Bloated and Unprofitable

Bloated and Unprofitable

succesful_teamIn Warren Buffett Speaks, Buffett’s business partner, Charlie Munger, said:

“Name a business that has been ruined by downsizing. I can’t name one. Name a company that has been ruined by bloat. I can name dozens.”

Team size is important, so is team balance.

Competence balance

In a real estate business, the more sales you want to make each month, the more salespeople you need. This makes sense: you couldn’t expect one salesperson to make 20 sales every month, so if you want to average that number of sales monthly you will need somewhere between 5 and 6 salespeople. If you need many more for that level of sales, you risk being bloated and unprofitable.

Large teams with too high a balance of new and/or incompetent people can also see the wages bill climb with too few results to show for it. The competent/incompetent balance needs to be watched.

I realise that we don’t want incompetent people on our teams at all, but sometimes people are in performance slumps, or have personal problems that cause them to lose focus. This is an inevitability. You just can’t have too many people like this, and you must quickly turn around the performances of such people and get them back to acceptable levels, or you must remove them from the team.

Producer to support balance

Real estate agencies can also subtly shift their balance from producers to supporters.

As the sales or rentals team grows, you can appoint more support and administration people to assist the teams. But if too many producers on a team leave, you could see a balance shift, resulting in the agency becoming too admin-heavy – bloated with non-producers.

Hire and develop producers, or downsize your support team, or be bloated and unprofitable.

Leader’s role

As leaders, we not only must keep an eye on our team size, competence and balance to ensure there is no bloat, but we must remember that we can be part of the problem if we are not productive.

Leaders who do not list and sell add to the imbalance unless they produce income in other ways. A leader who hires productive people for the rental and sales departments, who weeds out the non-performers, who sets standards of excellence and ensures that all team members reach those standards, is extremely productive. In the absence of that contribution to the company, the leader is also excess baggage that adds to the bloat.

A paradox

There is a saying that says, “You cannot shrink your way to greatness…” I believe this and it may appear to contradict my comments on bloat leading to unprofitability, but this is not so.

Provided you keep an eye on the competence balance, and on the producer to support balance, and provided you as leader do your share, your company can grow, it can be profitable, and have no bloat.

It’s all in the balance.

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