New to being a broker and want to operate your own brokerage office? Read on for an analysis of office management styles used by real estate brokers.
Real estate brokers are responsible for overseeing the conduct of their agents and managing the operations of their brokerage office, but how they complete these tasks is at their discretion. Management styles vary by broker, dependent on each broker’s business model and management preference (though California Bureau of Real Estate (CalBRE) rules apply).
When determining how to manage a brokerage office, brokers need to be cognizant of their duty to both:
- supervise current business in their office by tracking their agents’ activities and enforcing office standards for conduct in all transactions; and
- ensure the future prosperity and sustainability of their business through proper operational planning and client generation and retention.
To meet these requirements, brokers may choose to use:
- hands-on management, the more involved and direct method; or
- hands-off management, assigning supervisory duties to an office manager.
Either method may be adapted for use in any brokerage operation. Each method satisfies the broker’s duty owed to their clients, sales agents and the CalBRE to exercise reasonable supervision over all activities performed by their sales agents. Failure to properly supervise and manage sales agents exposed by a complaint or audit subjects the broker to review and disciplinary action by CalBRE when warranted. [Calif. Business and Professions Code §10177(h)]
The hands-on broker: active management
Brokers and their agents benefit from the care and control offered by the hands-on management method. Here, the employing broker provides their sales agents and broker associates with more direct supervision on a daily basis. Naturally, this allows the broker to pay special attention to the daily business operations of their office — notably, the dual tasks of a hands-on broker are the juggling and execution of current business operations and future business planning.
Management through a hands-on approach typically provides focus on:
- providing guidance and training to sales agents;
- keeping tabs on sales agents by tracking the status of their transactions;
- recruiting new sales agents; and
- managing the office, rather than soliciting and servicing listings.
For a hands-on broker, direct involvement in an agent’s guidance and training is key to a successful real estate practice — a component of both managing current brokerage operations and preparing for future business. The broker trains new sales agents by implementing and being part of a mentorship program. New sales agents in the office learn the ropes through instruction from their broker, other designated employees and even a team leader.
While mentorship programs are not unique to hands-on brokers, the broker’s active involvement in the agent’s training is a distinct attribute of hands-on management. A broker who prefers the hands-on management style invests their own time and efforts into training new sales agent, as well as providing continued guidance to existing sales agents. Here, the broker communicates directly with their agents, updating them on how to comply with real estate law and informing them of issues arising out of transactions in the office.
As part of their diligence supervising pending office transactions, hands-on brokers focus on tracking agent activity by creating an accountability program, which requires agents to report to the broker (or an office manager) routinely. [See RPI Form 520]
The tracking process involves the broker’s:
- review of transaction reports from agents or transaction coordinators (TCs) — an overview of the listings each agent is entering into and whether a transaction closes; and
- management of office staff to ensure ancillary tasks are completed — e.g. the development of advertisements and multiple listing service (MLS) submissions to publish information on property listed for sale or rent.
Here, the broker follows up with necessary changes to address transaction issues and ensure proper agent conduct.
The broker holds regular office meetings to keep agents in the loop about important office news and policies, providing a dedicated time for weekly announcements, instruction and any questions or concerns agents may have on the issues reviewed.
In addition to meetings, the hands-on broker maintains open and readily available communication with all agents through an “open door policy.” The policy encourages agents to turn to their broker for guidance about their real estate activities or specific transactions.
Similarly, a hands-on broker acts as a full-time coach and mentor. By being accessible and proactive, hands-on brokers personally motivate their agents to excel and meet their achievement goals — the broker keeps their head in the game at all times and, in turn, agent performance improves.
The benefits of and drawbacks of hands-on management
Why is hands-on management valuable? Hands-on management is a useful way for brokers to undertake an active leadership role and more closely provide guidance to sales agents. It also serves as a reliable method for directly fulfilling the broker’s duty to provide proper supervision and management of all activities undertaken by their office. This management style keeps the broker on top of all office activities personally, which may make them better able to:
- assist their sales agents more readily and directly;
- identify issues needing evaluation in the office; and
- implement additional office policies that complement their business objectives.
However, hands-on management requires more time and dedication, which may prevent the broker from:
- servicing their own listings; and
- expanding operations by setting up another office location or developing other strategies to increase or sustain business — vital components of a successful brokerage.
To offset the broker’s lack of income from their own transactions, the broker typically negotiates a lower fee split for their agents who, in turn, receive more comprehensive office support — a reasonable trade-off. [See RPI Form 506]
The hands-off broker: managing from a distance
Unlike the hands-on approach, hands-off management provides little daily oversight and supervision from the broker. Here, sales agents focus on their individual business with more flexibility in how they handle their transactions and less guidance from the broker.
With hands-off management, the broker assigns all supervisory duties to office managers. In turn, the broker oversees the managers, rather than providing direct management over agents themselves. [See RPI Form 510]
Importantly, a hands-off broker is still required to fulfill their duty to supervise and ensure agent compliance with real estate law and agency duties owed to clients.
This they do by employing a suitably experienced and competent office manager. However, they do not dedicate much time to overseeing the daily operations of their office as brokers who opt for the hands-on management approach.
Simply, hands-off management enlists the aid of managers, TCs and other administrative staff to handle the daily oversight of soliciting clients and managing existing transactions. Meanwhile, the hands-off broker dedicates their time to generating new business and a larger client base. The broker’s plan for business growth may include:
- ensuring agents are using effective FARMing techniques;
- following up with leads that may produce more clients;
- developing a sales volume production goal to be discussed with agents (typically through a manager); and
- tracking market trends to anticipate future demands.
Thus, hands-off brokers typically provide less training and mentorship to sales agents, catering to the more experienced agent. When they do provide comprehensive agent training, the mentorship program is conducted by the broker’s office managers or designated employee, such as a hired coach.
The broker remains available to answer agent questions and advise them in their transactions, as is their duty. They also update agents on real estate law developments and reinforce office policies — typically through office managers — which are essential tasks for risk management. However, they may choose not to implement the same proactive office policies, such as requiring routine updates from sales agents or enforcing regular meetings to facilitate discussion.
Instead, the broker disseminates information to agents through office managers who deal with their agents one-on-one without concern for their own listings. Office managers then provide the broker with a summary of all necessary reports gathered from the agents to keep the broker updated on office transactions.
With this management style, the broker is primarily there to ensure success of the business and fulfill their role as the licensed broker responsible for the operation of the real estate office. The result usually is a minimum level of compliance with supervisory and management duties owed to clients, their agents and the CalBRE.
Hands-off pros and cons
Hands-off management is beneficial for brokers who prefer to undertake their own transactions and develop business plans for the brokerage office. They may find a hands-off approach less demanding of their time and talent as they are not providing direct management and supervision of the daily business operations for the agents and their administrative personnel.
The broker’s lack of direct involvement with daily operations allows them to focus on expanding the brokerage and plan for fostering future clients — a necessary task for ensuring continued success of the brokerage business.
However, the hands-off approach does not give the broker as much direct control and oversight over the activities in their office since contact with agents is filtered through office managers. This may cause the broker to be ill-informed on important issues arising in agent transactions, unless brought to their attention.
It also does not provide the close guidance and training which helps create a supportive relationship which bonds a broker and their sales agents. Thus, hands-off brokers typically give their sales agent a larger percentage fee split in the trade off.
Assistance through office staff
To assist in the daily operations of a brokerage office, brokers benefit from a more efficient use of their time by employing staff members to coordinate and police the work of their agents, such as listing coordinators, TCs, office managers and bookkeepers.
For hands-off brokers, licensed office managers are essential to their business plan. Office managers allow the broker to assign important supervisory duties to the manager. Managers provide the broker with a full-time supervisor for a wider reach to their sales agents, giving the broker more time for other activities. The availability of office managers offers sales agents multiple resources to turn to for guidance and advice, as well as a way for brokers to control operations and disseminate important information. [See RPI Form 510]
Even hands-on brokers may find office managers useful for overseeing specific and detailed aspects of management needed by the broker over sales agents.
Employing assistants, such as TCs, further helps the hands-on broker streamline tasks of reviewing transaction documentation so the broker can devote time daily to less mundane needs of their sales agents. Similarly, bookkeepers document accounting and financial matters to reduce risk and increase the broker’s efficiency. [See RPI Form 507]
All hired staff are an asset to a broker using any type of management style – hands-on or hands-off – as they assist the broker in meeting their supervisory duties while the broker focuses on plans and discussions concerning business development.