In the book, the authors list, explain, and rate ten of the most important strategic issues facing the real estate industry. Each topic is rated by the potential impact the issue could have on a real estate company and the probability of it materializing.
Only one topic among ten was rated as potentially having a high impact on the real estate industry. All other strategic issues were rated as having moderate or low impact.
So, where’s the nuclear bomb that could go off?
It’s the potential loss of the independent contractor arrangement the real estate industry had enjoyed for more than 40 years.
As most of you know, several companies in the past have tried to employ agents as employees rather than as independent contractors. Most of these attempts have failed.
There is little risk that a new grassroots employment business model will sprout and gain traction in the near future. But, what if the government mandated such a change?
Game Changers makes the point that such a change may not be as farfetched as it sounds.
The federal government, along with local and state governments, are hungry for additional revenue. At the federal level, social security and Medicare shortfalls are looming; income tax bites have been on the rise.
At the state level, as many states have struggled to balance their budgets, several states sought to squeeze more revenue out of taxpayers; unemployment taxes and worker’s compensation taxed have also been impacted
Finally, at the local level, unemployment and income taxes are a factor. Momentum is certainly building to place pressure on the safe haven of independent contractors.
Game Changers lists and explains five factors (mostly recent developments) that are making this change more probable in the next few years. These issues are worth reading through and digesting (to do so, you’ll need to buy the book).
I suspect many of you think this could never happen, but you might be surprised. Things can change quickly when the government wants/needs money.
For example, in my home state, we’ve seen several changes we didn’t suspect in the last couple of years. Hard alcohol distribution laws were changed, recreational marijuana was legalized, and the $15/hour minimum wage was mandated in the city of Seattle.
The common thread among these changes: government needed money and they were willing to throw businesses (particularly small businesses) under the bus to get it.
Game Changers goes on to describe the “countering forces” that would likely keep this change from becoming a reality. Realtor organizations and most national branded firms would fight this change in the political arena. These organizations have a lot to lose if the status quo changes—some believe the number of agents in the industry would fall 50 to 70 percent.
Bottom line: This change will probably not happen in the short term, but the forces that would impact this change are stronger than they’ve ever been and they’re continuing to gain momentum. At some point, there will be a tipping point.
How would such a change impact real estate recruiting, and what should you be doing now to prepare?
As the authors of Game Changers state, this is not an urgent issue. Make sure you and your agents are paying your Realtor association dues—these groups are your best defense for maintaining the status quo.
From a recruiting perspective, here are several other things you could be doing as well.
Develop a plan. A few weeks ago, we discussed some issues that keep small organizations from growing (How to NOT Think Like and Entrepreneur). One of these issues was a lack of a contingency planning. I’m not suggesting you work up a 50-page “what-if” document, but it wouldn’t hurt to jot down a few ideas on how you would handle such a major change.
Start reading some non-real estate recruiting sources. If this change were to happen, you’d be joining the rest of the recruiting world in hiring employees rather than contractors. These folks have their own set of problems and solutions, but they are different issues than those in real estate. A good place to start would be the Electronic Recruiting Exchange (ERE).
Study what happened in other industries. Some of these changes (or similar issues) have impacted other industries such as financial services, insurance, and lending. There are recruiting lessons to be learned in all these areas. In addition to developing contingency ideas, you may learn how to improve your recruiting under current circumstances—some of the folks run very high-performing recruiting operations.