Trends and Opportunities For 2011: Full Commission Jobs Are Becoming More Common

Monday, December 27, 2010

I hope you’ve wrapped up a wonderful holiday weekend with family and friends. Assuming that you got everything you wanted for Christmas and you’re not out exploring the after-Christmas sales, you’re probably starting to think about the year ahead.

The job of any leader is to help those on their team to see and understand the business trends and opportunities that will affect their future. Just as an airline pilot lets his passengers know when he sees turbulence on the radar, it will help your teammates feel more safe and be more productive if you can help them interpret the events going on around them.

We’ll take the next few posts to relay some of the trends and opportunities we see for 2011. The purpose of these discussions is not to provide an exhaustive list of things that we think will happen in the future, rather it is to help get you in the mode of recognizing how the things going on around you will potentially affect those on your team and your recruiting efforts.

The first topic I’ll address is the future of full commission jobs. As we mentioned in a WorkPuzzle discussion last summer, there is a lot of economic pressure being put on the traditional “job with benefits.” At the time, I made the point that more and more companies are moving toward independent contractor employment models.

A recent article in Business Week conveys how this trend is not only continuing, but may be growing in the coming years:

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You can't buy Dallas clothier J. Hilburn's shirts in a retail store or online. Nonetheless, the company expects to sell 60,000 of them this year by dispatching salespeople to customers' homes or offices to take measurements and suggest fabrics and styles. They send their orders to a factory near Macau, China, where shirts are cut and sewn from Italian fabric. Buyers receive them in two to three weeks and pay between $80 and $150, less than half the price of similar shirts sold in some high-end stores….

Some 30,000 people have bought clothing or accessories from Hilburn, the company says. And 93 percent of its customers return for a second purchase, says Davis. Since Hilburn was founded in 2007, its sales have tripled each year and are on track to top $9 million in 2010, driven by growing demand for its shirts as well as newer products such as trousers, cuff links, and cashmere sweaters. "Customers are basically saying, 'You've become my solution, now offer me more products,' " says Davis, 38.

While new customers can find sales reps through Hilburn's website, most come through referrals. The company has 650 "style advisers" who earn commissions of up to 25 percent on clothing they sell after paying $399 for fabric samples, sales materials, and training…

Amy Mancini started selling Hilburn shirts in 2008. A mother of three in West Boylston, Mass., the former nurse says she earns about $60,000 annually, spending between 20 and 25 hours a week managing other reps and visiting customers. "I have clients anywhere from college students all the way up to presidents and CEOs," she says. The sales calls are crucial to getting measurements right and making customers feel comfortable about buying a garment they can't try on. Clients' measurements are stored in a database, and the company plans to launch an online store next year where customers can order new shirts once they've been fitted….

The model removes some traditional up-front costs of retailing. "You've got a sales force you're not paying until they sell things. You're not paying to make the shirt until the shirt is sold," says Brian O'Malley, a Hilburn board member and partner at Battery Ventures.

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Notice the last statement in the article… Isn’t this what the real estate industry has been saying for several decades? Of course, it is. What’s changing is that traditional industries, such as retail, are starting to use the same methodologies.

If you’re trying to attract talent into the real estate industry, this is exciting stuff. It is always difficult to get someone to consider something new. But when the value proposition is completely different (full commission) than what most people are used to, the jump can seem insurmountable. As the independent contractor becomes more common, the gap in someone’s perception of what’s “normal” is diminished. This should make the recruiting process easier.

The potential downside of this trend is that it may force you to compete with other businesses who will be continually trying to perfect the independent contractor employment model. If someone can earn $60K working 20 hours per week measuring people for shirts, you may have to sharpen your value proposition in order to compete when it comes to recruiting.

Editor's Note: This article was written by Ben Hess. Ben is the Founding Partner and Managing Director of Tidemark, Inc. and a regular contributor to WorkPuzzle. Comments or questions are welcome. If you're an email subscriber, reply to this WorkPuzzle email. If you read the blog directly from the web, you can click the "comments" link below.

Why Metrics Matter…

Wednesday, December 22, 2010

I realize that my last entry was fairly, well… adamant to say the least. As you probably already know, we write and speak on the importance of metrics frequently (as I emphatically did earlier this week). Everything that we do and ask you to do hinges on this principle.

We are certainly not alone. For example, Tom Malone said, “If you don’t keep score, you are only practicing.” Emery Powell noted that, “A strategy without metrics is just a wish. And metrics that are not aligned with strategic objectives are a waste of time.” Finally, some unknown but very wise manager once said, “Be careful what you measure—you might just get it.”

By measuring something, you are stating to your employees, managers, stakeholders, and industry analysts that an activity is important.

Steven A. Melnyk, of the Department of Marketing & Supply Chain Management at Michigan State University, sums up as succinctly as I have seen, why metrics are so important:

“Metrics are important because of the functions that they provide, namely:

Control: Metrics enable superiors to control and evaluate the performance of the people working under them. They also enable employees to control their own performance.

Reporting: This is the most commonly identified function of metrics. We use metrics to report performance to ourselves, our superiors, and external agencies.

Communication: This is a critical but over-looked function of a metric. We use metrics to tell people both internally and externally what constitutes value and what the key success factors are. As pointed out previously, people don’t understand value, but they understand metrics. As a result, value as implemented at the firm should influence the type of metrics developed.

Opportunities for Improvement: Metrics identify gaps (between performance and the expectation). Intervention takes place when we have to close undesired gaps. The size of then gap, the nature of the gap (whether it is positive or negative) and the importance of the activity determine the need for management to resolve these gaps.

Expectations: Metrics frame expectations both internally (with our personnel) and externally (with our customers). Metrics help form what the customer expects."

Melnyk also discusses various categories of metrics. For our purposes, let's take a look at predictive metrics.

“Predictive (also referred to as a process metric) is one that we can use to help predict our chances of achieving a certain objective or goal. In many systems, the bulk of metrics are outcome-oriented, rather than predictive. As a result, the measure system gives the managers little information on which they can predict their chances of meeting their objectives. However, firms such as Texas Instruments are now turning their attention to the development of predictive metrics. They recognize that such measures are far more useful to the users.”

It is the predictive metric that provides us the opportunity to track our clients' outcome metrics, such as number of candidates, number of interviews, and total hires over time, and then quickly convert these to provide a forecast of what you can expect to achieve with your recruitment efforts.

What else can we all measure collectively? How can we measure it? What behaviors should we track? How can you use metrics with your agents? What should they be measuring and tracking? What happens if they don't measure?

Because …

“A strategy without metrics is just a wish.”

Editor's Note: This article was written by Dr. David Mashburn. Dave is a Clinical and Consulting Psychologist, a Partner at Tidemark, Inc. and a regular contributor to WorkPuzzle. Comments or questions are welcome. If you're an email subscriber, reply to this WorkPuzzle email. If you read the blog directly from the web, you can click the "comments" link below.

Why Discipline in Recruiting Matters

Monday, December 20, 2010

You've all heard the saying "If it were easy, everyone would do it."

Ben wrote a great piece on the difference between microwave and crock pot recruiting that gets to the heart of the above principle.

Every tool and philosophy we espouse at Tidemark is built upon this central principle. I'm not surprised to say that 95% of our clients hold to this principle as well. They have an underlying conviction that in order to see results tomorrow, they must engage in constant, systematic, and seamless steps today. It's understood that "microwave" recruiting will only result in producing low hanging fruit that competitors are also vying for; And conversely that "crock pot" recruiting, may take more time and discipline, but over time yields the higher caliber and supplemental fruit that companies need to beat the competition.

The difference in conversation content between a microwave recruiter and a crock pot recruiter resembles two entirely different languages. A microwave recruiter offers every anecdotal excuse under the sun, with no metrics to back it up. In fact, metrics are absent from the language of the microwave recruiter altogether. If you ask them a metric question, they give you another anecdotal answer. Ask them how many candidates it takes to get ten interviews…or how many interviews it takes to get each hire, and then give them a week to come up with this information. What do they provide? More excuses. Why? Because they don't track it. We all know that what isn't measured cannot be managed, predicted, and improved upon.

Now, don't get me wrong…there are always factors that change those percentages and numbers from one cycle to the next. We're all aware that there is a time and place to dissect reasons to interpret the changes in percentages around the metrics. But, excuses with no grounding in metrics amount to sheer laziness and avoidance of accountability.

Discipline is really the key to all of this. Disciplined people and organizations rarely offer excuses. They implement systems to drive, track and improve performance.

Read carefully the definition of Discipline:

Training expected to produce a specific character or pattern of behavior.
Controlled behavior resulting from training.
A set of rules or methods.
Activity, exercise, or a regimen that develops or improves a skill.
Behavior in accord with rules of conduct; behavior and order maintained by training and control.
A set or system of rules and regulations.

A couple of weeks ago, I wrote a four-part piece on an expert recruiter (Andy Nazaroff) who clearly exercises discipline (1,2,3,4). He provides specifics regarding calls, interviews, information, timing, conduct, etc…and all of these methods amount to consistent and impressive success.

Why am I excited about the discipline that so many of our clients practice, and frustrated with the opposite? It comes down to a belief system. We believe that measuring discipline drives results, and increases responsibility — two characteristics of every successful company.

Let me know your thoughts and your own methods for assuring your own discipline.

In an upcoming article, I hope to feature a manager who is disciplined in working the experienced agent pipeline…

Have You Experienced TED? Great Ideas in 18 Minutes or Less

Wednesday, December 15, 2010

Where do you go to get great ideas? I like to read…and I tend to best assimilate knowledge this way. I know not everyone has this capacity or interest—some of you are more visual and auditory. If you’re in this latter group of learners, you might want to spend some time on TED.

TED (an abbreviation for Technology, Entertainment, Design) is a nonprofit organization that began in 1984 with the purpose of spreading great ideas. For years, they’ve hosted annual conferences, and in 2007 they launched a video-enabled website that has become quite popular.

The premise of TED is to challenge the finest thought leaders in the world to give the best talk of their life…in 18 minutes or less. The speeches are traditionally given at one of two live conferences held each year (one in Long Beach, CA and one in Oxford). Although, it appears that TED has recently started adding more conferences as their popularity has grown.

Here is a speech that you may want to digest if you’re a recruiter or a hiring manager who wants to become better at engaging the most talented individuals:

In this talk, author and consultant, Simon Sinek explains how great leaders have inspired great causes—both throughout history and even in modern day life. They do so by reversing the normal order of discovery, focusing first and most passionately on the question “Why?” Most people focus their effort on the questions “What?” and “How?” and never get to the most important question.

This oversight is very common in real estate recruiting, and it’s one of the main reasons that so few candidates are inspired to action after an interview. I don’t want to say any more at the risk of stealing Simon’s thunder, but let me assure you if you can master this technique and apply it to your candidate interactions, your effectiveness will skyrocket. Enjoy!

Effective Recruiting: A Microwave or a Crock Pot?

Monday, December 13, 2010

I hope you’ve had the opportunity to participate in the discussion that Dave has been facilitating on WorkPuzzle over the last two weeks concerning the best practices of high-performing recruiters (1,2,3,4). We’ve had a lot of great feedback on this issue, so it seems to be an area that many of us are striving to improve.

I'd like to add to the discussion by pointing out a mindset that we’ve noticed among many of the highly productive recruiters and hiring managers with whom we’ve worked over the last few years. This mindset is one of working a pipeline of candidates over time.

My attention to this topic was prompted by a recent errand I was running to drop my son off at a sports practice. On the way back, I was flipping though the radio channels and ran across a call-in program that was offering financial advice.

The caller was asking the host whether he should replace his older car that had transmission problems with a newer model that was less likely to break down. To purchase the newer model, the caller would have to take out a car loan. The host’s ultimate advice to the caller was to pay the repair bill and stick with the car he had (which he owned free and clear).

What caught my attention was not the host’s answer, but how he delivered the information. He did a great job of articulating what a pain and hassle it is to have a car that breaks down frequently. Secondly, he spent some time reminding the caller of the long-term objective—healthy finances down the line. With those two issues setting the tone, he was able to deliver the answer the caller needed to hear.

The host summed up the discussion by saying:

“Most of the financial strategies that I teach are 'crock pot' strategies. They take a long time to mature, but they do work if you have the discipline to stick to them. There are a whole bunch of banks, financial services companies, and others, who want to sell you 'microwave' strategies. These strategies are basically designed to alleviate short-term pain. While they are sometimes effective at accomplishing this objective, they undermine your prospects for long-term financial success.”

Hopefully, you’re seeing the connection already. Most good recruiting organizations resemble crock pots. The individuals who work for these companies are willing to treat the hiring process from a long-term perspective, and put up with the hassles that this type of perspective, and ensuing process, entails.

Quite often, we have companies approach us with the hope that we can help them find some microwave strategies for hiring. They have the short-term pain of diminished revenues and want recruiting efforts to fix this quickly. While there are some methodologies for making that happen (it typically involves buying a “book of business” or offering commission splits that are unsustainable without very favorable market conditions), the research on this topic shows that the long-term success rate of such approaches is typically below 20%.

Good recruiting companies won’t play these odds. Instead, they’ll develop a pipeline of candidates who have a high probability of success. And then they’ll maintain the discipline of proactively working that pipeline with near religious consistency. The results? It works every time…

Lessons from an Expert Recruiter: Part 4

Wednesday, December 08, 2010

If you've been following the past few editions (1,2,3), you've heard my interpretation of the excellent recruiting work performed by Andy Nazaroff of Guarantee Realty.

The resulting positive responses from the readers left me wondering how helpful it might be to hear directly from Andy. Fortunately, he agreed to give us a step by step view into his recruiting process. As you read the below excerpt, keep in mind Andy's philosophies behind each communication (found in previous editions). Here, in his own words, are the steps he takes to achieve consistently strong recruiting results:

"Here is my approach in its entirety to new agent recruiting with Tidemark.

I begin my day meeting with my assistant to talk about the candidates I met with from the previous day. We discuss lead follow-up issues, licensing school enrollments, and the current day's appointments. Then, I spend about an hour each morning making new candidate phone calls first, then 2nd phone calls to older leads in the pipeline. My assistant handles administering the Tidemark platform and all of the emails to the candidates.

When I call candidates, my script is usually the same every time:

1) I'm looking for __________________ (always use first name, as you will not sound like a telemarketer that way).
2) _________________ (first name) this is Andy Nazaroff, Manager of Agent Development with Guarantee . . . (intentional pause) and I noticed you found us online and completed the assessment on our website (listen for their recollection).
3) I was wondering if I could ask you a few questions about that assessment (if they cannot talk, they usually tell you here).
4) What brings you to: the job boards/craigslist/our website (this answer will tell you a lot about where they are at, and how to proceed).

If they are currently working:
5) What do you like most about what you are doing now? (Write these answers down for your interview.)
6) What do you like the least?

If they are not currently working, they may be applying to any job online:
5) What type of work or skills have you exercised in the past that makes you believe you would be a good fit in the real estate business?
6) What type of jobs are you applying to online, and what type of jobs are you avoiding, or not applying to?

Then, in either case:
7) Obviously a career in real estate is not right for everyone. The time it takes to get your license, to go through our training, and to close your first transaction could take at least 4-5 months. How are you prepared to bridge that gap financially? (listen)

8) I'd like to set an appointment to meet you face to face for an interview. Are you available to meet this afternoon or tomorrow afternoon? (I always try to book same day or next day, and in the afternoon, to stay in control of my schedule.)

I then give my address and my direct number.

When the candidate arrives, typically my assistant seats them in our conference room, and then gives them a folder of information and says, 'Andy prepared this for you to look over for a few minutes and he'll be in shortly.' This packet includes the start up costs estimate, recruiting information on Guarantee, our market share graph, a separate local real estate market update, and our pre-listing package. This typically covers 90% of the questions they were thinking about asking. This package allows me to stay in control of the interview by asking questions and then presenting how to get their license and our training plan.

At the interview, I usually open with, 'Since our conversation on the phone, what are your thoughts about YOU in the real estate business?' (This tells me a lot about their fears or excitement – but I do not address them yet.)

After that conversation I transition to, 'Let's say you are licensed today, you have completed our training, and you are ready to start day 1 in this business. What do you want to see happen in your first year in the real estate business?' (This tells me a lot about their motivation.)

After I listen to their first year answer I say, 'We are looking for two things in a candidate for this business at our company – personality and motivation. We can teach you real estate – that's the easy part, but we cannot teach who you are as a person, or how motivated you might be to do it. I called you and invited you in here because of your personality assessment scores. The questions I've been asking you today are to understand your motivation, and based on my information I'd like to recommend/not recommend you getting your license.'

'Before I tell you what it takes to get your license, I'd like to know… what does your family and close friends think about you getting into this business?' (Listen for that person that might be the wind in their sail, or the anchor in their tail – Then address it.)

Then I present that I cannot do anything to help them succeed in this business until they get their license. I highlight the licensing process, then talk about our Quick Start training program, then our Mentor Program. I close with, 'Any questions about the licensing process, the Quick Start program, or our Mentor program?' They usually say no – you covered it. Then I ask, 'Any questions about our company, the market, or for me?'

Then, my handoff…'Our next step in this process is to have our licensing school counselor contact you. Her name is Jessye. She will contact you within a day and give you all the information you need to move forward with licensing. Once you are ready, pull the trigger and we will be here to get you enrolled in training once you've passed. Fair enough?' They usually say yes – after all it's a soft close. Our licensing school rep is a good sales person. She praises the candidate for their interview results and says that I recommended them as a good candidate for this business. She then stays with the candidate until they enroll, or tell her they are not going to do it. We keep the candidate in the Tidemark pipeline to engage later until we have confirmed they are enrolled.

If you'd like to share ideas, or ask questions, please feel free to connect with me at andy@guarantee.com or at facebook.com/andynazaroff."

Thanks Andy for sharing your best practices. Please fill us in on any conversations that we can all learn from.