The Employee Reward System and The Real Estate Progression with Steve Kerr and Stefan Swanepoel

Performance = ability X motivation. Instead of looking for the tiny differences, watch out for what people have in common. When you acknowledge the good things your employees are doing, they become motivated to work and motivation is the best tool for growth. After all the recognition, motivation and growth should become the employee’s reward system. If this is given the right way, it creates feedback which promotes more motivation and then more growth.

Technology is dictating the pace of almost every industry today and real estate moving along with it at a relative speed that isn’t surprising most realtors. This change and innovation is seen more as an opportunity where there are risks and threats in the industry, but when done right, can translate to profit. Will realtors not be needed in the future? No, because while the industry might change, the essence of their task will remain.

 

TTL 089 | Employee Reward System

I have Dr. Steve Kerr and Stefan Swanepoel both on the show. Steve Kerr has worked with Goldman Sachs, GE, Jack Welch, his connections, his writing, everything he’s done is just amazing to me. He’s a friend of mine and I’m so excited to have him on the show. Stefan, his work internationally with real estate, his books. Every time I talk to him, it’s higher than the last of how many books he’s written. It’s just amazing to talk to both of these very successful gentlemen.

Listen to the podcast here:

The Employee Reward System and The Real Estate Progression with Steve Kerr

I am with Dr. Steve Kerr who is currently a senior adviser to Goldman Sachs following a six-year term as a Managing Director and Goldman’s Chief Learning Officer. Before joining Goldman, he was General Electric’s CLO and Vice President of Corporate Leadership Development for seven years, where he worked closely with Jack Welch and led GE’s renowned Leadership Education Center. After leaving Goldman, he again worked with Jack Welch serving as Co-Founder and Executive Director of the Jack Welch Management Institute. He’s also served on the business school faculties of the Ohio State University, the University of Michigan, and the University of Southern California where he is the Dean of Faculty and Director of the Ph.D. Program. Dr. Kerr, is it okay if I call you Steve?

Please do.

Thank you. Just from all the Board of Directors, the Harvard publishing and business publishing, The Motley Fool, all the things you’ve done, I didn’t even know where to start with you because you are impressive. I want to start with the Chief Learning Officer position and how that was conceived and how you’re the first, right?

Yes, as far as we know, the first ever.

Can you give that story a little bit?

I was Jack Welch’s consultant for a couple years. I did a lot of work at Crotonville, which is a leadership center. They offered me the inside job and it was involved in being a vice president and officer of the company and running Crotonville but no other title. What I did was to call together a lot of the people. I’ve been working out at Crotonville consulting, so I know some people. I told them I’m going to be running this now. Under my leadership now, what should Crotonville start doing, stop doing and keep going? I used the old conventional consulting tool. We talked awhile and they gave me some ideas for new things that might be worth trying. They also suggested a new title which was Chief Education Officer because of some of the new duties and responsibilities they recommended. I went back to Jack, and I said, “I’m going to be a CEO just like you, Chief Education Officer.”

He said, “Actually, one is the right number,” meaning no. He went on to say, “Let me tell you why you don’t want it.” He said, “Education is a noun like a chief knowledge officer or chief information officer. Those are nouns. If you think of yourself as that, then your client becomes the stuff, the information or the knowledge. You spend your time protecting it, moving it around, making compatibility, hardware and software, all those invaluable things. You already have a great CIO who does that stuff. Why don’t you think about learning? Learning is verb and if you think of it that way, then you realize your client is not the stuff itself or the people doing the learning.” It ended up being Chief Learning Officer. It turned out there wasn’t anybody like that which was interesting because there’s no role model, there’s no predecessor and there’s no job description. There’s no real sense of duty. It’s really a hunting license. It’s good and it was also a little stressful. That’s how the title came about. Then I have to go about this ability to create a job out of that.

Do you think that the chief learning officer in each company does similar things or do you think it’s so new that everybody has a different definition for what they do?

There’s an emerging definition. It was new at the time. That was the years when GE was the most admired company, seven of the nine years I was around them. Everybody was copying and Welch is on all the covers, The Rock Star, later called by the Time Magazine, CEO of the Century. The point is people are copying everything Welch did and everything GE did. A lot of people suddenly became chief learning officers. To your question, there wasn’t any similarity or uniformity to what they were doing. There were just sometimes a training manager was given the title, “Now you are the CLO.” What happened though is over time, it’s become a profession. In fact, one of the boards I’m on is advisory to the JV with the University of Pennsylvania that included Wharton Grad School of Education. They do wonderful training and they’ve got a curriculum now which is, in my view, outstanding. They produce masters and also doctorates and the chief learning officers, and they place them in the best companies in the world. At this point, there is a standard collection of stuff, but at the time I made it up as I went along.

TTL 089 | Employee Reward System
Employee Reward System: If you want something to happen, you’ve got to make people able and you’ve got to make them want to.

Who deals with engagement? Would that be the chief learning officer, training and help to make sure that people are engaged in the workplace? Whose responsibility would that be?

It still remains the traditional responsibility of HR. In many companies, probably the majority of the CLO does report within HR. I was fortunate, in fact the facility I took over at Crotonville worked through HR and my predecessors had been. Jack, I’ve had a business relationship with him and so he kept calling and I kept responding. In fact, mine was working through the office of the CEO closely with the HR people. In general, it’s still HR but that doesn’t mean it wouldn’t be the CLO’s responsibility. It’s just that it will be done under HR offices most of the time.

It’s interesting to see the things that you’ve written about. I didn’t even get to talk about how you’ve co-authored six books and even had more than 80 journal articles. All your writings on leadership are just the most cited report in the management sciences. You’ve done a lot of things. I was just looking at some of the stuff you’ve written and talked about. You’re really an expert in reward systems. I’m curious to know what you think it takes to reward employees. Is there a certain system that you’ve come to think is the best?

It’s not controversial in the real world that people like money and will kill to get it, but in management theory and research, there have actually been a lot questions raised that have been serious. There were others who are saying that money doesn’t motivate, at best it’s a hygiene factor. It prevents dissatisfaction but it won’t motivate people. It ends up being relatively controversial and that could be. I just think the old saying, “More is better than less.” At places like Goldman Sachs, the principal reward was money and in Jack Welch, money was a big part of the reward system.

It isn’t the case of all or nothing. The fact is money has some disadvantages. For one thing, it’s not always available, perhaps you have noticed. If you don’t have it, you can’t use it. Like in Goldman, when times get bad, we have recessions of various kinds. One of the co-heads of banking divisions and I built a course called Managing Without Money: Use of Non-Financials. We thought then that people learned the things that they already know but maybe more systematic in terms of recognition. In fact, when you do questionnaires of MBA students, what do they want in a new job? Money always comes out high but it’s always two, three, four or five on the list. Number one is usually professional advancement, a chance for recognition, a chance to learn skills that will help them in their career and that has financial implications also. It’s not instead of money, but I’m saying with the reward system mixes all of these things up. If money is given in the right way, it’s also recognition, it’s also a feedback, and then it has much more power to than just giving out typed anniversary dates or across the board increases. In most cases, nobody refuses it but it doesn’t motivate much.

You’re talking about advancement and opportunities for growth and that type of thing. I have talked to other people about how millennials, they want all that but then sometimes either the company doesn’t have money, or they don’t have the advancement opportunities. A lot of people I’ve talked to have planned out ways to come back to the company they like. They’ll go maybe to the XYZ company for three years to get these skills, and then go to ABC to get these skills, and then come back to the company that they like better. We didn’t see a lot of that in the boomer generation. If you left, you left. You didn’t come back. Do you see more people going back to their companies?

Yes. It’s more possible. We used to take it as a badge of dishonor. Loyalty was a big deal. I remember looking at resumes of the person, I’m like, “They moved three times in nine years. What’s wrong with this guy? Why can’t he keep a job?” These days it’s expected. You tell people you’re going to have twelve or fifteen jobs during your lifetime. You can go out and get skills that are out available somewhere else, but sometimes it takes you to a third place and the fourth place. You may come back in the first place because you liked it or for geographical reasons. In fact, one of the models, the way they make movies, you have temporary crews that were put together. They have precise skills, somebody does lighting, somebody does direction, somebody is stage manager. You break up after the movie is done, but if you like each other, the groups of people keep on running into each other. In a way, it’s an odd model for a business to follow but these are ideas of temporary organizations. You do maybe come back to the same people but it’s not necessarily in the same organization that it was before or the same corporation.

You have been around some pretty amazing people, Jack Welch, for one. What do you think of some of his practices? The portability of information or his firing the bottom 10%. Can you address what that was like? Do you think that that’s a good practice?

In fact, the first one I would say, this is the first learning I needed from him. I left you hanging and say, “We don’t have a job description, what do you do?” Jack went on to give me some “help.” That was really quite valuable to me because after he said, “You’re going to be a learning officer for now.” I supplied a little theory, coming out of academe as I was, but it was mostly Jack. Basically I said, “This is the most basic formula in life. It says ability times motivation equals performance.” All that means is if you want something to happen, you’ve got to make people able and you’ve got to make them want to. We have somebody, a CIO, an excellent guy, whose job is to improve people’s ability to share information, move information and learn. That’s what a learning officer is supposed to be doing. He said, “Don’t mess with him, he’s doing his job.” Jack said, “You can create the most wonderful hardware and software and make them compatible and prevent hacking and all that but he said, “I’m convinced the most important reason people don’t share information is because they mostly don’t want to.” That’s the problem. You’re not going to solve it by getting a faster hardware. He said, “That’s your job. Find out why people don’t want to share information and don’t want to use information either coming from other places inside or from the outside. You can call it not invented here and age syndrome but it doesn’t really explain much.” He said, “That’s your job.” He said, “Some things we already know. We know why folks don’t share information because folks keep everything for private advantage. They hoard stuff. We know why idiots don’t share, because they just don’t do anything well including sharing. Then Jack said, “We don’t have that many thugs and we don’t have that many morons either. Anyway, that’s not interesting.” He said, “What’s interesting is why do people, they’re smart, they communicate, they care about GE, and yet they’re not sharing information and they’re not adopting other people. Fix that. Find out why that’s happening. What’s in the reward systems? What’s in the organizations silos? What’s in the boarding relationships? What’s in the politics? What’s in the air that keeps this from happening? In a way, that was the first bit of useful learning I got from him.

To your point, the most interesting things about Jack is when he would say stuff that people would tend not to agree with. Sometimes he still didn’t agree at the end, but his way of explaining and defending his actions and his ideas. The one we talked about, firing the bottom 10%. It’s probably the least well accepted outside. It was the only thing that people didn’t blindly copy and it was opposed inside as well. This is Jack. It’s just to illustrate the way he thinks and the way he would market using analogies and examples. He said, “Give me your honest opinion.” People say, “It’s pretty cruel,” Jack said, “If you call this cruel, let’s see what you do. Let’s see what kindness looks like.” Jack said, “You won’t fire the bottom 10% but could you agree on one thing? Could you agree that the bottom 10% of your people, will you give me that much? God didn’t make us all equal. There’s some curve, normal or otherwise, so some people are worse than the rest.”

I was like, ” Right.”“ All we’re disagreeing about is how you treat them, which is you don’t want to fire them because that’s cruel. What do you do? You give them small raises. You write on the annual appraisals, ‘meets job requirements,’ a mild praise, you don’t want to hurt his feelings.”Jack says, “When you have a big client coming in, are you going to put this client with the bottom 10?” “No, of course not.” “If you have an important assignment, who are you giving it to?” “Not the bottom 10.” “If there is a fancy trip to Hawaii, who are you going to send?” “Nothing.” He said, “You cut this guy. You’re not being kind, that’s the cruelest thing you can do. You’re sabotaging his career, but you’re too polite to tell him, and he’s not stupid.” At age 55, he figures out what’s happening and now it’s too late to do anything for most people. He said, “Admit why are you doing it. You’re not doing it for his sake, you’re killing him by not giving him the information he could use and you’re not doing this for his sake. You’re not claiming that you couldn’t find better people than the bottom 10%.” People are dying to work in GE in those days. It was a hot job. He says, “You’re doing it for your own sake. You just don’t want to have that conversation.” Then he ended up by saying, “I hope you never get to like it. I hope you are sick to your stomach. I hope you can’t sleep tonight. It’s horrible to fire people, but you still got to do it.” That’s an example of how Jack would take something that at first glance, you would say this, “indefensible house.” Then when you kept on listening to him and you really can’t quite see what’s wrong with his idea. The other thing is Jack got rid of people. He was called the Neutron Jack. The reason he got attention is he did it early, when the rest of the world was still hiring, before the various crises and recessions. Most of our people are marketable. Indeed, some of them got much better jobs than they ever would have if they’ve stayed in GE. That’s an example of how he would influence my thinking with just the way he would frame things.

I’ll give you another example. Jack had reached in his career a celebrity stage so he could scream at our best customers and they would accept it. One day, we had one of the founders of Home Depot come in, Arthur Blank, who is a great guy and he was a giant customer of GE. They were buying our appliances. Arthur is complaining to Jack about, “You can’t set up ideal systems.” I was just a fly on the wall. I didn’t have a role but as a chief learning officer, you’ve got to sit with him and stuff. It gets cold in Buffalo but it stays warm in San Antonio so you need different merchandise which means you need different suppliers which means different supply chains. Jack puts up with this for about six minutes, which is his tolerance. If you didn’t know Jack, you didn’t know how badly he will wound you that he would say, “You’re making it complicated.” To Jack, there was nothing worse to say about something. He would always say, “Have the courage to be simple, stop making it complicated.”

He says, “Let’s see if we agree.” He says, “There are only two kinds of outputs in this world, there are products and there are services. You’ve got a third kind that I don’t know about? Once you got these two, no matter what you’re telling, if it’s a hit product or manufactured steel, don’t you have to do quality control? Don’t you have to market your product? Don’t you have to collect your receivables?” He goes through five or eight things that everybody has to do if you’re selling products or services. “Let’s go to the input side. You’ve got people, you’ve got money, you’ve got physical space, maybe you’d manufacture yourself if you’ve got some equipment.” That was his ways. Everything is portable. If you got the best way to bring accounts receivables in or you have the best way to onboard your people or you have the best way to deal with ecological environment, most of it is portable. He said, ”Stop looking for these tiny differences and look for what people have in common,” and that became the guiding light for my job. Everything is portable, you just got to find out how it could help other businesses or other geographical territories. That’s another example of Jack just being masterful in his way of marshalling data in ways to help you see old things through new eyes.

I’m curious how you think that the 10% thing impacted people’s sense of engagement at work. Did it have a negative impact at times? Did everybody just come to expect that? I’m curious of the impact.

It had two impacts. It was positive in that it accomplished Jack’s objectives, and I was around to affirm that. To answer your question now, he would say, “Don’t we agree we’re moving Ernie out? Don’t we agree Sally’s in the wrong job?” He found Ernie and Sally have been given raises and maybe be given stock options and he went crazy. What he would say is, “If these wimps can’t make tough decisions, I will force them to.” In that sense, he’d created a zero-sum game, 10% has to go. It met his needs, and it forced people to be more confrontational and to be more honest and to stop lying to people and calling them average or above average. The negative part was it was sampling without replacement, which means after the 10% had gone, next year, you got 10% more that got to get fired. After a while, most people run out of bad people. They ran out of average people, and now they’re being asked to fire good people. Jack would always say, “You can always get better people than your last 10%.” At that point, certainly it hurt morale and it punished the high performers. The golden rule of management says, “Never hurt the high performers.” When you do this across the board stuff, that’s who gets hurt. If you’re a bad manager with lots of bad people, you can keep canning people with no real effect and it’s not cruel. If you’re a good manager, you surround yourself with really good people. Taking out 10% for you is a tough job. You’re removing very good people.

That’s the problem with the philosophy that you should help your people. Jack always said, “Be hard-headed but soft-hearted.” We talked about Neutron Jack, but unless it was ethics reasons, he would say, “No. We’re not taking a bad job. You’re a good guy, you’re a good gal, but from now on your main job is finding a job. Don’t take forever but don’t worry we’re not taking something better, I want you to have a good life.” In those cases, it wasn’t a bad outcome. In general, it hurts the high performers, and you should never do that by making managers have to take out good people while other people who have 30% bad people only have to get rid of the 10%.

Why not take that 10% as a challenge and make that 10% better instead of getting rid of them?

He did. He emphasized that they should work the topside. He didn’t enforce it. It never got to be popular, in my memory. Lots of people didn’t do it or they played the game. He’s too smart. He knew they were playing the game. The game is people who are going to retire, you hold the rest until the end of the year. People are going to fire early, you’re going to have to fire the bottom 10% so you keep them until the end so you can have this ceremonial bloodletting. In fact, maybe they weren’t doing anything, it won’t going to happen anyway. He wanted the philosophy. He wanted people to make tough decisions, and he got that. It didn’t bother him that they were waffling on the details.

I’ve heard you say that you thought people needed to have a say in some of it. If they feel like they came up with part of an idea, they’re more apt to buy into it. Would he agree with that kind of thinking? Southwest allowed people to pick the style of their uniforms. I read. They really embraced the new change because they liked it better. I was listening to your video about how they can’t even come up with bad things, but if they felt like they had a say in it, they’re more apt to embrace it. Did I take that correctly?

TTL 089 | Employee Reward System
Employee Reward System: The GE Work-Out : How to Implement GE’s Revolutionary Method for Busting Bureaucracy & Attacking Organizational Proble

Yeah. It’s so obvious now, thinking about it. It’s so logical. It’s hard to believe that was a radical culture change, but the whole thing called Work-Out, there are books written on that. Fortune called it the most radical culture change in history of corporate America, taking a top down autocratic organization, which it was under Jack. Benevolent, but a benevolent autocrat, and converting it exactly what you said. In fact, one of the things Jack said, he made us rip out the suggestion boxes that a lot of companies have. He said, “I don’t want to pay people twice for the same thing. His point was, “I want everybody to understand that they’re getting paid to contribute their ideas. We bought their brains, we didn’t just buy their hands. We want their input. We don’t want to make it’s like that a special event. Get those out of there. It’s something they should do every day.” Part of it is because you get better ideas. The other part is what you said. There was an old saying that, “People don’t resist change, they resist being changed.”

Jack gives an example of this. “If you win $1 million dollar lottery, are you’re going to turn it down and you say, ‘I don’t want change?’ Of course, you do.” That’s the point. He really welcomes people’s contributions and ideas. In fact, he said there are two kinds of interventions in this world, which one you use depends on how much you trust your people. If you don’t trust your people, you hire McKinsey or BCG or one good consultant. They remap you processes and they rewrite your policies and then you let your people back in the building and show them how it works. He said, “That’s fine, because sometimes you can’t trust people because the law changes, the technology changes.” The second type of intervention goes on the assumption that people who do a job every day get really good about that job and they know ways to make it more effective, but they don’t tell. A) There’s not enough time. They can’t think about it. B) It’s not so safe in many places, and C) You are doing it in an inefficient way. That’s how Work-Out came about. It was specifically designed. He hired 24 of us outsiders. He said, “We’ll split the charges. I’m going to provide the time,” and he did that by requiring every employee in GE to go through this process which is a three-day process within a year. Then he said, “You make it safe so the people understand that we want their ideas and I don’t care if that upsets the applicant.

All the things that you’ve learned from all this background that you’ve had, you’ve written a lot of books, I’m curious which of your books is your most popular? You have so many. Is there one that you liked writing the most based on all your experiences?

Maybe the most copies sold, but when measured popularity is The GE Work-Out book which I co-authored with Dave Ulrich and Ron Ashkenas, they were on that book. We have a couple of versions. That sold because a lot of people are copying Work-Out to this day, though it’s less popular since Jack’s not here to keep talking about it, but The Work-Out book. The one that I liked the best is a little book. Harvard put out a series called Memo to the CEO, imagine you’re writing a short piece for the CEO. He gave us a word limit. We should make about only two-thirds the size of a regular book. No footnotes, no bibliography, and I talked about defining performance and measuring performance and rewarding performance and how these things work together. This one is easy to read. It is a short book. The way I introduced it, I said, “There are things that if you know how to do them, you make a billion dollars and make everybody happy, but nobody knows how like curing cancer. Then there’s stuff that everybody knows how to do, but it’s too expensive to do. To give everybody complete health care, we know how to do that but it would be too expensive. Then there are things we know how to do and we know how to do them cheaply but since everybody’s doing it well already, there’s no competitive advantage to doing it like getting up the monthly payroll. It’s terrible if you can’t, but everybody can so there’s no advantage to being able to do it.

Then there are reward systems. The fact is, everybody knows this goes back to Skinner and Pavlov, basically they are right. It’s knowing how to do it and it’s cheaper to do it well than to do it poorly. Unlike computers, the more expensive cost while doing good rewards and good motivation cost you less than doing it badly, and yet people are not doing that. It’s a great competitive advantage to be doing it well. The little book tells you how to do it. There are no secrets, just basic simple stuff. As Jack said, “Have the courage to be simple.”

I love how you make things sound simple. With your mind, you could make this all be very difficult to understand but you speak in a way that people understand. You’re so impressive, I was so glad that you agreed to be on the show and I’m hoping that people would look at your books and find out more about what you do. Can you just tell them how they can reach you or find your books?

It’s Harvard Business Press and it’s Amazon or right in the Harvard Book Store. It’s years ago, I don’t think it has become less relevant, it’s about fundamental principles, first principles. However, it would not be carried automatically though on any book by its own. They will not be able to order it. The easiest way is probably just find it online and find out what bookstores have it. It’s called Reward Systems and basically it’s about how you define performance, measure performance and reward performance. I make the point that you’ve got to do it in that order. People start at the wrong end. They start changing the reward system. If you can’t measure something, you can’t reward it. If you can’t define it and make an action, you can’t measure it. It’s really about rewards but it talks about the things that you have to do well in order to get to that stage.

Thanks, Steve. You have so much information. We could talk forever about all this because you definitely are the expert. I appreciate you being here. Thank you for being on the show.

Thank you, everyone. I enjoyed it.

You’re welcome.

The Employee Reward System and The Real Estate Progression with Stefan Swanepoel

I am with Stefan Swanepoel who’s held offices as President and/or CEO of a technology company, an education company, a real estate company, a non-profit association, a movie studio, and a 2000-office international franchise. He’s been voted Businessman of the Year, one of the top 50 people to follow on Twitter, and The Top 100 Most Influential People in real estate. He’s authored more than 24 books and reports on subjects such as real estate trends, technology, business strategies and consumerism. His books have been featured on more than eighteen bestseller lists including New York Times, Wall Street Journal, USA Today, Star Tribune, Huffington Post. Welcome, Stefan. How are you?

I’m always well, thank you. Thank you for the invite. Glad to be here.

You are an interesting guy. What haven’t you done? I didn’t even know where to start. I have a real estate license, I’ve worked in finance, I’ve worked in education, and I’ve worked in so many different areas. If somebody asks you what you do, what do you say is your main focus?

I live life to its fullest.

How did you get to achieve this level of success? I know you were born in Kenya, and then you came here after 35 years in various countries, and then now you are in the United States.

I was privileged enough to grow up in a diplomatic household. My father was in the diplomatic corps and he was stationed in East Africa, in Kenya in the Serengeti. If you remember the movie Out of Africa with Robert Redford, just like that, back in the 1950s. After that, he was stationed in Hong Kong, the south of China. We were there for six or seven years. Then he got stationed in South Africa. I went to elementary school one continent, and then middle school in another country and continent, in high school another country and continent. I’m a completely confused little kid. By the time I was in my twenties, I started looking for life and the purpose of life. I’ve been privileged to travel after that extensively. By the mid ‘80s, I had discovered America. It was an instant love affair. With all of the struggles which we hear about, it is still the most progressive, forward-thinking, capitalistic free country in the world. I just love the democracy, the freedom of speech and the opportunity. I took my family and we relocated in the early ‘90s to the US. I have now been here close to 25 years. Fifteen years ago, I became a citizen, proud to be one. I do as much as I possibly can the whole time.

You do a lot in real estate and I’m fascinated. I have a real estate license. What drew you to real estate?

I’m an engineer from trade originally. I was working in my occupation when an opportunity was made available via the newspaper. They were looking for a CEO for the National Association of Realtors in another country. At that stage, I didn’t even know what a realtor was. I had no idea. I read the job description and it said, “Change in industry, write books, meet the president, write the law, go on stage, do international transactions.” I look at all of that stuff like that, “Change an industry, educate people, teach people.” As an engineer, I said, “I’m probably never going to do any of that or definitely not a lot of that.” I was fascinated by just the opportunity. I was very young at the time, I was 26. There was no reason for me to have gotten that job. I didn’t apply for the job but somebody threw my hat in the ring. To cut a long story short, I was interviewed and nine months later, after 200 candidates, at the age of 26, I was given the chance to become CEO of the National Association of Realtors for another country. That was the first door that opened for me. I did meet the president of South Africa. I got the opportunity to come to the US and I met the CEO of probably the five or six or seven biggest real estate brands in the world; RE/MAX and Coldwell Banker and Century 21 and Sotheby’s. These are big recognizable companies. I was invited. At that young age, I got that exposure. I just fell in love with this industry. It is a very, very large industry. The United States, as a collective, sells more than a trillion dollars of homes every year. That’s a lot of homes, trillion dollars of value. It’s a big piece of our economy.

TTL 089 | Employee Reward System
Employee Reward System: If you get a chance to run up the stairs of life or your business, take the stairs and not the elevator.

I’ve had Ron Klein on my show. He created the MLS. I’ve had Tom Hopkins and some major names in real estate. I’m curious what you think of where it’s going? With the technology, what’s going to happen to real estate agents with Zillow and things like that? Do you have any predictions?

You picked a favorite subject of mine. I’ve written 35 books. That’s what we write about. That’s what we do, we write about three books a year and books are 200 pages long. These are not short, they don’t carry commercials. They’re basically an analysis of the residential real estate industry. My team and I have dissected from every angle you can think of, whether that’s buyer side, seller side, transaction side, investment side, technology side, MLS side, association side, mergers side and acquisitions side. We’ve looked at it, and there is no question that the real estate industry, the residential brokerage side, is one of the very last bastionship of entrepreneurship. This is still a very fragmented industry. Where many other industries, maybe coal, travel, transportation, retail, they’ve all gone through stages of corporatization, consolidation. We are very much accustomed with big companies, whether it’s Blue Cross or Kaiser Permanente or Home Depot or Walmart. We’ve seen these big companies arise. In real estate, we don’t have that. We still have 86,000 real estate brokerage companies in the country and 2.5 million licensed agents. It is a very fragmented industry. It’s possibly going to take about ten to fifteen years to change that, to corporatize it, to completely technologize it, to put it onto the web, and to make it bigger. We’re probably already three or four or five years into that process. There’s no definitive line in the sand, but we are approaching the halfway mark and you can feel the critical mass. You can feel the momentum building. We had two major acquisitions take place between two unexpected companies. It was not even a merger that was in the pipeline that the industry knew about. It was just announced and this is happening on a regular basis. The industry is going up with a global scale and with scale will come change.

What were those companies?

The one was a very large public company that purchased more local technology-based securitizations, a security data company. The other one was a very large brokerage company in the East, which is unquestionably one of the top one or two or three in the east. They have now expanded their footprint on the West by acquiring probably the third largest company in the Los Angeles area. They can now bring their brand over. That’s happening a lot where a giant switch have been formed at either side of the coast are now like the banks that maybe ten or fifteen years ago, when the B of A’s and the Wells and those companies started acquiring other smaller regional banks to become a national bank, we see that now happening a lot with the companies, filling in foothold or footprints where they didn’t have footprints or making them stronger.

Do you deal mostly with residential real estate or do you deal with commercial real estate? I had a Chris Volk on, who was with Store Capital. He’s a pretty interesting CEO. Do you give predictions in both residential and commercial or do you focus mostly on residential?

We have published a 150-page commercial real estate alert program which does look at opportunities and risks and threats in the commercial industry. We do consider ourselves predominantly a residential real estate and consulting company. In a commercial space, you have many recognizable names, the Lloyds, Pricewaterhouse, Mackenzie and many of those companies that are powerhouses and do extensive research in the commercial industry. The industry is consolidated a little bit more. It’s easier to get the data, the data is more discoverable. The residential industry, because it is so very fragmented and it is all over the board, none of those big players have any significant presence in the residential industry. Hence my company, we are by far the largest consulting company in the residential space. We focus on that and we consider that our domain. Because the market is so extremely big, we tend to stay away from the others a fair amount and focus on our strength.

You don’t only look at strategies and things for real estate but you deal with the technology in general too. Didn’t I see you create talks on how to create podcasts, how to use Twitter? How do you get into so many different industries?

We do the technology. We do publish a very comprehensive guide every second year or sometimes every year, but usually every second year, in which we do evaluate all the software. We do focus on software that is used in the residential real estate industry. Although we are involved with mergers and acquisitions, leadership, leadership training, management training, we do leadership events, we do technology variations where we function almost like a J.D. Power or Foresters or Gartner company, but we do that all in the residential space. Our focus is the real estate brokerage industry. As a result of that, these companies like Zillow and Trulia and Realtor.com are our clients. Then also there’s Sotheby’s, the Coldwell Banker, Keller Williams, and RE/MAX, those kinds of players, then other support companies that support this industry: the Core Logic, the Black Knight, the Equifax, the DocuSign, which all enable and empower the real estate professional to help the consumer, either a buyer or a seller, sell or buy their home. There are close to six million residential real estate home transactions that take place on average on a year. This year it will be probably be about 5.8 million transactions. You can totally see when you divide that by twelve on an average month, we’re doing around about a 500,000 transactions a month, a little bit more in the summer than in the winter. That’s 100,000 to a 125,000 homes that are being sold every single week in the United States. That’s huge. There are millions of people, whether it’s mortgage officers, title officers, attorneys, escrow officers, insurance people, the real estate professionals that earn their keep. This industry sustains the single biggest chunk on the GDP in the United States budget. Real estate is big.

My license is with Keller Williams. I don’t do this except for my own use at this point. Just the technology changes I’ve seen, everything from the contracts being online, you mentioned DocuSign and some of the other technologies out there, was there any technology that fascinated you, that surprised you or that you find just different than you were expecting?

Diane, very seldom when something surprise us. It’s more the excitement and enthusiasm when you see that a company that you’ve been aware of for a couple of years actually starts getting traction in the industry. It is easy to read the media and hear about something that was announced yesterday or something that got funded. They are so far from bringing it to market or being accepted by the market, getting to critical mass, getting the price down to a point where it can go mainstream. That process often takes many years. We didn’t seem to get to some critical mass, it could even take five to ten years. Depending on the product, we usually already know about a product, but when a company gets funded, you see the right management gradually being appointed, you see them running the right business plans, gradually getting the team together, and then signing up one client and then maybe a regional client, and then a national client, and then you start seeing them more frequently at conferences. We do lots of orders from companies. We’re the neutral voice for the industry. If somebody wants a digital analysis on order to try and determine if somebody is upset and trying to escape. Because we’re neutral, we don’t have involvement from a management or a leadership. We don’t sit on company’s board of directors. We’re often brought in to be the evaluator. When you look at them and you can see their growth, that’s the exciting part. That’s when you realize that the change is here. It started maybe five years, ten years, fifty years ago but the change is no longer just something coming in the future. We are in the middle of it. I can confirm that by simply looking at the conversion numbers, the growth numbers, the adoption numbers, and the numbers which many of the key companies are reflecting in their financials. That’s exciting. Change is here.

It is amazing, the changes you do. I’m like you, I’m a boomer that embraces technology, which sometimes isn’t the norm out there. A lot of the older generations may have challenges with all of this. What advice do you give people that maybe don’t embrace all these changes and that have difficulty with this?

If you get a chance to run up the stairs of life or your business, take the stairs and not the elevator, because the elevator is going at a fixed speed and everybody in the elevator is at the same time.If you run up the stairs, you’re running up at your speed, so you determine when you get to the top. Life and business and money and aspiration and growth and goals are in the list. You can always keep on adding to that dream and you should. Understand that the difference between awesome and alarming is about a decade or two. Once you hear about something for the first time, you go like, “What did you say? That can’t be happening. No. I don’t agree with that. Big daddy is watching. I’ll never use the ATM. I’ll never do online banking. I don’t like email. I’m scared of Facebook. People are following me. It goes by my footprint.” We have this paranoia sometimes. The difference between that and then five or ten or fifteen years later saying, “I used Alexa every day. Isn’t it cool? Look at my email. I have so much email, I’m texting every day. I like my Facebook account.” It’s sometimes just becoming comfortable with change and innovation and it depends on how fast you want to make that change. You just said that unlike me you’re a boomer that embraces technology. I’m not sure if you don’t think I embrace or you don’t think I’m a boomer.

I’m saying you and I are unique because other boomers don’t.

The other boomers on your call should. They should really. You have to, Diane. That’s why your show is so important. You have to embrace change. It doesn’t mean that all change is good. Change is when we give birth to new ideas and new concepts. Clearly, the person who is doing that is pushing the envelope, and often they will push it into an uncomfortable zone because it’s a place where we haven’t been before. That’s okay. He or she is not trying to do something bad, they’re just trying to strive to be innovative or creative. If you don’t run your life, if you don’t run your day, your day will run you. Why would you not push the envelope? I applaud you for what you do and everybody should do the same.

I’m fascinated by what people do for a living. A lot of people go into real estate because it seems like they’re going to make a lot of money or they have some potential for growth and all that. If we’re seeing technology as going to be taking over to the point where maybe we won’t need as many real estate agents, what advice would you give somebody who’s thinking of getting into real estate at this point? Is it a good move?

Yes. I absolutely don’t believe in an end of time theory. I don’t like fear mongering at all. I don’t think technology will take over anything. Technology is a very handy tool that if used by a smart person, by a clever person, by a person who really has a system or a company or a structure, you can use technology to do more. You can use it to do something quicker, faster. You can probably get your economy to scale. Don’t make technology out to be a person that could take your livelihood away. Technology is simply just like everything else in life, it’s a tool. Use it. There are certain tasks which we as humans do that are mundane and repetitive and boring and don’t require a lot of skill or attention. Most certainly, those can be done by a machine, probably more effectively, probably at a lower price. There are lots of other things in life that you can do. I don’t think a realtor will go away. I think a realtor’s tasks, their functions, will just simply move. It will evolve. It will change. Maybe they will be used to interpret information. Maybe they will be used to become an advisor. Maybe they will be the person that takes all the data and make sense out of it and process it through. Maybe there’s a trusted adviser or colleague who says, “Diane, this neighborhood is right for you, and this is why. Let me walk through this for you. Let me explain to you the comparative market analysis. Let me show you this other house down the street and why you might or might not like it.” There is always a role for the human. At the end of the day, why would we allow a piece of creation that we’ve made, whether it’s a chair or a car or a computer or a transistor, why do you want to give them control? Don’t you dare give them control. Keep your dreams alive because your dreams are yours. You can use your dreams to create a roadmap for you to go forward. Realtors, you still have a life. You just have to be current, be like Diane, be a boomer that’s willing to adopt technology and use it for your betterment, even for your client’s betterment.

TTL 089 | Employee Reward System
Employee Reward System: Technology is simply just like everything else in life, it’s a tool.

I have so many friends that are either real estate agents, a lot of them are mortgage brokers because I was in the subprime lending. I was a loan officer in the past. I have a lot of people that ask for advice that would be applicable to real estate agents and to mortgage lenders. How do you network them? How to get known through social media? You are the Twitter king out there and you know so much. A lot of LinkedIn experts have been on my show who have talked about the importance of using LinkedIn because that’s where their customers are, and to use the platforms where your customers are. Where do you think that real estate agents and mortgage professionals should focus in terms of social media?

I do use probably three platforms more than others, I’m on six or seven platforms. I’m in the top 1% of the LinkedIn, Twitter and Facebook group. It’s not because they’re better than any other necessarily. It’s because that’s the ones I’ve chosen, that’s the ones which I like for different reasons. The one allows interaction. The one is more my professional image. The other one allows for quick distribution of information. They serve different purposes at different times. They reach different audiences, so I use all of them and I’m most certainly on all of those social media platforms many, many times a week, between ten and twenty times a week. It’s not at a specific routine. I don’t think that the people that struggle with social media, they are the ones which want to automate this or give it to an assistant or they want to keep on selling and selling and selling.

Use it as an extension of who you are, put passion behind it, put commitment behind it, put a piece of you behind it. That doesn’t mean that you have to share a secret family stuff which you don’t have to do. I’m a reasonably private person. People know that I am married and I have kids and I worked the same company for twenty years. People don’t know a lot about me personally and I still keep my personal life to myself. I do share with passion and commitment. When I read a tweet or I read a post on Facebook and I like it, I agree with it, I support it or I have a diverse opinion about it, I’ll participate. I don’t authorize systems to do that, I’m there. I’ll tweet and text and go back and forth. Then you might not hear about me for the next day or two or three because I have a life. I’ve got other stuff to do. I do a lot of talks. I do 1,400 talks a year. If I’m on stage or I’m on a plane, I’m not tweeting. If I’m standing in line to board the plane and I’m there on line for twenty minutes and I’m killing time, I will most certainly go look at my screen and see if there’s anything that may have happened, that might be important. If I recognize that Diane’s done something cool, I’ll do a shout out, I’ll do comments, I’ll do a re-tweet, I’ll participate in that discussion. When you hear about me online, it’s me. When you don’t hear about me, I’m simply busy doing other stuff. It hasn’t absorbed my life. I probably have a 160,000, 170,000 friends and followers, and I haven’t done a deliberate campaign to go look for them. We haven’t drawn or pushed them. They just over time joined the discussion.

It’s so fascinating to follow all the different technologies. I had an outdated number of how many books have you wrote. Have you written 35?

Yeah, that’s it. It does change every 90 days.

Are you also looking at creating other things like apps or have you already done things like that?

We have consulted for clients on apps, so we have been involved in the creation of apps. We haven’t created apps for ourselves because we see ourselves as the McKinsey of real estate. We see ourselves largely as a very high-level management consulting company which assists people. If you have a problem, then you call me. If something needs to be taken care of, I know a SEAL Team. If you don’t need me, don’t call me. I’m not looking for an ongoing contract. We don’t really serve the average realtor every day. We’re not here to try and get thousands of subscribers to a newsletter. We have a very select audience and that means basically decision makers in the residential real estate industry. It doesn’t matter if you’re a CPO or a COO or a CIO or a CEO. If you have a problem, we fix it. If you want information, we’ll get it for you. If you want something confirmed or verified, we’ll do that for you. If you want something certified, we are your men. As a rule, we don’t think that an app is probably something which we need. If you are a company that has a large following, if you have a company that has a consumer or a B to C initiative, apps are great. Creating the app is, in my opinion, relatively easy. It’s actually getting the app used. Getting it out there, getting traction, and getting people to follow you and to use the app, that’s a little bit trickier.

A lot of people think that people are just going to find them. It doesn’t work that way. There’s a lot of marketing that goes behind in sales. It’s interesting to see how much you’ve done. When you give so many talks, is it all real-estate based? What’s your main thing that you like to talk about? Who’s your typical client.

These big real estate companies have their annual conferences. You mentioned that you were with Keller Williams, they have one of the largest real estate conferences every year with about 10,000 people. We just got asked by Coldwell Banker to be the keynote for their next conference, which is going to be about 5,500 people. The National Association of Realtors has their annual big conference every year which is probably about 25,000 people. It is largely the big groups that have their annual get together. I am most of the time the keynote speaker for these events. The talks are probably divided into three broad categories. They often ask us to come and talk about trends because we publish a report every year identifying the ten biggest trends and that’s not just a short list of ten lines, that’s a 200-page analysis of the top ten trends. Many companies ask us to come and talk about what we think is going to be next in the industry. Technology is a hot topic. We’re often asked to come and talk about technology disruptions or innovations or creation. We will often go outside the real estate industry and we will look at the big drivers, the technology companies, the social media companies, hospitality companies, travel companies, and the medical companies and look at what they are doing to see if they are doing anything that would cross-pollinate into our industry. Then third but not the least, we also have a variety of management leadership and/or motivational related talks, where the talk is not the specific subject matter related about technology or training, but it is more about motivating your group or leadership. I’ve written a book or two about leadership, so we are sometimes asked to speak about that as well.

This has been so fascinating. I could talk to you all day with all this stuff because I love all this and it’s definitely my field of interest. A lot of people want to know how to reach you, in case if they want to find out more about you.

Our consulting company is called T3 Sixty. If you’re looking for me, my name is Stefan Swanepoel, Swanepoel.com. I am on Twitter, Facebook, LinkedIn or Google.

It’s been so much fun. Thank you so much for being here.

Thank you very much. Good luck to you, your program. Have a wonderful day. Have a wonderful life.

Thank you.

Thank you so much, Steve and Stefan. I thoroughly enjoyed talking to both of you; what unbelievable guests, what a show. I hope you enjoyed as much as I did. I hope you come back for the next episode of Take The Lead Radio.

About Steve Kerr

TTL 089 | Employee Reward System

Dr. Steve Kerr is currently a senior advisor to Goldman Sachs, following a six-year term as a managing director and Goldman’s chief learning officer. Before joining Goldman he was General Electric’s CLO and vice president of corporate leadership development for seven years, where he worked closely with Jack Welch and led GE’s renowned leadership-education center at Crotonville. After leaving Goldman he again worked with Jack Welch, serving as co-founder and executive director of the Jack Welch Management Institute. Dr. Kerr has also served on the business school faculties of The Ohio State University, the University of Michigan and the University of Southern California, where he was dean of the faculty and director of the Ph.D. program. He is a former president of the Academy of Management, the world’s largest association of academicians in management. He has authored or coauthored six books and more than 80 journal articles, and his writings on leadership and “on the folly of rewarding a, while hoping for b” are among the most cited and reprinted in the management sciences.

About Stefan Swanepoel

TTL 089 | Employee Reward SystemStefan Swanepoel has held the offices as President and/or CEO of a technology company, an education company, a real estate company, an education company, a real estate company, a non-profit association, a movie studio, and a 2,000-office international franchise. He has been voted “Businessman of the Year, “One of the Top 50 people to follow on Twitter” and as one of the “Top 100 Most Influential People in Real Estate.” He has authored more than 35 books and reports on subjects such as real estate trends, technology, business strategies, and consumerism. His books have been featured on more than 18 bestseller lists including New York Times, Wall Street Journal, USA Today, Star Tribune, Huffington Post, Amazon, Barnes & Noble, Inc. Magazine, CEO Read, San Francisco Chronicle, MSNBC, Publishers Weekly, ABC and Miami Herald.

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