Property management has become a more complex operation in the last decade. New technologies, new resident profiles and new regulations all have created new demands on managers. While the job demands have increased, the supply of people qualified to fill property management positions has decreased.
Add a booming economy and you have all the ingredients for a labor shortage. Throw into the mix a growing appreciation by investors and managers of the importance of human capital in determining the value of a firm, particularly a publicly traded firm, and human resources (HR) quickly becomes one of the industry's most important issues.
To effectively build human capital, though, the firm needs a toolbox of resources. And until now, one of the most highly sought, but unavailable, resources has been a market-by-market compensation and benefits survey of property management positions. Thanks to the Washington, D.C.-based National Multi Housing Council (NMHC), just such a benchmarking tool is now available in the "2000 National Apartment Management Survey of Compensation and Benefits Practices." At its September Human Resources Forum, NMHC released the first-ever survey of compensation data for 18 different job titles in 85 geographic markets.
The market-by-market focus of the survey and the involvement of the industry's leading apartment companies make it a truly unique product. NMHC and the senior HR professionals from 17 of the leading apartment firms worked closely with Watson Wyatt Data Services, one of the premier compensation and benefits information organizations, to complete this project.
The 200-page survey provides industry members with a clear picture of market variances in compensation levels and allows them to assess the competitiveness of their wage and benefit packages in each part of their portfolio. The ability to determine whether a firm's wage and benefit offers are a factor in its employee turnover is a critical advantage.
Survey says... So what does the survey tell us? First, it found significant geographical variation in compensation. For example, the median compensation level for regional property managers ranged from $68,800 in the Southeast to $85,000 on the West Coast. But market variances for the same position were even more pronounced, varying from $55,400 in Jacksonville to $103,900 in Seattle. Interestingly, firms reported paying as much for leasing consultants in Providence, R.I., as in Los Angeles ($25,600 average total compensation).
In terms of future wage growth, the survey forecasts a slowdown in merit-based compensation increases for all property management professionals. At the executive level, average compensation increases are expected to drop from 7% in 1999 to 5.5% this year and 5.1% in 2001. Increases for exempt-level employees (excluding executives) will similarly fall from 5.4% in 1999 to 4.7% in 2000 and 4.6% in 2001, and non-exempt employees can expect to see their average pay raise drop from 4.8% in 1999 to 4.6% in 2000 and 4.5% in 2001.
Benefit packages also showed significant differences within the industry. At least 15% of participating companies offered no incentive or bonus plan for any of the 18 apartment management job titles surveyed. Some 30% of employers offered no tuition assistance to their employees, and 31% offered no bonus for employees who refer qualified candidates to open positions. Wide differences in leasing agent commissions; medical, dental, and life insurance benefits; and 401(k) and profit-sharing plans also were found.
In the area of turnover, the NMHC survey found that apartment firms suffer from higher turnover rates than other similarly sized companies in different industries. Whereas the Society for Human Resources finds voluntary turnover rates averaging 17% and going as high as 21% for firms with more than 1,000 employees, NMHC's survey found a median voluntary turnover rate of 36% in the apartment industry. The rate for larger management companies and third-party management companies often was higher.
Using the survey results strategically Much of the discussion at the recent NMHC Human Resources Forum centered on how apartment firms can best put this new information to work. The following strategies are taken from Forum participants and best practices in other industries.
- Know where to set your compensation levels
Just as a firm must determine what renter demographic to target with a given property, it also must know where it wants to position itself in the employee recruitment market. Smart firms know that the median salary level may not be the best for them. Instead they must look at a variety of factors to determine where their salaries should be set.
- Tailor your benefits package to workers' needs
Smart firms are reviewing their benefits packages to ensure that they meet the needs of the specific employees whom they are trying to recruit. Traditionally, women and older employees have been well represented in the apartment industry. As NMHC first pointed out in a September 1999 research memo, women and older employees are also expected to be two of the fastest-growing employee subgroups in the next decade. That means that other industries are changing their recruiting strategies to attract these subgroups.
Smart apartment firms are deploying new benefits such as onsite child care, employee assistance hotlines, schedule flexibility and tuition assistance to attract and retain single mothers. Others are reviewing their current menu of retirement health benefits and part-time work opportunities to motivate experienced, older employees to apply and stay with the company.
- Modify job responsibilities to minimize risk
Smart firms are defining job duties and simplifying job procedures to better manage the risk of employee loss. Shifting undesirable tasks away from employees who are difficult to replace; outsourcing maintenance or administrative functions in markets with especially high turnover; and providing guidance that new employees can follow with minimal training all can reduce the impact of losing a key employee at a critical time.
- Develop individual-specific training plans
One-size-fits-all training no longer keeps employees motivated and loyal. Smart firms are providing more employee-specific training that responds to employees' stated preferences. These training plans often integrate distance learning (to save costs and expand opportunity) with industry-wide learning forums to give employees the opportunity for inter-company networking.
- Keep a balanced focus on HR issues
Smart firms are balancing their attention to executive compensation plans with the need to think strategically about portfolio-wide HR turnover. They also are investing in the tools to improve company-wide HR practices. As Bill Ferguson of Chicago-based FPL & Associates told NMHC members, public and privately held apartment companies alike now are using increasingly sophisticated techniques to reward outstanding performance and encourage key executives to stay long-term.
Smart management, however, is also keeping in perspective the smaller, bottom-line costs of executive turnover compared with the much larger ongoing costs of turnover company-wide. Industry leaders are investing in tools that reduce turnover and increase productivity, such as company-wide training and recognition, HR information systems and screening tools to improve hiring decisions.
Can we talk? The participants in NMHC's HR forums are seeing true benefits. The sophistication of the communication has grown tremendously. These discussions are making a bottom-line impact on real estate operations. Companies that skip the discussion run the risk of continuing to operate with high, and expensive, turnover rates.
To order the survey, visit www.nmhc.org.
- Median salary for regional property managers ranged from $68,800 in the Southeast to $85,000 on the West Coast.
- The average compensation increase for an apartment management executive is expected to drop from 7% in 1999 to 5.5% in 2000 and 5.1% in 2001.
- Approximately 30% of the companies surveyed offered no tuition assistance to their employees, and 31% offered no bonus for employees who refer qualified candidates to open positions.
- The survey found a median voluntary turnover rate of 36% in the apartment industry.
- The survey also discovered significant differences in leasing-agent commissions; medical, dental and life insurance benefits; and 401(k) and profit-sharing plans.