Getting in Front of the Inevitable

Structural Change - Anticipate changes to the way “things have always been” to keep your business running smoothly.

The ability to anticipate and manage change is a critical leadership skill. The first step in being a “Change Leader” is recognizing the four types of change: cyclical, structural, exponential and incremental. In this article, we’ll focus on structural change. This is the kind of change that changes the rules.  

What are some examples of these rule changers? Think of technology. Cassette tapes replace vinyl records. CDs replace cassettes. iTunes replaces CDs. Think of market disrupters such as Apple iTunes and Amazon replacing Borders Books & Music. Redbox and Netflix are replacing Blockbuster. Whenever there is structural change, the old market doesn’t come back. It morphs into a new market.

For real estate, changes in government policy or regulation can quickly change the rules of the game. Are you able to anticipate changes in tax law, zoning law and mortgage qualification rules and prepare a strategy for your team? What is your plan if the government outlaws the independent contractor status for your real estate associates, and you are required to guarantee them minimum wage plus benefits?

Forty years ago, market disrupters Realty Executives and RE/MAX changed the rules on agent compensation by popularizing the 100 percent commission concept. This caused a structural change in the industry, moving us from an owner-centric industry to one that is agent-centric. We have been in the agent-centric era for about 40 years.

Today, the so-called freedom shop with a minimal monthly fee to the sales associate and a push to have access to the MLS without being a Realtor is disrupting the traditional rules of the game on compensation, cooperation, arbitration and subscription to the Realtor® Code of Ethics. This movement may signal the finale of the agent-centric era.

We are now experiencing the structural change from agent-centric to customer-centric. To understand these eras, simply follow the money.

•      Owner-centric era: “This is my money and how much do I have to pay the agent?”
•      Agent-centric era: “This is my money and how much do I have to pay the owner?”
•      Customer-centric era: “You want how much money to sell my house? Show me the value!”

One of the biggest drivers (and structural changes) of the customer-centric era is the Internet. While the Internet has dramatically changed how we do our business, it hasn’t changed who does the business. Consumers go to the Internet for information. Then, 88 percent choose to use the services of a real estate professional, about 70 percent choosing someone they already know or to whom they are referred. (Source: NAR Profile of Buyers and Sellers) So, the who (a real estate agent I know) has remained constant. What has changed dramatically is how.

It’s the Internet

The Internet has changed how we sell real estate in two profound ways. First, today, most customers have done a great deal of research even before they enter the real estate office, sales center or open house. In many cases, these empowered consumers know more about the market and the product than the salesperson. Second, customers in social media can roast salespeople who deliver poor customer service. A salesperson’s (and company’s) reputation can be made or broken by just one customer in the online world.

How will our industry and its leadership respond to this customer-centric era? We have a 40-year history of focusing on what our agents want—seeing them as our primary customer. What happens when the goals of customers (our buyers and sellers) conflict with the goals of our independent contractor salespeople? How will we respond? Our ability to anticipate, respond and navigate these structural changes will determine our future. 

This article originally appeared in the December issue of the REAL Trends Newsletter and is reprinted with permission of REAL Trends Inc. Copyright 2014

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