Bizarro Brokerages: Businesses can teach us something
Robert Knakal Nov. 20, 2014, 2:03 p.m.
Today let’s travel to a place made famous in a Seinfeld episode: Bizarro World. In Bizarro World, there are many countries and each has a commercial real estate market. The size of the markets in each country is different and different countries implement the brokerage business in different ways with different rules.
One of the largest markets in Bizarro World is in the nation of UpSide Down (US). The commercial real estate market in US is massive and, historically, there has been one brokerage company that has essentially had a monopoly on the market.
Old School Brokerage (OSB) has been around for generations and has significant control over the marketplace. Its owners spend tremendous amounts of money to support the services OSB provides. In fact, these owners spend considerably more per employee than any other brokerage firm in Bizarro World. But somehow the OSB’s performance ranks very low compared to the results attained by brokerages in other countries.
The performance of OSB has been so poor over the last several years that competitors have been circling and, one in particular, Modern Age Brokerage (MAB), while much smaller than OSB, has been consistently outperforming them. Old School Brokerage stakeholders are growing concerned and feel they have to look into the situation. They have retained Common Sense Consulting (CSC) to analyze OSB’s business practices and to provide a plan for producing better results.
Common Sense Consulting discovers several interesting things. First, OSB operates hundreds of offices and most of them are underperforming. Second, OSB brokers receive salaries. They are not commission based. Third, the good brokers and the bad brokers receive the same salaries. There is no ability for management to reward the top performers. Fourth, the brokers have gotten together and established a platform within which they cannot be fired even if they stink at what they do. Even misdemeanors or accusations of impropriety only send them to a “neither here nor there” room where they can sleep all day to still and collect their salary. These brokers have elected a representative to advocate for their position. If, for example, an OSB client complains about quality of service, brokers are insulated from ramification. Fifth, the CEO of the company gets to appoint top-management personnel and has been appointing people from some of OSB’s worst offices to fill top positions. Lastly, all of the owners, management and employees of OSB see that MAB is constantly achieving better results, but rather than adopting some of the strategies, OSB simply attacks MAB.
After seeing all of this, CSC concludes that it’s no wonder that OSB performance is poor. If you can’t get rid of poor employees, pay employees the same regardless of merit, have a strong lobbyist fighting for the status quo and won’t adopt practices that have proven to work better than your old ones, you are destined for failure.
Of course, I’m not talking about some company—this is what is happening in our public school system. I bring this up because of the importance of education in our city and to our nation. The income inequality gap will continue to grow as technology continues to eliminate unskilled jobs. People will need to be educated to get the jobs of tomorrow. The United States spends more per capita on education than any other country, yet our performance ranks 38th in the world. Good teachers do not get compensated accordingly, nor do poor ones. The advocate for the teachers is union boss, Michael Mulgrew. But the United Federation of Teachers is not about improving the school system—it is about making life better for teachers. Mr. Mulgrew is good at what he does. Tenure makes it nearly impossible to fire bad teachers and rubber rooms hold teachers who, if employed by the private sector, would have been fired.
Nearly half of NYC School Chancellor Carmen Farina’s recently appointed superintendents had overseen well below-average schools. Managers of failing offices are never promoted to senior positions in the private sector where accountability is unavoidable. Not so in city schools.
Charter schools (MAB) are consistently outperforming public schools, yet strategies that are working well are not considered by public schools. Who in the world wouldn’t adopt practices that prove to produce better results? The political power of the UFT has a lot to do with that, but what about the children? Isn’t it really about them? It should be. Too bad we live in Bizarro World.
Bob Knakal is the chairman of Massey Knakal Realty Services and has brokered the sale of nearly 1,600 properties having a market value of approximately $11.5 billion.