When it comes to Keller Williams Realty – Running like a Business is in the DNA
Keller Williams Realty has grown into a very successful real estate company. That success is especially intriguing given that they have done so operating on only about half of the profit due to its Profit Sharing model with agent stakeholders. In an era of consolidation, mergers, acquisitions and bankruptcies – Keller Williams Realty has…thrived!
Harvard Case Study
The Harvard Business Review has performed two case studies on Keller Williams Realty. Both are available for purchase. Keller Williams Realty (A) as they call it describes the economic and cultural models that have led to the success of Keller Williams Realty. Keller Williams Realty (B) is a follow-up that explains the actions taken by Keller Williams in response to the residential real estate market downturn in 2008.
So what is the big deal? The big deal is that models and systems that empower agents to build interdependent businesses of their own. Not dependent – Not independent. Interdependent. A partnership. The old saying goes “Give a man a fish and feed him for a day. Teach a man to fish and you feed him for a lifetime.” This is the way Keller Williams Realty approaches the agents who choose to affiliate with the company.
Building a Brand
Most companies go to great lengths to build and protect their brand. That holds true for most real estate companies as well. Brand recognition and perceived credibility generate consumer confidence. That consumer confidence makes the phone ring and cash register light up. But the reality is that this brand building is a double-edged sword for the agents in a real estate company. Branding does build credibility and name recognition which helps agent win business in a competitive interview. However, calls and online inquiries are captured by the company and are then sold in some fashion back the agents. The company controls the leads and who gets them. That means the company also controls how much the agent will get paid in exchange for those leads. This is true for all industries. So who is the brand really being built for?
Profit and Profit Share
In most jobs, you go to work and the company pays you for it. Making money is up to the company (and the stockholders if it is publicly traded). With real estate agents, it’s actually the opposite – the agents pay the company to work there. Real estate companies operate by collecting money from the agents on the sales they make. In exchange, the company provides various administrative, marketing and training services. Generally, this happens under two models: 1: Commission Splits OR 2.Monthly Fees. With Commission Splits, the agent does the work and closes the deal. The commission check is issued to the company and the company takes anywhere from 50% (for the lowest producing agents) down to 20% (for the rockstars) of the commission earned. The exception is relocation business where third-party relocation companies enter the mix and even superstars end up sharing about 50+% of the commission with their company.
Profit Sharing in the real estate arena was pioneered by Keller Williams Realty. After having operated on a typical Commission Split model, the company incorporated a Profit Sharing model in 1987. Gary Keller invited the top agents in the office to a round table discussion and the result was the creation of the Agent Leadership Council (ALC). Through the ALC, the agents joined in the management decisions and the results are summarized in this ProfitShareWhitePaper. Giving agents a voice in the operations of the office and a share in the profits gave each of the agents a greater stake in the company’s success. One interesting by-product of the Profit Sharing model was transparency in the books. In order to maintain total accountability for the integrity of the Profit Sharing program, agents needed full access to the company’s income and expenses each month. They got it! To this day, the finances of every Keller Williams Realty office are open for review by the agents.
Recruiting
All real estate brokers recruit agents. It is how every real estate office is grown. Keller Williams Realty just mobilized its agents as “helpers” by setting up a reward system called Profit Sharing. No profit – no sharing. No signing bonuses. No purchase required. In fact, for an agent to receive Profit Share, an agent they refer must join a Keller Williams Realty office AND that office has to be profitable AND that particular agent has to contribute to the profitability. No one profits until the referred agent succeeds. Keller Williams Realty office owners agree to operate within the cost model and the office cost model derives its income from roughly 52% of the total profit generated by the sales. That means approximately 48% of the total monthly profit goes back to agent stakeholders as a reward for finding talented agents to grow the offices. It doesn’t take higher commissions – it takes lean business operations, systems and models. Makes you wonder about the other real estate companies out there… What are they doing with all of that money? No wonder Warren Buffet and Rupert Murdoch are buying real estate companies…
Rewards are actually not limited to the U.S. though. There is also Growth Share.
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Training / Running Like a Business
Keller Williams Realty is often described as a Training Company cleverly disguised as real estate sales company. That must hold some validity because in 2015 the company was named by Training Magazine as the #1 training company in the U.S. – up from #2 in 2014. Training IS a major emphasis at Keller Williams Realty. In fact, the leadership is so committed to training that new programs continue to emerge to help agents build their businesses. Real Estate is one of those professions that can eat you alive and burn you out if you don’t set some boundaries. Classes at KW run the gamut from sales skills to incorporating to exit strategies. There is even a test for determining if you have a real business. It ends with the question “Do you have a Board of Directors that can fire you?” All KW training is based on sound fundamentals that apply to any business.
Culture
All the training in the world can be wasted if your company feels like a boiler room. Culture can be very difficult to describe but very easy to feel. Keller Williams Realty is very intentional about culture. While no system is fool-proof and with 108,000 agents across the world, there are inevitably examples where these values are not consistently demonstrated. And yet, having a set of stated values does set forth a lighthouse of what the company stands for and wants to be known by. Taking a stand sets a standard by which all business activities and relationships can be measured. Gary Keller has be quoted “Don’t judge me by the people I hire. Judge me by the people I keep.” Not everyone is a good match for the values outlined below and that’s ok. There are other choices.
