“Bake In” Margin When Hiring

standards

I get asked a lot about how to set standards/goals for various roles when hiring.  In my companies, we have a belief in “baking in the margin” when setting standards of performance for every role.  For me, this is the truest way to set standards based on evidence instead of emotion.  Let’s give an example from the real estate industry:

A real estate sales team is ready to hire their first Executive Assistant.  Big rocks for the role are:  Database Management, Transaction Coordination, and Listing Management.  Let’s say starting salary is $45,000.

In this example, I would suggest tying the standard to the first big rock because it produces income using our “bake in” methodology.  (By the way, all positions should produce income!)  Take an example from The Millionaire Real Estate Agent (www.kellerink.com) that shows top performing teams are investing 12% in Salaries to achieve a 40% profit margin.  Now to “bake in” your margin, you need to keep this new hire at 12% of total sales.

$45,000 / 12% = $375,000

This means the new Executive Assistant would need to add $375,000 in commission income for their $45,000 salary to be at 12% of income and for your current profit margin to stay intact.  WHAT?!?  An assistant responsible for sales?  How dare you!  No, I dare.  There are no maintenance positions in a growth organization.  Everyone adds to the top line either by sales or support.  Based on an average sales price of $250,000 and a (fictional just an example) 3% commission, that would mean the average commission of $7,500.  To achieve $375,000 in new income, this person would need to be responsible for generating 50 new transactions.  As all the math freaks rejoice in my logic :).  Could I really hold my new Executive Assistant accountable to generating 50 new transactions?  You betcha.

Lets take the first big rock of responsibility for this hire of Database Management.  We understand for every 12 people in the database touched at least 36 times a year cementing the relationship should yield 2 closings per year.  So 300 names in the database getting those super effective touches from your EA should yield 50 transactions right there.  Take how many you get now and add +50 to it.  Do you need more names in the database to do it?  Good, they can market you to get more names.  Do you have 1,000 names but aren’t coming close to doing that many transactions?  Great, that’s the #1 reason you hired this person.  Put it on their shoulders to create touches that are effective.  You have this person already doing touches and they don’t get those kinds of results?  Hold them accountable to owning it and creating more effective touches.  They are there to create touches, they are there to create effective touches that cause referrals.

You could even bleed over to the second rock of transaction management and put ownership on them to deliver such incredible service through the closing process that at least 30% of the closings give them a referral or two before closing – based on them asking for it obviously.

Now that you are armed with your “bake in” for standards that protects your margins… you can install the milestones in their first 90 days to make sure they are the right hire.  How many referrals should they have generated by day 30, 60, 90 to be on track for 50 closings added in year one?

The key to setting standards is about the “bake in” and that keeps margin built into every hire so you can scale quickly and evidentially evaluate performance in the role.

 

 

Published by sethcampbell2

Real Estate Broker

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