Transformation in the estate agency sector poses real challenges

Transformation, an obviously desirable goal with political, financial and social benefits for the whole of South African society, is, nevertheless, particularly difficult to achieve in the estate agency sector.

This was said recently by Bill Rawson, Chairman of the Rawson Property Group, in a presentation to senior officials in the estate agency sector. Rawson has had 42 years in the property industry, for 30 of which he has run his own business. Today this business has nearly 200 franchises countrywide.

Rawson pointed out that 40% of job applicants in his group today are previously disadvantaged, but research by his head office has shown that only 20%, on average, can afford to sustain themselves without payment for the nine to twelve month period (or longer) that has to be worked through before a rookie agent starts earning commissions.

Nevertheless, said Rawson, today 18% of Rawson Property Group franchises are black owned and the 22,5% attrition rate in the black agencies is far lower than that of the white owned agencies.

The big question, therefore, is which groups, if any, are suited to transformation?

Rawson said that it has become crystal clear that transformation is particularly difficult for small estate agencies. He quoted the researcher James Otter, who in a recently published paper said that of the 16 major estate agencies operating in Gauteng today, only five or six are ‘really significant enterprises’ which have the ability to sustain an on-going transformation programme that includes training (free of charge for previously disadvantaged agents) and preparation for earning a living on commission only. Quite often only such agencies, he added, have the ability to install agents in areas where they will be comfortable and successful.

Even these major agencies, said Rawson, would probably regard the cost of transformation as too high because experience has shown that once agents are fully trained, they all too often move on to more financially attractive prospects.

The difficulties facing a previously disadvantaged person seeking to break into this industry, said Rawson, have been defined by Otter under four interlinked headings: social, financial, educational and psychological.

“Socially,” said Rawson, “it is widely recognized that a successful agent will usually be the one who fits into the community where he works. He might, for example, be a member of the school committee and a regular attendee at school sports meetings. If, therefore, he comes from a different income, race or religion and/or speaks a different language, it will be far harder to be accepted.”

In black areas it can also be difficult for an agent of any colour to achieve success because such areas can be, by First World standards, dysfunctional in their property operations. Transactions tend to be in cash without any legal registration, deceased estates are often not wound up and no proof of ownership is given. Even though the agent here might, therefore, be ‘appropriate’, he might well find himself struggling.

Looking at the financial aspects (already mentioned), estate agency work, said Rawson, can have the big disadvantage of generating no cash flow for the first nine to twelve months. The agent has to be able to fund himself and, in addition, be able to afford the “tools” of the profession: a car, a cell phone, a laptop and internet access. The Rawson Property Group’s research (as mentioned) indicates that only one in five previously disadvantaged applicants can afford these.

“All in all, therefore,” he said, “until a different remuneration system evolves in estate work, transformation will be particularly difficult here because so large a number of our previously disadvantaged applicants do not have the funds to survive this initial period.”

On the educational issue, said Rawson, it can be acknowledged, too, that the highly beneficial new NQF4, NQF5 and other qualifications insisted on by the Estate Agency Affairs Board have raised the standard of professionalism among estate agents – but at the same time they have raised yet another barrier for applicants from disadvantaged backgrounds.

Touching on the psychological issues, Rawson said that, here again, many people come to the estate agency world with the wrong perceptions. It is seen by some, he said, as an easy road to riches, whereas in fact it is anything but this.

The successful estate agent, he said, is always very much an individualist and very seldom a team player. This can also be a major disadvantage to those who come from civil service or big corporations and who are fundamentally and psychologically team members. Such people, he said, will always find the whole process of being reliant on commission a huge strain.

One solution to the dilemma that the estate agency industry finds itself in today, said Rawson, is the concept of ‘tandem franchising’. This, he said, is an empowerment mechanism which provides a strong mentoring backup to the new employee. It involves setting up a joint venture between a franchiser/mentor and a new franchisee. As applied at the Rawson Property Group, the franchisee purchases a minority stake in the business and receives mentoring from the franchisor’s management team until he or she has gained the knowledge and experience required to run a business on his own. If he is successful, the franchisee is then given the option of increasing his shareholding over time. The mentor is always rewarded for the sales achieved by the franchisee. The system, added Rawson, does depend on the franchisor and his management team being prepared to devote time and effort to the trainee without any real guarantee that they will benefit significantly down the line.

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