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CompensationMaster Case Study, June 2005
"I was born into the real estate business," says Rob Hovious, vice president and
broker/owner of Coldwell Banker de Wetter Hovious. His father was a successful
real estate broker who started his own company when Hovious was just three years
old, so it was no surprise that he would grow up to join the family firm.
"Over the years I've done pretty much everything in the real estate
business—selling, putting up signs, cleaning houses—I even worked for about a
year in the bookkeeping end," explains Hovious. "I have a good head for numbers,
so I was the one in the family who was tagged with developing commission plans."
At one point, Hovious wanted to make a commission change. It took him about six
months working with his brother and father to calculate what the impact on the
business would be. Frustrated with the amount of time and effort the
calculations took, he began a search for software that would automate the
analysis.
Hovious tried several software programs, but none worked the way he hoped it
would. Then he met David Cocks, managing partner of CompensationMaster, at a
Coldwell Banker conference. It sounded like the software Cocks had developed
would fit the bill. Hovious purchased the Commission Planner and attended a
training session in Chicago.
"By that time I had enough experience with that kind of program to know how to
test it," says Hovious. "I just put in the previous year's expenses, agents, and
plans. I let the Commission Planner crunch the numbers and come up with the
answer. It was about $1000 off. Finally, I found a program that did what it was
supposed to do!"
"Most brokers define profit as the surprise at the end of the year," states
Hovious. "That's exactly what we had been doing too. So CompensationMaster's
approach—budgeting for profit—really appealed to me."
"Right at that time—it was serendipitous—my brother and I started negotiations
with another company to merge," explains Hovious. "We were number one in our
market; they were number three. Between us we controlled most of the relo
business in El Paso." It was a true merger; the owners dissolved both companies
and formed a new business.
During CompensationMaster's training, Cocks had suggested offering more than one
commission plan. He pointed out that the best way to be fair wasn't to treat
everyone the same, but rather to provide equal opportunity for everyone.
Hovious decided to introduce five plans for the newly formed company: three main
plans plus two plans designed specifically to target competitors.
"I used the graph in CompensationMaster to show which plans would be best for
each agent," says Hovious. "I created a chart for each agent showing what their
gross earnings were last year what their net was, and how much they would have
made on each plan."
Offering different plans has allowed Hovious to be very responsive to his
agents' needs. One plan without a monthly fee is targeted to new agents; another
is designed for agents who don't want to pay a franchise fee, even though the
company is a Coldwell Banker franchise.
"The beauty of having it all laid out is that you can think through the
processwhat kind of objection would an agent have. When you approach it like
that, finding the solution is easy. It's very much like selling real estate,
actually," says Hovious.
Hovious also uses CompensationMaster's software to analyze acquisition targets.
Having grown to dominate the El Paso market, the next step was to expand into
other areas. "We purchased three companies in Las Cruces and combined them,"
says Hovious. He designed three new plans for the combined company. Agents were
given the choice of moving to one of the three new plans or of staying on their
current plan (each of the three companies had its own plan). This helped Hovious
hold down attrition among the agents.
"CompensationMaster's software makes the acquisition process much easier,"
states Hovious. "It lets me analyze a company's situation and find out if I can
live with their plan. If we had not had the experience with CompensationMaster,
we probably would not have bought some of the companies we bought, and would not
have been able to retain the agents as we did."
"When we started working with CompensationMaster, we had about $3.5-4 million in
gross commission income. We're up to around $13 million now," says Hovious. "In
sales we did $251 million last year. Last year Real Trends said we were the
fastest growing company in the country. CompensationMaster has been a great tool
for us, it really has." Back
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