According to the Iceberg Report, right now in the United States, there are about 22 million single family rental homes and multi-family rental properties up to fourplexes. Out of these, 14.3 million, or 65 percent, are self-managed by the investor or landlord. This gives a vast opportunity to the 32,000 management companies competing for the business. By contrast, in Australia, about 70 percent of similar properties are professionally managed.
If the United States follows the Australian model, there should be about 8 million single family rentals coming into the professional management market over the next few years. Property managers can double their business by default. But – there will be a lot of consolidation in those 32,000 management companies, and the best companies will get most of the business.
One of the biggest problems in property management is the lack of trust between landlords, investors and professional managers. A large portion of that potential market doesn’t see the value in professional property management and there needs to be a bridge – one that places a focus on customer experience.
One way to bridge this divide, improving the customer experience, is to implement a high performing team framework. A framework that results in an engaged team with a true career path, a team motivated to work with clients at a level that is otherwise impossible to achieve. To date, the real estate industry has been ignoring fundamental concepts like this when it comes to developing motivated, engaged employees and getting better results in both customer service and employee and owner retention – with the profitability that comes along with it.
The customer experience needs to be improved for both owners and tenants, and the best way you can do this is to empower your team. Happy employees make happy customers who make happy shareholders. Our guest today, Adam Hooley, has been in real estate all his life and has worked in many corporate environments. Along the way, he picked up some good habits concerning how to manage teams and has brought those tools to bear, helping property management companies change the way they do things. Adam recently spoke about the framework of a high performing team, and he has a lot to share.
Property Management Structure: 3 Ways Companies are Currently Organized
Two main business “frameworks” currently exist in property management company structures: the portfolio framework, and the task framework.
The portfolio framework is one property manager taking care of all aspects of a portfolio of properties from start to finish. That one manager is responsible for leasing, maintenance, inspections, and contact with tenants and owners. The portfolio system can be more efficient, but if one property manager leaves, you lose a lot of knowledge and information about the portfolio that was managed. That’s a huge drawback, especially if there isn’t a clear path to advancement for experienced employees, causing them to leave you.
The task (or departmental) framework is putting individual staff members in charge of specific areas for all of the properties the business manages. There will be different people in charge of leasing, inspections, maintenance, owner and tenant contact, etc. This large number of possible contacts can create confused owners, confused staff, and a loss of efficiency. Again, neither of these frameworks provide accountability or career paths for excellent performers.
In the U.S., there’s a third system, which is a hybrid of the two. In the hybrid system, there is one property manager in charge of a portfolio, who has significant support from others who handle maintenance, inspection, late notices, and other tasks. The hybrid system is probably the best system if you had to choose out of the three frameworks – but we’re going to give you a better option.
Why It’s Time to Rethink How Your Property Management Company is Structured
We understand it’s a lot of work to restructure a team and rethink their job descriptions. But, this alternate framework solves a few key problems. For one, it provides a holistic view of your business for employees and prevents people from working in isolated parts of the business, without seeing the overall picture. For another, recruiting, retention, and turnover are issues all property management companies face. One of the ways to fix this is by providing an upward career path, which this framework includes.
You’ll find that when these issues improve, customer satisfaction and experience improves. This provides a higher dollar value for each customer, as you’ll keep them longer. This also means you can spend more money to acquire customers. You’ll get a more sustainable staff, eliminate the costs of training, and achieve more engaged clients because there’s a consistency in service.
Introducing the New Property Management Structure: The Squad System
The new framework is a squad system; it’s still a team structure, but the important difference is that there’s a hierarchy. Staff at the entry level roles are called property associates. Above this is the property manager role, which is someone who does most of the day to day management. At the top of the squad, there’s a property manager executive. Everyone works closely together and everyone has a role in each task. For example, the property associate may run and analyze reports to see which tenants are late with rent. The property manager will handle serving notice to the tenants. Then, the property manager executive will deal with any escalation, such as evictions or terminations. A hierarchy is in place and the organizational chart is clear.
The property manager executive also takes on a leadership and mentor role. It’s a way to feed knowledge down into the squad so junior members of the squad develop along their career path. The property manager executive also takes on the accountability role. They make sure their team is working efficiently and has the tools to do their job.
If someone from a squad leaves, you still have two people in the squad, so the portfolio knowledge doesn’t get lost. You can move the associate up to the manager role if the manager leaves. This protects your culture and keeps everything glued together. It attempts to solve the problems of the old system.
Here are the roles in detail:
- Property Associate. This is the junior role. It’s designed to let a person learn and progress. This is an entry level role that can be nurtured and trained. The employee relieves some of the pressure on the property manager, but the key here is the learning. With a clear career path, the company can get the associates to embrace their culture. It’s not just an assistant role. It’s about growing to benefit the whole company.
- Property Manager. Most agencies understand the concept of what a property manager does. Their core function is to manage the portfolio. So, the person in this role will be skilled in all property management tasks. They are the workhorses of the squad, and the foundation. They do a great job.
- Executive. This is the senior role who will be someone good at managing the escalated parts of property management. The executive takes care of conflicts like overdue repairs, late rent payments, and managing the owners.
So in the squad structure, the property manager and the executive handle the owner relationship and the property manager handles the tenant relationship.
The brilliance of this framework is that it keeps everything efficient. If the property manager leaves for six weeks, there doesn’t have to be panic. This is what the squad is designed for. Everything will stay up to date and operational because the associate and executive are handling it. When the property manager comes back, not one phone call was missed and not one email was ignored. Property managers can come back to a clean desk. This is where it excels.
PM Grow Summit Sponsorship
This is THE conference for property management entrepreneurs looking to grow a business. There will be discussions about team culture, marketing and sales, and a lot of other things. The speaker line-up is exciting. Adam will be there, Marcus Sheridan will be there, Victor Antonio will talk about sales processes, Jason Goldberg and Andrew Propst will join the program, and there will also be presentations by Bob Walters, Kasey MacDonald, and a lot of people from Australia. John Jantsch is another speaker who founded Duct Tape Marketing, and he will be fun to hear. Check out pmgrowsummit.com and plan to be there in January 31st – February 2nd, 2018.
Key Performance Indicators and How to Measure Success
There are three things to keep track of so you can measure the impact this structure has on your business. These are:
- Customer facing measurements, so you can make sure you’re delivering on what you promise.
- Team measurements so you know if your team members are doing what they’re responsible for.
- Financial goals.
Net Promoter Score, or NPS, is really important. It measures what your customer is getting from you. You’ve encountered it before; it’s the classic “one question” survey: “On a scale of 1 to 10, how likely are you to recommend our service?”
A lot of companies are good at measuring what they deliver. But, you have to measure what the customer is getting and whether it matches what you promise. You’re measuring customer service. You can use any survey you like but we find that you need a benchmark so you can learn and grow from those measurements. NPS offers a benchmark.
Key Performance Indicators, or KPIs need to be numerous. A good property management company will have at least 10 core KPIs. They should measure everything from lease expirations to defaults to inspections and overdue invoices. These measure how your business is operating. You can identify quickly where things are going well and not going well. If a team member is veering off track, you have the KPIs to show you the problem. Maybe it’s a personal problem causing neglected work, or maybe there are improvements that can easily be made.
Champions are important. If you find a team member who is really good at something, that’s the person who trains new team members in that area. Maybe your measurements show that someone is really good at rent collection. You’ll recognize that and put that team member to work improving another team member’s ability to collect rent effectively. Instead of firing a staff member who isn’t performing, you can identify where the problems start, and improve those areas. In those cases, you can engage your staff and give them support.
Team KPIs are as important as individual KPIs. It makes sure the team is efficient. This is a good way to move from a reactive business where things are chaotic to an efficient business where you have more time to do team lunches and build your culture.
The property manager executive is responsible for compiling numbers and tracking KPIs. This is helpful to the business owner because the owner cannot be involved in everything.
Reputation tracking can be an easy and efficient alternative to NPS. It’s a simple and accurate way to measure impact on customer experience. You just measure your reviews. If you do reputation surveys, you can find your average pretty easily. Take your benchmark, restructure, and see what the impact is. You can validate customer reaction.
CMO Consulting Sponsorship
The second sponsor for today’s podcast is Alex Osenenko, who is offering intensive consulting sessions on marketing. A lot of property management companies underspend on marketing. That cuts off their ability to grow, and it can cost the business hundreds of thousands of dollars in opportunity. Here’s an example. Company A spends $50,000 a year on marketing and gets 70 new contracts. Company B spends $20,000 on marketing and only gets 30 contracts. In annual contract value, that’s a $100,000 difference. With CMO strategic level consulting, you’ll get a marketing plan with a blueprint that can be deployed using specific channels. It’s a unit economics model that gets down to profitability so you know what each property is worth to you. You can remodel your fee structure so you get more add-on value services. By bringing value to your clients, you make money. This is expensive, and will cost $5,000 for a full day. If you’re interested, email firstname.lastname@example.org to get an intake form.
How to Implement the Squad Structure
A lot of people may grab this and run with it, but you don’t have to start over. You don’t want to fire your team and start with new people. Instead, bring your existing team on board and decide who you can move around. Talk about who is performing better than expected. Take advantage of the climate and leverage off that. You always have those property managers who just want to do property management, but you may have a leasing consultant who has always wanted to do more. Dynamic things are happening in every business. Channel that. Instead of uprooting everything, leverage off the current assets of the business.
Plan this out in advance. Restructuring means opportunities, and some of your team members will want to be involved. Others may not. If you want a high performing team, you want the team you have to be on board with you. If they aren’t, let them go somewhere else. Plan ahead, engage the team, and you’ll see progress over a period of time.
If you’re a smaller business just starting out, you can build these into your business immediately. The property manager is the role to focus on. It’s the core role to build into the company first. The right person in that role will grow your business. Then, look for the associate and start protecting the property manager role so someone is in place if your property manager leaves. As your business grows, create the executive role and move everyone up. The manager becomes the executive and the associate becomes the manager. Then, you can recruit for a new associate. The culture evolves into what the team creates.
There are different ways to do this depending on the size of your business. It can take some time, but it may be natural to the company and can be done quickly.
Most of what Adam talks about comes from a book called Building Blocks, published by Ben White. It is 450-pages of high quality, engaging content on building out a great property management team, and Adam is offering our listeners a free download of the ebook. If you have any questions about what you’ve learned today or ready to get started in marketing your property management business to receive more owner contracts, talk to us at Fourandhalf.
If you liked this article, you may like these as well: