Creating one culture of collaboration in CRE firms
How can commercial real estate (CRE) service firms create one collaborative culture?
It is a challenge, partly due to CRE being a competitive and performance-based industry – which makes it inherently more individualistic. Compartmentalised organisational structures divided into geographies and service lines can create silos, while compensation structures are often a barrier to achieving this goal.
Despite these inherent challenges, the current COVID-19 crisis presents an opportunity to bring people together (albeit virtually, not physically). Geographic barriers are less pronounced when even people in the same city are meeting online, and many staff will likely have more time to build trust in the current climate
Why pursue one collaborative culture?
Firstly, clients value consistency. Just as an individual consumer expects McDonald’s to provide a certain level of quality wherever they are in the world, an institutional investor or corporate occupier expects a certain standard from a CRE service providers wherever or however they engage with them.
Having one collaborative culture helps achieve this. When clients get consistency, the perceived risk of engaging additional services goes down. In times of crisis, having a set of principles that underpin messaging to stakeholders increases certainty and reduces fear.
If consistency does not exist, a company’s scale and platform (which incurs some additional cost) is no longer a strength relative to smaller competitors. In fact, inconsistency is an inherent risk for large firms, as one bad experience could ruin the entire firm’s reputation in the eyes of key clients.
From the perspective of employees, everyone’s contributions should be valued and all staff should benefit from working for the company. If certain departments or geographies feel neglected or if some departments think they are better than others (or that the rules don’t apply to them), it will negatively impact culture, breed resentment and create barriers to sharing.
Traditionally, sales teams were highest in the pecking order. However, large CRE service firms now rely on annuity revenue as well as transaction fees to deliver their top line and bottom line financial results. In fact, in economic downturns, like the one we are entering now, annuity income “keeps the lights on” when transaction revenue dries up. A culture that tolerates cultural exceptions for particular business lines or high performers is out-of-date.
Greater collaboration within one culture facilitates increased selling opportunities, which leads to higher revenue and improved bottom-line performance for shareholders.
Three levers to achieve one collaborative culture
The journey towards one culture of collaboration depends on activating the levers of consistent leadership and improved communication, while implementing a compensation structure that rewards its application.
Leaders should strive to avoid playing favourites through their words and actions. Public recognition for top performers across departments should be consistent, and leaders must show an equal level of interest across business lines (with some reasonable consideration to the proportion of its revenue contribution). While equality may not be realistic from a compensation perspective, it is achievable using other forms of recognition.
One mistake I made in 2018 was to organise a Pyeongchang Winter Olympics event to recognise the ‘top performers’ in the country based on individual revenue contribution. This meant that team members from business lines without individual revenue targets were ineligible to participate. Some damage control took place after this faux pas!
On the other hand, I drove one consistent culture through exit interviews. I always sat down with an employee before they left the firm, regardless of their position. While this was feasible in a 300-person business (there was only one departure every second week, on average), it may not be possible in larger firms. The point is to make sure that a principle or ‘culture anchor’ applies consistently.
For example, it would be wrong to limit interviews to departing employees from certain business lines or those who are ‘top performers’. It would, however, be consistent with one collaborative culture if the standard was for the country head to hold exit interviews with employees who have served a certain number of years, or with those at or above a certain seniority level, and to delegate the rest to department heads. Note that the process described was in addition to HR’s exit process.
Communication lowers barriers and increases trust, helping to build one collaborative culture consistently. Facilitating communication between business lines should therefore be encouraged. Holding regular meetings where business line heads are required to actively participate and share information should be a minimum leadership requirement.
Ensuring the communication flows at all levels of the organisation requires more effort. Large-scale events across borders can be costly and logistically challenging; with current Coronavirus travel restrictions, they are not even be possible. However, smaller initiatives can be just as impactful (and often deliver a far better ROI).
One of my favourite events to host in a previous role was ‘same title/different business line’ dinners. We would invite everyone in the office with the same title (e.g. Assistant Manager) to a night out, funded by the company, along with one or two senior leaders to play the role of unofficial mentors. Unlike whole-of-company events, where people tend to congregate with their closest colleagues or feel obligated to stick with their team, these informal occasions, which were not mandatory, sparked relationships that led to greater cooperation. This helped drive one collaborative culture across the business.
With COVID-19 and social distancing measures in place, there is an opportunity to increase communication via web-based video conferences. Leaders should insist that all participants take part with their videos on; this ensures people are actually participating and not ‘tuning out’ as people tend to do on voice calls. Remember, social distancing is actually physical distancing; by utilizing technology, teams can increase social interactions without interacting physically.
3. Compensation structures
My experience is management usually comes at collaboration-building compensation structures from the wrong direction: by threatening a penalty. Having a portion of variable compensation ‘at risk’ or ‘held back’, subject to certain non-financial KPIs being achieved, is problematic; this structure is often proposed, but seldom is a penalty actually imposed when the variable compensation is paid.
Companies can instead create positive reinforcement by using compensation structures to reward desired behaviours, rather than penalise individuals. A ‘collaboration dividend’ could be paid to leaders if certain targets, like cross selling, existing client revenue growth and intra-business referrals, are met.
The revenue growth that these target results generate would cover the cost of the incentive. Further, meeting the targets would reflect progress towards the creation of one collaborative culture. Meaningful recognition for individuals who spearhead collaboration efforts at the coalface can reinforce this goal.
There are other levers to consider and trial. With every crisis there is an opportunity, and the current climate lends itself to creating more connectivity and comradery within an organisation. Sharing challenges between business lines and geographies will drive best-practice and improve companies’ ability to respond consistently.
The broader point is that CRE service firms can incorporate their existing entrepreneurial spirit and drive improved performance as they work towards achieving one collaborative culture. Its successful implementation will improve employee retention and increase client satisfaction, which ultimately drives stronger financial performance.
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