Jan. 30, 2011 - The High Cost of Governance
Yesterday I was reading an MLS-related online forum in which one of the contributors remarked that originally the MLS was a simple concept costing very little to run and maintain: just a bunch of brokers getting together for coffee and holding a marketing session.
“But of course with all the refinements the MLS has accumulated over the years,” the writer remarked, “The MLS has gotten much more expensive to maintain.”
Refinements. THAT'S what those are! IDX policies, anti-trust laws, NAR mandates: those are refinements! (I knew that.)
Don't get me wrong. I am not belittling any of these 'refinements'. What I am saying is that refinements do consume association resources—money, staff, volunteer time. Seldom is thought given to the cost of administering policies and programs (or 'refinements', if you will). A perfect example is the NAR quadrennial ethics training mandate of some years ago: what would it cost local associations to administer a compliance programs? Who knew? Who even asked?
As an association strategic planning facilitator, one of my favorite questions is, “What's the cost of maintaining your local professional standards program?” Usually, leadership replies with a blank stare. AE's nod sagely and mutter, “Lots.” But nobody has ever replied with a specific dollar figure, cost per member, or ratio of program expenditures to total budget.
Interesting, isn't it? No matter how many grievances and arbitrations you actually process in your association, the fact of the matter is that training the staff, maintaining skilled volunteers, and educating members in code of ethics principles is a significant expense for any size association. And if we as staff and leaders isolate those program expenses, articulate them, and judge their effectiveness in sustaining our association mission, we may be in for a few management surprises.
The same is true of association governance. It's important, I think, to know how much it costs your association to maintain its governance structure, and to evaluate whether or not the return on your investment is worth the cost.
Let's examine the first part of this issue: how much does it cost to maintain your association governance structure? Start by collecting the following information for the past five years:
A. Historical expenses of meetings such as board meetings and retreats, leadership training, annual meetings, and participation in other levels of the organization such as NAR meetings and state gatherings;
B. Direct expenses the association pays for volunteer attendance at meetings (industry meetings, trade shows, ethics or RPAC training);
C. Governance expenses associated with maintaining chapters and specialty groups such as Women's Council, Resort Real Estate, International practitioners;
D. Records of expenses related to committee maintenance, including staff allocation.
You'll undoubtedly think of other areas that will be appropriate to your own organization, but you see the point—just maintaining your association governance is a consuming resource. ASAE ratio reports suggest that the appropriate percentage of governance cost to dues income should be about 10%, but my suspicion about the Realtor organization is that the percentage of governance cost is much higher in many local associations, at least. (This is where an operating expense ratio study would be of great assistance to professional association managers.)
At any rate, the next step is to spend some time with leadership and staff analyzing the effective of your governance expenditures. This process is always difficult, because it includes questioning some long-held practices and inherited values. Here are some possible questions:
A. What is the length of time it takes our organization to make a major decision? Analyze this by identifying 3-5 major decisions the group has considered over the past five years. How long was it between the time the issue was first introduced until a decision was made? Was the decision made in a timely fashion or was it made too late to be really effective?
Sunday, January 30, 2011
Friday, January 28, 2011
You haven’t heard from Gertie in a few days, and you may be wondering why the silence.
When I last wrote, Captain Jim had had a little mishap with the dinghy, as you may recall. Well, the little mishap turned into a bigger mishap than we thought: seems there was salt water in the boat motor and a rip in the seam. Jim made it out to the Ocean Dance, and the dinghy motor refused to run again. After some frantic calls and text messages, I managed to find Kervin, and we met Jim at the shore, after he rowed in. Kervin looked at the dinghy and said, “Machu can’t fix dat, and I can’t fix dat. It’sa four-stroke engine and you gotta go to a special school for that.”
Of course, Machu disagreed: “That’s easy, Mr. Jim. All you gotta do is pull the carburator.” Jim went with Kervin’s analysis of Machu’s capabilities: the engine has no carburator. Kervin suggested the names of a couple of mechanics in the vicinity, but one was busy with a regular customer and the other was nowhere to be found.
“My brudder Pedro could fix it,” Kervin said. “But he in Nassau.”
So you guessed it: Jim bought Pedro a ticket to fly from Nassau to work on the engine.
The next day was sunny and calm, and Pedro and Kervin went to work. By evening the engine was fixed, and the dinghy needed to be brought ashore to be patched. Jim would be good to go.
We celebrated with a dinner at my house: Kervin barbecued the chicken, Brenda made fried snapper and barracuda (which the locals eat, but which we didn’t try), Jim brought the rice and the sodas. It was a festive evening, with a late dinner (Kervin was late–’Island Time’, you know). Nine people attacked the food like starving locusts, and I made a sinful coconut dessert which should have given everyone a sugar high for at least a week.
There was much joking—nobody was spared any expense . Jim had earlier observed that he never new when his new Bahamian friends were kidding and when they were not, but we got lots of practice trying to figure it out that evening.
But far too early the next morning my phone rang. “I got bad news, Miss Judith,” Kervin announced. “Pedro got pissed off and went back to Nassau on the plane this morning.”
“Yeah, he got mad and he went home. Mr. Thingum—Mr. Jim paid him $150 and Pedro say that’s an insult.”
“Kervin! Jim just gave him the plane fare. He will settle up for the work when it’s finished. Didn’t Pedro understand that?”
“I don’t guess so, Miss Judith. I try to tell him to call Jim and ax him, but Pedro he just went home.”
Kervin gets the persuasive Bahamian wheedle in his voice: “You call Mr. Jim and tell him?”
“No, Kervin, I will NOT call Mr. Jim and tell him. Pedro is your brother, and it’s your problem. If Pedro can’t make a phone call and straighten out his own business, I am not going to get in the middle of it.”
It’s difficult doing business in Eleuthera sometimes. I’ve built a house here, and we regularly rent cars and purchase goods and services from our friends and neighbors in Tarpum Bay. But there’s often a problem in communication, which leads to misunderstanding—as it did in this case.
My friends here are reluctant to set a price on themselves and their services. “Oh, Miss Judith, I ain’t charging you,” Brenda will say. “You are my friend.”
When I insist (“Brenda, you cleaned my house and I am going to pay you for it. Now how much?”), she will quote me a price which is ridiculously low. (“Miss Judith, then just give me $30. That’s all I need.”)
No amount of argument will change the price, but the semantics becomes important. “Ok, Brenda, here’s $30. And I included something for a tip.”
For the last two days, Kervin has been working on patching Jim’s boat. Jim said to him, “Kervin, I am sorry your brother didn’t understand and went home. I will certainly pay him for his work. And I will pay you for all you are doing. You just tell me how much I owe you for borrowing your dinghy will mine was being fixed, and for all the trips between your house and the boat, and for all the repair work that you did. Just tell me, and I will will pay.”
“No, Mr. Jim. You don’t worry about that. I be your friend,” is his answer.
Thursday, January 20, 2011
Jan. 20, 2011 - Jumping Ship
On January 19, 2011, Inman News carried a feature article by Matt Carter with the headline, “South Carolina real estate brokerage drops Realtor affiliation: Company maintains MLS membership''.
The article continues, “The largest brokerage in the Columbia, S.C., metro area has dropped its Realtor association membership, saying too many of its agents balked at paying $431 in annual dues in December 2010.” In this Realtor association, that action meant a significant loss of membership (and income), not to mention major tarnish to the Realtor image.
Why did the brokerage make its decision to break ranks? "The association here does not have an MLS (and) the agents did not perceive the value" in the Realtor association (local, state, and national), says the company manager. And NAR bylaws state that the Realtor-broker is responsible for the dues of those of associates who do not which to become Realtors. In this case, the company in question would have been facing the alternative of either paying over $100,000 in compensatory annual dues to maintain its Realtor status, or becoming an adversary to its own sales associates by forcing them to pay those dues. The brokerage saw this as a losing situation on all counts.
I think back to my former Realtor association days, and I can hear the voice of one of my favorite brokers: “So what? Be glad we got ride of these folks. Anybody who can't afford $400 a year for professional association dues drags the rest of us down. Let's RAISE the dues, and get rid of more of the part-timers and non-producers!” Of course, he'd go on to add something about the non-producers in the business siphoning off commission income with their occasional sales, but in the North Carolina situation, the sales associates will continue to operate and remain in an MLS where association membership is not a requirement for use.
I'm not writing about this problem to say “I told you so”, but here is a perfect example of a Life without MLS situation—the Realtor association's greatest threat. And I'm not casting any stones at the brokerage or the Realtor association on all three levels. What I am saying is that Realtors and AE's need to read Carter's article as an object lesson about how to build a stronger association.
The key phrase in the story is that the agents did not perceive $431 of value in Realtor association membership. Did the local association need to better market the return-on-investment more effectively? Maybe, or maybe not – that's really beside the point. Maybe, in fact, the product was simply over-priced. Maybe there just WASN'T $431 in association value once the MLS incentive was removed from the equation.
“Oh,” you say. “That's not true in the case of our association. I can total up the dollars of each benefit of membership. That amount far exceeds what the members pay in annual dues.”
But you're missing the point. Cost does not equal value. As consumers we are faced with the cost vs. value dilemma on a daily basis, and we walk away from a purchase knowing that expense outweighs value and the price is more than we are willing or able to pay.
In all successful marketing programs, knowing the competition for your product is important. What's interesting in this case is that the competition for the value items of the Realtor association is its own member, the large brokerage. As the Inman article explains, the broker in this case provides education, dispute resolution, and standard forms – all bottom-line impacting services from the perspective of the sales associates. The brokerage has only experienced one inter-company arbitration in 10 years, and its sales associates don't consider legislative influence a $431 annual expense. Probably the most telling fact is that the brokerage makes significant income from charging its associates for the services it provides, and by dropping Realtor membership the competition for sales associate dollars has been eliminated.
It's truly the MLS service that is the value proposition for many Realtors: that's not a new idea. What is news is that when the Realtor membership requirement for MLS services was removed, a major brokerage in an association made a business-based consumer decision that professional association membership is an expendable expense.
What that situation must say to the Realtor organization manager is that the organization needs to begin to operate as though membership were truly voluntary, even though 84% of us have the luxury of peeking out from behind the mandatory Realtor membership requirement. Would local, state, and national associations survive without the protection of the MLS shield, if our members had a choice and the Realtor association operated in a genuinely open market?
Only when we can answer that question with an unqualified 'yes' can Realtor associations be assured of continued success.
Monday, January 3, 2011
: The concept of homeownership as a necessity of modern life has been broken, bagged and tossed in the trash.
This is an interesting and provocative article. Association execs need to do some thinking about what this means to our members, who have long counted on 'the American Dream of home ownership' as a business staple.
If in fact home ownership is not a part of The Dream any longer, then where will investors invest and families live? How will this trend influence the skill set our members will need to survive in their business. How can we, as trade associations, re-define ourselves to meet these changing needs?
Let the dialogue begin!