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With Wendy Alexander

A particular mindset is needed for a business to succeed across generations. Leaders have to understand what makes their operation unique and hang onto it but they also must look to the future and constantly innovate to ensure that they have continuous market power. The New Zealand real estate company, Barfoot & Thompson is one such company.

Barfoot & Thompson is New Zealand’s largest privately owned real estate company and is still run by the Barfoot and Thompson families after more than 90 years. Based in Auckland, there are 67 branches and 2200 staff including 1400 sales staff. They hold around 40 per cent of the Auckland residential market but they are also strong in both commercial and rural markets as well.

The company recently received the honour of being named the Best Real Estate Agency in New Zealand at the Asia Pacific Property Awards and in May the company was also named the New Zealand agency of the year at the New Zealand Real Estate Institute Awards.

To have continuous market power over 90 years is an amazing achievement. Barfoot and Thompson have managed to stay on top because they understand that the industry is about people, are prepared to adopt a business model that rewards the many rather than the few and they also keep a ready eye towards the future. Lazy doesn’t cut it at Barfoot and Thompson.

The power of people

The dynamic and incredibly busy CEO of Barfoot and Thompson, Wendy Alexander says, “Don’t forget that 90 per cent to 95 per cent of the average person’s equity is still tied up in their real estate. It might be about property, but that’s just the product, that’s what’s in your hand.” Wendy believes that real estate, “is actually about people. In any branch, in any environment, in our business today or any day, there is somebody, whether it’s a client, a customer or a staff member, who is struggling with health, who is struggling with financial pressure, with relationship pressure. And they are absolutely normal as far as a day-to-day environment is concerned. That’s what we’re dealing with; it’s about people, and the moment we forget that, we’re going to struggle.”

She continues, “When I know I haven’t been in and out of the branches for quite some period of time, there is a very real risk I have lost touch with who our business is; and that’s the people out there doing the listing and the selling. I have a commitment to vary my style of communication, because for some people something works, and for others it doesn’t. Some people respond to texts, and there are times when text is appropriate. Some people respond to email, because they like a little bit more detail, and they like confirmation in writing, and that is appropriate sometimes. I also know that the personal cards of just saying, ‘Well done. Thank you. I’m thinking of you. Sorry to hear about that’, etcetera may be old fashioned, but it still works. But the day you realise that you have not done face-to-face or voice-to-voice with key people in your team for quite some period of time, that’s when you need to look over your shoulder.”

Wendy has learned that the company’s success is built on the shoulders of a strong team. She says, “Critically, at the level at which I’m operating, you must be surrounded by good people. I don’t want to know about HR, I do not front training any longer. I need to know that my Compliance Manager is going to steer us through the minefield of getting it right. And all of those people need to be the best that they can be, and each one of them needs to be reinforced.”

Wendy has been in the industry for 35 years. She says, “It’s pretty much what I do. I’ve never been strong in either listing or selling; I like running the business. I love people and I’m just truly blessed to have found an industry that I love and I am privileged to work for a company that I both admire and respect.”

Unique partnership model

Barfoot and Thompson have one of the most original business models in the world. The stakes are high and hard work and collaboration are rewarded. Wendy explains, “The model is unique in the industry. I travel extensively across Australasia, and I haven’t seen it replicated. Both our managers and our salespeople are all independent contractors. Our managers are remunerated on the basis of profit share. If they do a good job, they get a significant percentage of the profit. If they don’t do a good job, they pay back the same percentage of the loss. Our remuneration structure attracts strong enquiry within the industry and we tend to have with any opening that comes up in our branches an excess of 20 applicants.”

She continues, “Without intending to, we allowed this business model to evolve. And it was only when it became a reality that we took check and thought, ‘Whoa, we’ve actually got salespeople with up to six or seven associates supporting them in their business’. All of the money drops into the pot that is owned by the predominant salesperson, so that takes them far more quickly to our bonus levels, which is why the model appeals to them. It is an unusual structure, but for us it works, and our market dominance is evidence of that.”

Simple free structure

Barfoot and Thompson have the most simple of fee structures that would make agents across Australia weep. Wendy admits to being perplexed by the state based models in Australia. She says, “I seem to see tremendous variation in Australia, and the thing that absolutely confuses me is that it is different per state; I just don’t get that. I choose not to get involved in how you operate over there, because our model works.”

With Barfoot and Thompson, Wendy explains, “The fee being charged on that property is the same as on all of our properties; there is no variation. We are privately owned, there’s no franchise, so there’s no franchise fee. There’s no auctioneer’s fee, there’re no supplementaries. To run the business we take $500 off the top of the commission, and then we charge 3.95 per cent on the first $300,000, and two per cent on the balance, and that is across all transactions at all levels.”

Wendy says, “Last financial year we sold almost 14,000 properties. Actually, I like being accurate: 13,693 properties. Of those, 8997 were auctions, and that represents $9.759 billion worth of property. Along the way we got $25.4 million worth of vendor investment and our average sale price was $666,000. So you can challenge our model, but I would look you in the eye and say, ‘It works’. I’ve been in the industry 35 years, 18 of those are with Barfoot and Thompson; it works!”

Wendy continues, “So anyone earning up to $75,000 in gross commission earns 50 per cent of the commission. Remember we’ve got the splits depending on whether it’s an auction, tender, etcetera. Between $75,000 and $105,000 gross commission, it’s 60 per cent. 70 per cent from $105,000 to $125,000. And beyond $125,000, it is 80 per cent of the commission. And as at the end of the last financial year, 662 of our people were on 80 per cent. Now that’s out of 1400. It is highly achievable, and they all aspire to that.”

Listings are owned by the company

Another unique aspect of Barfoot and Thompson is that agents can list and sell anywhere. Wendy explains, “So if it is my listing, it is highly likely that someone else in the Barfoot and Thompson sales team of up to 1400 will sell it for me. Our cultural diversity is also a very unique aspect of our business. Our 1400 salespeople were born in one of 52 countries; they speak one or more of 67/68 languages or dialects. It’s highly likely that my listing, which is owned by the company not by me, will be advertised by someone else in our sales team, in another language at the same time in another publication. And I may list it, but highly likely, somebody else is going to sell it. So our splits are of interest to our teams. We predominantly recognise as the lister, those who list an auction or a tender. If they then get the contribution, they also get more, and then the seller gets less. So for example, with an auction you would get 60 per cent of the commission. And the seller, which may be one and the same person – lister and seller, gets 40 per cent. I may not be the person who sells your property, but I intend to be the reason that it does sell.”

One of the strengths of the business, the cultural diversity of the community, also presents challenges but the company is commited to its staff and understands the value of participation. Wendy says, “We constantly revise and consider our bonus structure, because we try to be fair and market savvy. We have a system where per annum, we go out to every member of our team, all 2200 of them, regardless of whether they’re rentals, frontline management, sales, whatever – and we ask them what they would like the company to consider at our Annual General Meeting. I’ve never seen this before. Anybody can put a remit in; it’s debated across the branches before they come to the AGM. The Manager speaks on behalf of that branch, and we take a vote and move changes with regard to how the company will continue to operate. Our three Directors are the ultimate decision makers, but they listen closely to the feedback from the field and from the floor.”

An eye to the future

Wendy believes that she is blessed, “to have landed in an industry that I love. Real estate absolutely suits my personality! And because I’m trusted and empowered, I can work as hard as I like, and I can make a difference. That’s what lights my button, and what I love to do. I think these sharp minds coming into the industry are exciting. I think some of the best marriages I’m seeing of competence and capability are a wise head coupling up with the sharp, young brain that’s coming in who loves to do it a different way. And we see that both across the age groups, but also across the cultures, and it is so exciting to watch them get that right. They can’t be everything. So just, ‘Where’s my weakness and who do I find to prop that up?’.”

Successful business operators have to look into their crystal balls to try and anticipate what is coming in order to remain relevant to a changing market. In the future, Wendy believes that the company will continue to grow. She says, “Auckland is perceived to be the destination for a significant percentage of the people who will settle in New Zealand over the next 30 years. Our unitary plan supports that, and when I’m looking at the growth both outwards and upwards within our city, I know that we need to change our business model. Because of that, we have just incorporated at this time a body corporate structure, because we want to be involved. We work with developers through a special project, so we want to be involved in the development. We want to be involved in the management of those properties, whether it is through body corporate or through property management; we’ve got 12,000 managements. And then we want to sell it. So each component in that quadrant of four speak to each other, but they are independent and financially they stand alone. That appeals to me, and I think it not only creates diversity for Barfoot and Thompson, it creates an environment where we will survive any market. Barfoot and Thompson is going to have to accommodate that we opened four new branches last year. I’m very confident that there will be further opened in the foreseeable future. And we will continue to evolve and reshape to adapt to our market environment.”

All of the companies that have survived across generations have known what makes them unique and also what they have to do to keep one step ahead of the market. In a recent article in, ‘The Economist’, an analyst explained that Apple will survive, not because of the new iPhone or Apple Watch but because of its burgeoning ecosystem of software, services, data and partners — its 800m active users on iTunes that generated revenues of more than $16bn in 2013.

On a smaller scale, Barfoot and Thompson have adopted a similar approach. They know what their strengths are and what they need to do to future proof their business. No doubt some of those new arrivals to Auckland in the next year will be readers of this magazine, looking to make their fortune with Barfoot and Thompson in the land of the long white cloud.

 

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