Myth #1: PMs are dispensable
30 January 2019
In our last blog post Ben White kicked off our of myth-busting series by highlighting how old thinking is holding the industry back.
He addressed the biggest myth of all — that Property Management is a simple business. This week’s blog addresses Myth #1: PMs are dispensable.
Few people would disagree being a property manager is a thankless job. Whether it’s with landlords or tenants, PMs are on the front-line day in and day out. Add to that average pay, long hours, traditionally limited career progression and weekend work, and it’s not surprising there is a high turnover of staff in the industry.
Most business owners look at staff costs as something to minimise. The lower the staff costs the better. This leads to many avoidable mistakes and robs businesses of their momentum. Of course, keeping costs down is key to any successful business, but you need to see all of the moving pieces and have all of the data if you are going to make good decisions.
“Our investor research reveals that 84% of investors believe that the property manager is more important than the systems used in the company.”
— Ben White, Ailo Co-Founder
The core reality of property management is that we are a services business, and that virtually every source of value for our clients is created by the property manager at the point of interaction. A property management company does not create value just by following a process when a repair is needed; rather value is created when the property manager talks to the investor, explains what is happening, goes through the options and keeps the client informed, and exercises his or her judgement to get the best outcome. In short, the value comes from the interaction, not the process.
And so when you think about the team and the people in it, you have to consider much more than minimising costs. You need to think about how to attract and retain the best people to create the most value for your clients. This is the key to client retention, fee levels and new business growth. The core myth to dispel is that all property managers are the same and can be swapped and changed without cost.
At Ailo, we’ve spent years analysing the data we’ve captured from almost one million tenancies and have some “truths” on the consequences of a PM leaving your team.
- Our investor research reveals that 84% of investors believe that the property manager is more important than the systems used in the company.
- Losing a PM is the single biggest driver of lost business. In our Ailo Protect algorithm, a change in property manager drives a big increase in risk for investors in that portfolio, increasing the chance of leaving in the next 90 days by over 20 percentage points.
- When we look at specific case studies, if a business changes out a property manager without proper planning, it can often lead to a loss of over 30 clients.
- When a client goes through two changes in property managers over the course of a year the risk rating increases over three fold.
We know that the key to business growth is client retention, and the key to client retention is a good team. If you think all property managers are the same and you just need to get the cheapest ones you can find and get the most from them while they are with you, then your business will never achieve its potential. You will just end up in a recruit-by-crisis cycle and your client retention rate will drop dramatically. Profit and growth will drop accordingly.
So, what can be done to keep your PMs on board and engaged? First, it’s helpful to know the main reasons why PMs leave. Research shows that despite the conditions, for many, it’s not the job itself. Often, it’s related to the office culture, not the external day-to-day pressures.
Here are the top four reasons we’ve found for why PMs leave:
- Lack of career progression
- Lack of support
- Little or no recognition
Knowing the above, it’s easier to take steps to ensure you not only keep your PMs on your team but also help and support them in their careers. Why is this important? Happy staff means happy customers and happy customers means loyal customers who are going to drive growth and profit.
Working closely with your PM on their career progression is the first step to identifying the aspirations your PM has, and how you can support them. In many cases, depending on the team structure, that may mean rethinking the way the team is set up entirely. Whether you have one, or a team of PMs, it’s important there is room for career growth.
Career growth is the common bond that unites the ambition for each team member and the ambitions of the business owner. Scheduling regular catch-ups ensures you are both on the same page.
Many PMs feel they don’t get support from their manager/principal. This could be a lack of support in terms of resources, it could mean a lack of support via technology and systems, it could be a lack of emotional/mental support, or even a combination of all three. Whatever the scenario, there are a few ways you can increase your level of support to help your PMs feel less overwhelmed, especially in the busy periods.
Technology is obviously a key part of support. There are a lot of different ways you can use technology to lighten the property manager’s workload. There are a number of different ways to help property managers stay connected when out of the office and automate some of the processes. We at Ailo naturally believe there are ways that we can help property managers prioritise their work so that they can be most effective with the limited time they have, and that thinking has been the basis of the development of the Ailo platform.
While remuneration is something that comes up, it is a tricky one as the average salary of a PM is not on the high end. However, there are ways managers can help bolster a salary package by using incentives, a bonus system and offering staff value add. Recognising good work can be done by offering well-performing staff things like vouchers or tickets to events etc. They are a cost-effective way to make staff feel appreciated.
A lot of these ideas are set out in our book “Building Blocks: Building professional careers in property management” published by our sister company LPMA.
Your PMs are in many ways the business' most valuable asset to your team. In an industry where customer service is key to long term business success, the value of having team members who are engaged, growing and appreciated cannot be understated.