Human resources are key to multifamily success Recruiting and retaining outstanding employee talent is a challenge facing apartment managers, owners and developers. Rapid employee and asset growth has meant that corporate human resource issues must be addressed by apartment firms to a larger extent than before. With turnover costs averaging between $10,000 and $30,000 per employee, the bottom-line implications of not meeting the challenge are substantial.
Experienced mutifamily employers understand that prospective and current employees are choosing between an apartment firm and other consumer-focused real estate employers as often as they are choosing between multifamily companies. This is true for entry-level, middle management and senior-level employees. Consider the entry-level employee who compares a multifamily firm's training programs with the world-class training offered by hotel and entertainment companies like Marriott and Disney. Similarly, acquisitions and development professionals evaluate multifamily jobs in the context of the broader real estate and finance industry. And it is not uncommon for senior human resources, information technology and legal and marketing professionals to come into the apartment industry with much experience outside the real estate business.
So what makes an employee choose multifamily as a career? Industry surveys and apartment professionals cite training and education, career path development and compensation as the leading reasons for choosing one position over another. With that in mind, multifamily firms should evaluate the effectiveness of their recruitment and retention efforts from the perspective of their customers, i.e., target hires.
Training and education So how do we apply this advice at the company level? First, when evaluating their in-house university-style training and education programs, apartment companies should look to successful models of firms such as Nordstrom and Disney, instead of focusing only on what their competitors and trade associations offer. The external models highlight the importance of offering high quality training and career development for every employee, regardless of title or experience. They also point to the need to be able to measure the impact of training to ensure that it is producing improvements in employee performance.
Some of the multifamily industry leaders already have taken on this challenge. More than a dozen of the leading firms and the National Apartment Association have established an undergraduate Residential Property Management (RPM) degree at Virginia Tech University that is similar to the university-based hotel training programs around the country. The RPM program's curriculum, visiting lecturer series, industry internship and alumni commitment are superb models for the industry and should be replicated in multifamily markets throughout the country.
Technological advances in the delivery of educational content will ease the delivery of site-based training and will make it a critical management tool and employee benefit for the next generation of employees. As management guru Peter Drucker noted in last August's Forbes ASAP, "It is becoming clearer every day that these technical changes will - indeed, must - lead to redefining what is meant by education. One probable consequence: the center of gravity in higher education (i.e., post secondary teaching and learning) may shift to the continuing professional education of adults during their entire working lives."
Today, companies can use e-mail and Intranets to inexpensively deliver training materials, updates of internal policies and procedures, testing materials and companywide performance recognition to their employees. Computer-mounted cameras combined with faster remote-site computers permit real time video and phone communication. And satellite uplink options with call-in or email questions allow two-way communication between a trainer/teacher and personnel at sites across the country. Wharton Business School and Sylvan Learning Systems are among the institutions that have jumped on the distance-learning bandwagon. They have joined forces to offer a business school distance learning program for busy executives called WhartonDirect. Can a company-specific application for multifamily training be far behind?
Career building & recognition Multifamily employers must also respond to employees' diminished company loyalty and their increased ability to market themselves as free agents. Employees have indicated that they want a clear path for advancement, meaningful work, recognition for a job well done and open lines of communication with management. While most of these employee requirements are not new, the solutions being provided by human resource managers are.
Today's best managers participate in interactive career development planning and feedback processes with their employees. The format is simple: The companywide vision is translated into division goals and division personnel are deployed and redeployed in ways that meet these goals. Employees receive regular feedback on their strengths and areas needing further development. Managers include career path information in the overall discussion and work cooperatively with employees to gauge their progress. Managers also review work responsibilities to ensure they align with employee skills and preferences. This process enables employees to evaluate their skills in the context of employer needs and satisfies their own needs to perform work that is meaningful to them.
Personal recognition by senior management also is becoming an increasingly important part of retaining employees. The best managers will reach within the organization to highlight exceptional performance and share those success stories. Recognition programs serve both as a companywide motivation tool and as a way to identify the company's best performers for future opportunities.
Compensation While many employees indicate that compensation is not a primary consideration in selecting a career opportunity, it is clearly a critical component of any employee recruitment and retentionprogram. The multifamily industry has found many innovative ways to align employees' and the firms' interests through their salary and benefit packages.
The obvious example is the use of stock-option compensation for senior and mid-level executives working for REITs (even though the volatile market for these stocks in 1998 has caused many multifamily companies to re-think this benefit). Beyond the stock-option method, both public and private firms are increasingly basing compensation for site and regional managers on overall property performance and not only on rental income growth. That is, employees often share in property wide cost savings as well as the ancillary income they help generate. Bonus programs for mid-level managers are also evolving and are now often based on companywide performance instead of in-region performance. This structure encourages team-oriented outlooks and behavior such as resource and employee sharing across corporate divisions.
Further improvements to employee benefits and better promotion of existing benefits offer companies a way to distinguish themselves. Turnover can often be reduced by low-cost options such as flexible work/life arrangements, wellness day programs offering free blood pressure readings and back and neck massages, days off for exceptional job attendance records and corporate conscience days off that give employees the opportunity to work for the charity of their choice.
Innovations aside, maintaining a competitive compensation package is also important. In firms where compensation lags, personnel turnover increases. According to the Real Estate Compensation Survey by CEL & Associates, the median 1997 salary for the director of property management was $101,600 plus an average bonus of 36.1% of base. Asset management executives received a $113,500 annual base plus an average bonus of 43.6%. Leasing executives (not including leasing reps) received similar compensation with higher bonuses. A median base salary in 1997 was $100,000 with an average bonus of 72.5%.
Looking Ahead Training and education, career path development and recognition and compensation are three key steps in reducing turnover and attracting talent to multifamily companies. While this article addresses key concerns, each of these three key areas has a number of company-specific aspects that remain to be explored. How can in-house, private, academic and trade association training best respond to the increasing multitasking that is expected of industry employees? How is technology best integrated into the training program and what is the proper balance of "live teaching" with printed and computer-delivered training information? For a company operating in multiple states, what are the relevant sources and competitors for available employee talent? How can the industry work collectively to increase the number and sophistication level of college graduates intent on a career (not merely a job) in multifamily development, ownership, finance and management?
There also will be new human resource challenges unique to the industry's emerging highly computerized, decentralized, ancillary-income seeking environment. For example, how is the company brand best conveyed from policy manual through the employee to the customer/resident? How can management best ensure that increasingly mobile employees receive quality career feedback and feel they are part of the team?
Multifamily companies that successfully answer these questions will be prepared to reduce turnover costs and attract better real estate professionals from the broader arena of consumer-focused real estate. Orienting by the star of Nordstrom, Disney and Marriott, multifamily companies can position their human resource management to compete successfully in the next wave of real estate consolidation.
The National Multi Housing Council will be there to help them. Beginning with its Annual Meeting, January 13-15, in Rancho Mirage, Calif., NMHC is creating the agenda for multifamily human resource management in the 21st century. Strategic information about management models that work, reviews of information technologies that can advance human resource management, human resource meeting programming involving leading real estate and customer service professionals and support for education and recruitment programs that benefit the industry are but a few of the ways NMHC will deliver strategic information for multifamily decision making in 1999 and beyond.