Incentive Based Commission

Incentive based commission has been a component of real estate since the birth of the commission split between sales associates and brokerage firms. Some firms have innovated the incentive program with production incentives whereby the more an agent sells, the greater the percentage of the commission they retain. In some brokerage firms and franchise organizations, once you hit a top number, you "cap out" and get 100% of the commission.

These production-based incentives are effective at attracting and retaining top producing agents, but fall short in many other ways. A new model for brokerages to consider is an incentive program that encourages sales associates to adopt brokerage-provided solutions. Agents who choose not to use brokerage firms' provided solutions undermine the professional standards of the firm.

Going into 2015, brokerages may want to consider adding a points system to the production-based incentive program that is in place today. The thesis is that strategy would drive adoption of brokerage solutions that would increase the effectiveness of each sales associate and deliver a broker centric service experience to the consumer.

This thesis sounds like nirvana to brokerage owners. But I believe that a significant amount of thought needs to go into developing a good incentive solution. Firms need to go through a strategic process to arrive at a great solution. If a firm whips up an incentive program with little research, the risk is significant: agents will leave the firm.

Begin by defining the problem in solvable terms from the perspective of the brokerage, the sales associate, and the consumer. The broker perspective is pretty easy to define: agents don't use the tools we provide. The agent perspective will help you understand why. The consumer perspective will enlighten the outcomes.

Gain an understanding the sales associates' world. This involves research. We recommend quarterly surveys to gage satisfaction with the solutions the brokerage offers along with focus groups with each quartile of your sales force.

The next step of the process is to interrupt the pattern of agents who are not using the broker provided solutions by enrolling them in a test group. Measure the outcomes of the test group to benchmark improvements in effectiveness. Measure from the three key perspectives: the brokerage firm, the sales associate, and the consumer. You may find that agents are not using the brokerage provided tools because they are not that good. You may find that consumers are not delighted. You may have bad solutions. This is likely true of some of the services provided by the brokerage, but not true for all of them. Keep the ones that agents and consumers benefit from and cancel or replace the ones that are not working.

When you have attained a deep and quantified understanding about how broker provided solutions improve the effectiveness of the brokerage, the agent, and the consumer, you should connect the strategy of product adoption to the company's mission statement. For example, the National Association of Realtors® has adopted the higher purpose of "raising the bar."

Once you have researched the problem, measured the effectiveness, and adopted your higher purpose as your mission, empower agents to adopt the program. This is where the incentive based commission comes in.

Points toward more commission:

• Attend training
• Attend conference
• Write a business plan
• Follow the firm on social media
• Launch a marketing plan
• Use the firm's listing and buyer presentations
• Use the firm's provided website
• Use the firm's provided email address
• Use the firm's transaction management system
• Send satisfaction surveys to clients after a recent transaction

Gamification is a newer economic strategy that can augment the commission incentive program. Create leaderboards in offices that show the ranking of agents as they gain points. Celebrate agents when they get their first points on the board and provide monthly recognition for the highest points earners each month and the agents who improve the most each month.

Don't forget, celebration and recognition are the most empowering rewards for success – more than money.