G.M. Filisko is a Chicago area freelance and former editor for REALTOR® Magazine.
Team Angst Revealed
Managing sales teams comes with a sea of challenges. Here's how to preserve the peace while keeping your brand and bottom line strong.
September 16, 2015
If you ask agents what they love about working on a sales team, you're likely to hear passionate testaments about the benefits of strategic collaboration and the comfort of knowing that others can step up when you can't be in two places at once or need a day off. When broker-owners are being totally candid about teams, their views tend to be more circumspect. Their skittishness comes from reconciling competing sentiments: They may be reluctant to come across as unfriendly to the team concept given its rising popularity, but the proliferation of those teams could potentially chip away at a company's bottom line.
Although there’s no national data on how many teams operate in the industry, few would question that their presence has exploded over the past decade. "The number and kinds of teams, and the amount of business they do, continues to grow," reports Steve Murray, president of REAL Trends in Castle Pines, Colo., a real estate research and consulting firm.
Allen Tate, REALTORS®, in Raleigh, N.C., currently has 92 teams among its 1,450 salespeople and estimates that it has experienced team growth of 10 to 20 percent in the past two years, according to Phyllis Brookshire, the company’s president.
At Coldwell Banker Sea Coast Advantage in Wilmington, N.C., more than 30 percent of its 400-person sales force belong to teams. Currently the company has about 50 teams, which is double the number from a decade ago.
That type of growth poses challenges for brokers. "Frankly, many brokers don’t know how to handle teams," contends real estate trainer Jon Cheplak, CEO and founder of Seattle-based Cheplak Live, who does quarterly coaching phone calls with broker-owners nationwide. He says brokers' main concern is whether teams will hurt the company's profitability, but they’re also worried about how teams could disrupt their company culture or dilute the brokerage's branding.
And then there's the worry few broker-owners own up to publicly: how to manage an associate who in some respects functions as a peer. "Teams are essentially a brokerage within a brokerage," says Cheplak. For some, there's a very real fear associated with figuring out how to lead team leaders.
Despite the challenges, Murray says, most broker-owners and managers at larger firms have made peace with teams and will grow even more team-friendly in the future. They're achieving that peace by creating policies and guidelines to manage teams wisely. That starts with defining what exactly constitutes a team.
Teams fall within three categories, Murray says. The most common now is the two-person team. "All they’re doing is sharing the costs and burdens of the business, and having a team enables them to get away so they’re not killing themselves," he explains.
The next most common, and becoming more so, says Murray, are teams of three to 50 people, though they often fall within the eight- to 12-person range. In these groups, the team leader is hugely involved, acting as the primary listing generator and hiring others to fill such positions as buyers’ agents and marketing coordinators to service the business the team leader generates.
The rarest type of team isn’t based on size but on the systems the team leader builds to generate prospects. These often specialize in things like REO properties, new homes, or calling expireds and FSBOs, and the team services the leads the engine generates. "The person running that team is truly a business manager and not typically involved in deals," says Murray.
Eye on the Company Dollar
The two most common types of teams create the most challenges for brokers, and one of the biggest is how to maintain the company dollar.
Take a two-person team, for example. "If two salespeople are each doing $5 million a year in production and are at an 80–20 commission split, if they combine their businesses, they're maybe then at a 90–10 split because they're treated as one unit doing $10 million in business," notes Murray. "That broker has lost that 10 percent of his business."
Many brokers have tweaked their compensation plans to prevent that type of revenue loss. "I think every broker has guidelines and manages that a little differently in terms of how their compensation plan is built," says Brookshire. Her company’s compensation for teams is based on the team leader’s income, not all the team members' combined production.
At Berkshire Hathaway HomeServices Fox & Roach, REALTORS®, in Devon, Pa., the compensation plan has also been adjusted for teams. "Our policy is that you can't take two salespeople’s production and put them together," says president Joan Docktor, who says her company is very team-friendly, with roughly 400 team leaders among its 4,400 salespeople. "They can work together and market together. But whatever income they generate together is divided by two, and that’s where their splits will be."
Another issue is the way team leaders categorize their team members for tax purposes. “Some salespeople have people in a range of positions that they're treating as independent contractors, but they should probably be treated as employees," says Murray. "That's a real concern to brokerage companies."
Not for Tim Milam, president of Coldwell Banker Sea Coast Advantage in Wilmington, N.C., because he has an attorney draft an independent contractor agreement between his team leaders and all their team members."It clearly states what you can and can’t do to be compliant with our real estate commission and the Internal Revenue Service," reports Milam. "I always tell team captains if they're hiring administrative staff, they need to be treating them like employees by taking out taxes and things like that. But if it's somebody they're bringing in on occasion to stuff mailers, that can probably be an independent contractor."
Space is another challenge, if only for practical reasons. Docktor says her company doesn't limit teams' physical space unless there’s literally no more room to accommodate all the players.
At Coldwell Banker Sea Coast, space is allotted based on production. If Milam has two teams, each with six members, and one closes 150 transactions and the other closes 100 annually, the smaller team will typically get fewer desks.
Production also governs space at Brookshire's company, though she stresses that, as with many aspects of managing teams, her company has many guidelines but few firm rules. "Our policy has always been that there’s a certain amount of production required to earn a desk in the office," she explains. "But we try to keep an open mind and work with teams to be fair to everybody involved—the team, the salespeople, and the company. You have to remain flexible."
Brokers have different perspectives on team leaders' recruiting from within the brokerage. "We have to have some rules, and the ones we have revolve around how teams treat each other and the salespeople we recruit into the company," says Docktor. At her company, team leaders can’t recruit salespeople from within the company or from other teams. But if a member of one team wants to move to another team, the company won't object if neither team leader does, either. Also, if a salesperson isn't hitting production numbers and believes joining a team will benefit the salesperson and the team, managers will review each case -individually.
Recruiting for top salespeople and team leaders is one of Rich Casto’s roles as chief strategy officer for Better Homes & Gardens Mason McDuffie, in the San Francisco Bay area. He was recently in the thick of recruiting a buyer’s agent for one of his top-producing teams, a task he prefers doing so the company controls teams’ hiring processes and ensures that team recruits progress through the company’s training program.
Marketing is another area where brokers can take a hit. All too common is a team website that never identifies the brokerage the team is affiliated with, which not only harms brokers but in many states violates real estate regulations. Candace Adams, president and CEO of Berkshire Hathaway HomeServices New England Properties in Wallingford, Conn., who has 36 teams among her 1,500 salespeople, has brand guidelines for marketing and a team of lawyers who monitor marketing materials to ensure compliance.
Brookshire won't tolerate the problem not only because she wants to protect her company’s brand but also because her company’s guidelines protect consumers, too. "There are a lot of people out there working as a team, and they appear to be a brokerage the way they present themselves in their marketing," she says. "That's confusing to the consumers, and that’s never a good thing."
On a positive note: Murray says some brokers with affiliated businesses are harnessing the power of teams to boost those services, making sure team members understand how those businesses can help their clients. "Brokers can benefit by trying to ensure teams participate in supporting the broker's other businesses, like mortgage, escrow, and title companies," he says. "Some brokers have had very good success with that."
Calling herself a "control freak," Adams admits she fears losing control of oversight and standards at her company. Striving for consistent service, she doesn't want to have to worry about team leaders who don't have adequate time to train their team members. So she ensures her managers train, grow, and nurture team members.
"The other thing I impress on my managers is to have a relationship with team members, not just team leaders," explains Adams. "There inevitably comes a time when there’s conflict, and having that relationship will help a manager intervene and do some conflict resolution to preserve the business. If you have a team member who goes off the farm, what does that do to the company? And what risk is there for that person to take business with them?"
Milam also works to minimize conflicts within teams, which he says is often the result of team leaders hiring before they truly need more bodies. That causes team members to become unproductive and dissatisfied, with the inevitable result being disputes over how teams disband.
"We help team leaders understand when it's the right time to add more members and emphasize that they need to set clear expectations for all parties," he says. "I like to have what I call a prenup, or a written agreement that says here's how the team will work, and if we decide to divorce, how are we going to handle things like the team’s listings? We write down everything that can go wrong and discuss what we’re going to do in those situations."
Another way brokers can protect against team discord, says Murray, is to connect deeply with team leaders so both parties benefit. "We've interviewed dozens of teams for a white paper on the best practices of top teams. Some very smart brokers are truly engaging with team leaders and learning from them, in addition to helping them," he says. "They come to a clear understanding of the value a brokerage brings to a team and a modus vivendi, or a way to peacefully coexist."
Despite ambivalence about the growing clout of teams, brokers, ironically, may also worry about losing them. Cheplak believes that fear holds brokers back from managing teams effectively. "I ask these questions to brokers everywhere: How do you manage your top producers? How do you lead them?" he explains. “Their answer every time: 'I leave them alone.' To me, that means brokers don't want any challenges, and they hope things go well."
Docktor has had a few big teams jump ship. But she says it comes with the territory, and she doesn’t walk on eggshells when overseeing team leaders. "I don't believe we're afraid to police team leaders as we would individual salespeople," she says. "We have some very high-producing teams, and as long as the sales manager in their office understands that those team leaders are strong entrepreneurs, there's not a problem. I don’t think you can manage teams. You need to lead them, and they have to want to follow you. You have to be an inspiration, and that’s a challenge for all of our office managers to be at the top of their game."
Learn about the new Certified Real Estate Team Specialist certification in Your NAR or at realtor.org/-designations-and-certifications/crets.