few if any systems available to do this automatically and produce the needed dashboard. A few franchisors through their consulting service teams produce Operations Reviews on a periodic basis. These are helpful tools but often measured in a time period long past. Significant market and economic changes like those experienced since 2005 – 2006 might have created benchmarks and averaged norms that if applied in the business 2007 to current would often set a path for missed goals and performance. There are a few franchisors with centralized accounting and reporting systems that can give a more current report with a macro focus but are not able to integrate KPI’s that would enable local and timely decisions easily.

Simple spreadsheets can be used to track the most important KPI’s with very little data input but will give a point-in-time and measurement against a like period view rather than real time. Better yet, a simple database which produce the report and eliminate some of the work in keeping spreadsheets current. This is much better than nothing and will be very helpful until software publishers for the industry support KPI reporting through integrated systems.

Soltys, Inc. utilizes KPI’s in analysis and consulting to real estate brokerages. If you would like more information on KPI management, we'd love to help. Watch for information about how to receive our KPI guide next week.


The Magic of Machines: Operations & Opportunities (Part 3)

The Operations and Opportunities series will posted on Tuesdays Wednesdays, and Thursdays through the month of August 2011. A number of operational issues will be addressed in the blog. For more detail, depth or individual information and answers, please contact Soltys, Inc. Comments and questions are welcome. We will post answers and responses.

In Part 2 of Operations and Opportunities, we touched on the business machine in terms of sales, because this is usually one of the hardest areas with the most resistance for enabling the machine which is really a tool.

Perhaps an enhanced understanding of the machine would be helpful.
  • The machine does not have human error other than what a human builds into the processes, or where the human tries to interrupt, delay or change the processes of the machine.
  • The machine does not get tired, have bad days or have distractions. It works in the background, moving processes, supporting human effort and identifying opportunities as a part of the process.
  • Its sole purpose is to drive the gears of business and produce results.
  • The machine runs efficiently incurring little additional cost once implemented, excepting maintenance, updating and normal quality controls.
  • The machine drives profit.

The book “Warren Buffet’s Management Secrets” by Mary Buffett and David Clark describes companies with a “durable competitive advantage.” The descriptions of the best companies utilizing the advantage all have machines at work for every process that can and should be repeated throughout their companies. It is worth taking a look at some of the examples they cite.

If you are a real estate brokerage, franchisor, software company or country club you do basically the same things over and over. You have sales promotions but your base product does not change and your processes do not change much either. All of these companies add to their product and service mix which does mean some changes to the machine, but not a retooling of all processes. Companies, such as car companies, which annually release new models have significant production and process retooling with each new model but even they try to use as many components, from a chassis to a promotional process, as possible to build efficiencies which control costs and drive profit.

The business machine actually is behind all operations in a company. In some cases, it is working well and production is high. In others, especially businesses where there is a high degree of personal interface, it is often not utilized in part due to fears, concerns and control issues.
  • Fears include that the sales person or manager will not be the center of the process and final product. They are not now, as the consumer is not tied to the person.
  • Concerns include individual ways of doing business. A signature style can coexist nicely and be complemented by a business machine. The signature should exist in the relationship and not the process.
  • Control issues are perhaps the greatest and in many cases the most difficult to conquer as they are often driven by management and even leadership who are either clinging to the ways they have always done things or may not want the limelight of accountability.
The magic of the machine is that, given the chance to operate at peak efficiency, many costly challenges businesses face can be significantly reduced or eliminated.


The Machine: Operations & Opportunities (Part 2)

The Operations and Opportunities series will posted on Tuesdays Wednesdays, and Thursdays through the month of August 2011. A number of operational issues will be addressed in the blog. For more detail, depth or individual information and answers, please contact Soltys, Inc. Comments and questions are welcome. We will post answers and responses.

Businesses wanting to maximize bottom line impact find ways to make a series of processes predictably produce results. In essence, these businesses run like machines. These “machines” can exist in sales and service businesses, not just manufacturing. Yes, everything from real estate brokerage and franchising to software companies and country clubs.

All raw materials (data, customers, sales) work through the machine’s finely honed gears, each turning and meshing with paired gears delivering purpose, synced timing and precision. There are parts of the process that require human touch and application of skills, but every effort is made to ensure that the completion of the human task allows the machine to carry out as many of the functions as possible. The machine works best for everyone and the company when human intervention is limited as much as possible. The less dependent on people the processes are, the more money the people make.

If we take a look at the sales process for example, there are many points of input (sources of clients and customers) and many services and sales persons who will touch those customers in the process.

In the case of the example company, they are working through a disconnected process with silos of information and methods held by individuals at different points of the prospect’s experience and the transaction. The ratio of all prospects to all sales closing runs at approximately 5%.
The company decided to implement an operational machine to create consistent processes and increase results. Implementation required:
  • Organization of parts, pieces and information related to the processes. A significant portion of the information and document flow was already in place but had never been formalized.
  • Operational rules
  • Training of all parties and commitment to the process.
  • Accountability at all levels. Managers wanting to be heroes in problem solving were the biggest challenge.
  • Communicated understanding of the cost benefit of all actions.
  • Company-wide CRM system
  • Integration of all other products and services sold in the company
  • Paperless document system

Results of implementation will continue to grow but are initially showing a prospect closing percentage nearing 20%, with a higher proportion of qualified prospects seeking the better experience. Sales persons incomes are expected to rise significantly and the company retained profit will be much stronger due to client leverage and sales persons handling more transactions.

A simplified outline of the machine.

1. Interest initiated by potential customer by web inquiry.
a. Thank you for inquiry and process outlined in immediate response.
b. Prospect qualified and triaged for most favorable sales positioning.
c. Missing data noted and flagged as incomplete

2. Assignment
a. Options
i. Source allows for assignment to the best qualified ready, willing and able sales person.
ii. Source specifies initial assignment of sales person.
iii. Prospects determined not ready, willing or able through triage will be incubated.

3. Data on prospect, needs etc. fed to database.
a. Mined data related to prospect needs and available solutions can be fed to the sales person or other resources as needed throughout the process.
i. Opens opportunities to add on sales.
ii. Sets up referrals and future sales.
b. Prospect data as accumulates engaged services and products related to the sales process to be offered to the prospect by the sales person.
i. Required tools, data, applications and documents are readied in queue.
c. Initiates performance and documentation
d. Challenge, obstacle and fail reporting with potential remedies are ready as events occur and create ongoing process analysis and with opportunities of correction.

4. Quality controls and reviews are event and process triggered.
a. Quick resolutions and adjustments to meet challenges
b. Significant risk reduction
c. Higher satisfaction for all parties.

5. Consistent information flow for the prospect, sales associate and company are automatic.

6. Process conclusion
a. Sale is made and closing occurs with all parties feeling success.
i. Multiple products and services sold to one prospect generating additional revenue.
ii. Future sales and referrals are prepositioned
iii. Post sales activity is launched.
b. Saleperson is able to handle more opportunities because the machine works for them
c. Sales person and the company make more money than they would without the machine.

Yes, the machine requires maintenance and recalibration periodically but its operation creates many opportunities including volume, product and service expansion. Once sales people and management embrace the power of the machine, growth opportunities are no longer as limited as when they are people rather than process dependent. A good machine makes work easier and more productive.