Industry
– Real Estate
Background
As standard in the real estate industry, employees have always been incentivised based on individual performance. This has created a competitive environment, which has slowed overall business growth.
Other factors & considerations
With a focus on performance and the changing economic environment, the owner wishes to maintain minimum individual performance targets.
The owner would like to keep their succession options open with long-term options, including selling to one or more employees or a larger corporate buyer.
Solution
– Profit Share Incentive
In consultation with the employee agents, the traditional commission-based incentive is updated. Employees halve their previous commission percentage to participate in the profit pool.
The terms of the profit pool include that after a minimum 10% net profit is achieved, 25% of business profits are paid into the profit pool. This is distributed to the participating employees based on a transparent formula including performance and term of employment.
By retaining an element of individual commission, individual performance continues to be rewarded. At the same time, by sharing in the overall profit, teammates’ success does not threaten individual remuneration, promoting collaborative listings and driving better outcomes for the business and its clients. By sharing in the overall business profit, team members are incentivized to cross-refer within the business (between the sales and rental teams) and benefit from upsells such as marketing packages.
Outcome
With a more collaborative approach the business sees continual growth in market share and better sale outcomes increasing commision sizes.
Employees are receiving 15% more cumulative annual income than under the previous remuneration structure.
The business profit increases see an increase in the overall value of the business.
A large corporate buyer makes an offer to purchase the company, with the strong team an evident element of the business success the buyer offers attractive retention packages to the employees upon the transition.