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Phillip C. Querin, Partner
Partner - Portland, Oregon Office
philquerin@dwt.com
(503) 241-2300
Leadership in a Time of Change
[March 2007]
No one will dispute that over the last few years, the Realtor® industry has undergone change of seismic proportions. And while critics may debate among themselves as to whether the change is good or bad, there is one essential truth that cannot be denied: The groundswell of change is not even close to being over. So the $64,000 question is whether the Realtor® industry will survive intact, and if so, what will it look like in a few years? The smart money is betting that while the industry will survive, it will look different than it does today.
Here are some thoughts to ponder:
- Notwithstanding the negative national press, Realtor® membership continues to grow. This anomaly seems to belie the critics’ predictions that between the Internet and the flood of alternative business models, Realtors® will become increasingly marginalized and the real value of their services diminished. But by the numbers of new Realtor® members, there must be quite a few people out there who do not subscribe to the gloom and doom predictions that the industry is on the ropes.
- But who are these new members? Does anyone have any idea what the demographics are today in state and local associations? Certainly, a quick look around tells us that an increasing number of Realtors® today are young, entrepreneurial, and Internet savvy. They don’t hew to the traditions of the past, and they are more willing to take risks for the sake of innovation.
- The reality of this changing demographic raises an essential question: How can the Realtor® association, on a national, state and local level, best serve today’s increasingly younger, diverse, entrepreneurial and technologically driven members? It does not take a Gallup pollster to see that association leadership today consists of older, traditional, and more conservative members. In this time of evolutionary change in the industry, will leadership be able to remain relevant to the new breed of Realtor® so that they and the industry can succeed?
A recent article in the McKinsey Quarterly, Making the Most of Uncertainty,1 approached the issue of uncertainty as a fundamental choice between two different business strategies. When confronting change, the authors asked, is it better to: (1) Try to shape the outcome by influencing the elements of change, or (2) Try to adapt to the outcome by recognizing and capturing the new opportunities that the change brings with it? The authors of the article noted that “The truth is that no dominant solution exists” and sometimes the best approach may be to “shape” and “adapt.” They add that whether one should “… attempt to shape or adapt depends largely on the level and nature of the uncertainty it faces.”
Applying this analysis to the Realtor® industry, the question is how are we dealing with the uncertainty that exists today? The answer is “Not very well.” There currently is virtually no effort to shape the agents of change, and there is very little effort to adapt. The result is that while Realtor® membership continues to grow, inertia creates a risk of membership becoming increasingly disenfranchised. The glue that keeps everyone together is the Realtor®-owned MLS. It is the common bond between the members, and like an old matriarch, everyone hopes she will live on forever so the family stays together. But as we know, the MLS system, which worked so well for decades, is under a barrage of attacks from all sides.
In this time of uncertainty, whether we shape or adapt will ultimately be up to Realtor® leadership. But is leadership up to the task? The answer to this question requires the type of introspection best left to the leaders individually. But one thing is certain – much is at stake. Change is occurring under our feet, and with each passing day. We have only to read the paper or watch the news. Each day we learn of some new Internet company or innovative business model. Between satellite imagery, mapping, Zillow, Google, Yahoo, and a host of other innovations, there is little doubt that the Realtor® industry is becoming increasingly technologically driven. The days of the MLS books and lock box keys are long since gone. There is no question but that innovative and progressive Realtor® leadership is needed for the industry to survive and flourish.
The March 3-4, 2007 Wall Street Journal carried an article entitled Leading From Below. The byline read: CEOs can’t change companies on their own. The secret is to foster a leadership mentality throughout the ranks. One of the main points of the article was that no one will tell you to be a leader. To the contrary, there are those who will encourage you not to “make waves.” So without waiting to be told, one must make the personal and private decision to be a leader.
The alternative, i.e. the failure to lead, can have disastrous results in a time of uncertainty and change. Today, the Realtor® industry can ill-afford caretaker leadership. Bold leadership decisions must be made that will affect our industry at every level: Are we shapers or adapters? Or will we try to do both? The temptation is to go along just to get along. But inaction cannot protect the status quo, because these are not static times. There is no status quo. Without effective, entrepreneurial, innovative, and dynamic leadership, the Realtor® industry will be shaped by forces outside of its own control.
And what is obvious is that these forces, which are taking place daily, may not have the same goals as the core industry itself: Each year, the banking industry makes another legislative effort to break into the real estate industry. Each year there are more and more Zillow wannabes. Within the past twelve months since Zillow first appeared on the Internet there have been four or five new imitators. The more traffic these sites attract, the more lead aggregation we can expect to occur – with the commensurate reduction in net commission dollars to agents buying those leads. Redfin, a truly Internet brokerage firm that originated last year in Washington State, is now opening offices in California. Redfin’s business model is based upon a “commission rebate” program that gives buyers two-thirds of the selling commission. A bill has just been introduced in the 2007 Oregon Legislative Session which, if passed, could legalize Redfin-type rebate programs here. The Department of Justice’s lawsuit against the National Association of Realtors® has not settled, subpoenas have now been issued, and depositions are being scheduled this year. It looks increasingly likely that the matter will actually go to trial late this year or next. The outcome, whatever it is, will have repercussions on the industry for years to come.
So, 2007 may be a watershed year for the Realtor® industry. On the one hand, there are several good signs. Notwithstanding the dire predictions of a collapse of the housing bubble, it didn’t occur. The market is stabilizing and interest rates are doing the same. With more and more buyers having an opportunity to actually negotiate prices and terms, Realtors® are in a better position today to provide real value to the transaction.
But as we know, things can change in a heartbeat. Since the national press’s preoccupation with the collapse of the housing bubble has not materialized, we are seeing them re-direct their attention to the losses in the subprime lending market. If these losses bleed over into the conventional secondary mortgage market, the national press may again commence its predictions of gloom and doom for the housing industry.
For Realtor® leadership, the task is to stay ahead of the curve. First, to know and understand the events affecting the industry, and then to shape and adapt. But in order to do so, the industry must foster a leadership mentality from within its rank and file. This is doubly difficult for Realtors®, because their organizations are primarily based upon volunteerism rather than the type of meritocracy we see in the business world. And the more entrenched volunteer leadership is viewed to be at the highest levels, the less incentive there is for the younger, more entrepreneurial and innovative members to seek entry. But if the industry is to survive – and survive well – the task is clear: Leadership must be relevant to today’s broad range of members. This means that today’s leaders must become familiar with membership’s new demographic and be willing to encourage its “young guns” out there to speak up and be heard.
Footnotes
1 http://www.mckinseyquarterly.com/article_page.aspx?ar=1128
© Copyright 2007. Phillip C. Querin,
Davis Wright Tremaine. No part may be reproduced without the author’s
express written consent.
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