Minnesota Housing Real Estate Corp (MRESC) was founded with the mission to provide outsourced
business services and solutions to independent real estate companies. They provide large and small real
estate companies with support systems and non-core real estate business services and requirements.
Examples of the services provided include:
Advertising and promotions materials
Graphic designers to create and custom print literature and promotions materials
Software designed to manage real estate offices and back-room operations
Multiple listing services
Printing of multiple listing books
Websites and software for multiple listings
Custom signage (For Sale signs) on properties
Installing and un-installing For Sale signage on properties
Photographing properties and creating sales brochures
Measuring properties to confirm room sizes
Creation of canvas banners to announce a property sales
Property condition audits
Contract and emergency repair services and contract maintenance (property management)
MRESC has over 200 employees, has been profitable over the past 20 years and has maintained a
reputation for providing adequate services needed by the real estate industry. (they have been the only
“game in town” providing many of these services). They have maintained long-term (three to five year)
contracts with large and small real estate companies, and they have continued to grow throughout their
history. Most of their business has been within the state of Minnesota but some requests for their
services have begun to emerge from neighboring states.
Minnesota Real Estate Service Corporation
Actual and Projected Head Counts
In addition to head count growth, their revenues and profits have also kept pace with the economy and
inflation. Their top-line growth and profits have remained consistent with actual head count, and
revenues and profits per employee. Only in significant economic down-turns have their sales and profits
Revenues per year in $ millions.
* = estimates based on business plan
$27.00 $25.50 $27.8* $28.0* $29.9*
$35.9* $37.5* $40.0*
In similar fashion, the organization’s profits generally kept pace with revenues and employee head
Profits per millions. (EBITDA)
*=estimates based on business plan.
$4.10* $5.75* $6.44*
$7.45* $8.00* $.8.33*
Based on the growth of the company during 2005, 2006 and 2007, MRESC leaders began to realize their
current leased office facility would soon be out-grown. And, consistent with the business plan and
projected growth, leaders planned to vacate their suburban Maplewood, Minnesota facility in 2007
when their lease expired. They began to make plans and did assume a ten year lease on a property in
the downtown area of St. Paul. The structurally sound brick building in the center of the city was vacant,
was on the record of historic old buildings, and provided a chance to design creative office spaces within
a rustic and historic, city-center location. Leaders believed the new high tech offices would motivate
employees and knew they would be enthralled with the idea of being located in a more active and
energy driven part of the Twin Cities. They were looking forward to making a surprise announcement on
the new office space when they announced their annual 2.5 percent salary increases. Opportunities for
varied luncheon spots would become within walking distance of the new office as would shopping,
parks, and entertainment. Leaders’ strategy was to offset the modest salary increases with the
excitement of new office spaces and a chance to be in a down-town area.
The new landlord was willing to invest approximately half the cost associated with remodeling the
interior of the historic facility to meet the new office needs. The landlord’s decision was based on a ten
year lease at annually escalating rent payments tied to the consumer price index. MRESC’s leaders and
planners were very much in tune with the real estate growth and felt confident in remaining the primary
provider of services to the real estate industry, and growing at a level where the indexing rent payments
should be achievable.
Where MRESC’s leaders had focused significant efforts in forecasting the real estate market, home
construction, construction loans and projected growth trends in all types of real property, they spent
less time forecasting the availability of manpower to fill the jobs that would fuel their projected growth.
MRESC had operated for several years, and until 2001, with the finance department, (Finance Director),
providing internal HR services to the organization. For example, when recruiting had been necessary, the
“project” was outsourced to a professional recruiting organization that had always been able to locate
sufficiently qualified candidates to meet their immediate needs. As MRESC’s leaders considered how
they wished and needed to grow to serve their customers, their focus was on fiscal space and not on
employee requirements,… they had always been comfortable in acquiring their employees through
consultants and the local labor market.
In late 2007, as the newly remodeled down-town St. Paul offices were being completed, there was a
search underway for a new director of marketing. As the search seemingly stalled, their contract
recruiter was, for the first time, failing to provide a cadre of candidates with the necessary education
and industry-related experience to fill the opening. MRESC’s president Judy Madrus called the
recruiters into their offices for a meeting. Her intent was to provide Pat Paulson a heavy handed critique
concerning his failure to deliver candidates per their contract. As the meeting progressed Pat, the
project recruiter from the prestigious search firm of Heidrichs and Struggles delivered some strong
words of his own to Judy Madrus and her Finance/HR Director Jack Pratt. Paulson provided statistics on
the local and national job market, along with high school and college graduations statistics for
Minnesota. Pat indicated the Minnesota statistics mirrored the nation’s statistics. He went on to say that
the changes in national demographic data were rapidly changing the availability of young and talented
employee candidates. Pat further suggested MRESC take a look at their employee demographics. He
asked Jack, the Finance/HR Director, to share data from their organization concerning age profiles and
the talent management system. Paulson also asked to see MRESC’s succession plan for the organization.
Jack had to admit that his focus in the company was much more on finance than HR and he had no such
data nor a succession plan for the organization. Jack went on to say they expected H&S to provide new
employees when they were needed. He hastened to add, that’s why we pay you the big bucks to help us
hire people from the outside. The meeting ended on a less than perfect note but with Pat offering to put
more energy into the search for the marketing director, and Judy and Jack had reluctantly agreed to the
assignment of providing information on their internal age demographics and turnover statistics.
One week later Judy, Jack, and Pat from H&S, met again to review data that had been collected. A snap
shot of the organization age demographics along with local and national “supply” data were shared. Jack
admitted that he was shocked to learn that MRESC was experiencing an average turnover rate of 15
percent per year where by more than half of the employee losses (nearly 10 percent) were voluntary.
How could they be losing 10 percent of their employee base each year because people did not wish to
remain with MRESC….and another five percent due to retirements or involuntary terminations? Pat
suggested their voluntary and retirement losses were probably not even close to what might be
encountered in the future given the current age profile (demographics) of their employees’ ages.
As Pat was helping Judy and Jack analyze the Minnesota, national and company data and charts from a
MRESC perspective they were surprised by some additional data delivered to them in the middle of their
meeting by the company receptionist. She knew the topic of their conversation and thought the letters
just delivered to her desk might impact on their conversation and decisions. She had nine letters in hand
from company employees. All letters were from frustrated employees that had been talking about
confirmed rumors the company was moving to new facilities in down-town St. Paul. The nine
employees, all in the 30 to 39 year old age groups, had just submitted letters of resignation out of
frustration and anger because they had not been given opportunity to “weigh-in” on the proposed office
move. In their words the leadership had planned to drop this “bomb” on employees and had not
considered that it impacted the hours, wages and working conditions of employees. This was just typical
of management and they had included words of this sort into their letters of resignation. (MRESC was
not a unionized organization.) They were particularly upset when the move to the St. Paul location was a
much greater distance from their home and would now require all employees to pay for parking. The
new St. Paul office location would require a monthly parking fee from $120 to $175 depending on the
distance from the office and whether the parking was covered or outside. The frustrated, and now
“resigned” employees viewed their leaders’ actions as unthinkable if not insensitive. Leaders were
proposing an annual wage increase that was less than the cost of living increase for the year and then
there would be added parking costs. With the current labor market however they felt it possible to
secure an equal or better job opportunity within a week. They understood the high demand for new,
young, educated and experienced employees. Most of the resigning employees were from the IT
department and had been designing software and websites for the company’s customers. They knew
their skills were in high demand within the Twin Cities area and further understood the supply of talent
in their age range was becoming a problem for many employers. They also knew the unemployment
rate was below five percent. Virtually everyone with the slightest amount of talent who wished to be
employed in today’s labor market was already employed. They had no fear of locating a great new
As Judy and Jack choked on the impact of the resignations…they continued discussing the several and
immediate problems facing MRESC. Pat added to their concerns by providing information from studies
recently completed by the Society for Human Resource Management (SHRM). Pat thought the
information was timely and impacted on their current status:
The four most significant future challenges facing organizations regardless of size, location or
--Recruiting and Selecting Talented Employees
--Engaging and Retaining Talented Employees
--Providing Leaders with Skills to be Successful
CEOs had identified the most pressing problems:
--71% - “Providing leaders with the skills they need to be successful
--69% - “recruiting and selecting talented employees”.
SOURCE: WorldatWork. December 17, 2007. Research conducted by the Society for Human Resource Management
(SHRM) of 526 C-Suite Executives.
Pat continued on with information from other sources that fueled the need for change within MRESC.
Research by the Hackett Group over a three year period, correlating top-quartile talent
management practices and financial performance found that:
--The average Fortune 500 company can generate a 15% improvement in EBITDA (earnings
before interest, taxes, depreciation, and amortization) through improved talent management
--“The best organizations treat employees the same way they treat their business lines, as
something to be carefully analyzed and strategically developed in support of business goals.
Top performing organizations:
--Determine the skills, competencies, and experiences needed to run their company over the
next few years
--Quantify the gap between their needs and their current resources,
--Acquire the expertise they need through a combination of staff development and hiring
--Reflected in improved (performance) earnings.
SOURCE: WorldatWork. August 8, 2007. Research was conducted by The Hackett Group. Analysis was based on
more than 125 HR benchmarks performed by the firm over the previous three years.
Pat was now feeling more like a management, OD or HR consultant and change agent for MRESC. When
he reviewed and considered the data on the table, (the head count numbers, financial projections, age
demographics and the turnover statistics), he felt like it was necessary to provide at least some big-
picture recommendations to Judy and Jack….and maybe a shocking dose of reality. Pat had only been
hired to fill an open marketing position, but he continued to add just a few comments that he hoped
would spur the leaders into making many critical decisions and changes for the organization. Pat
emphasized the following:
Over 30 percent of MRESC’s employees are 55 years of age and older.
In 2010, 39 percent of MRESC employees will be 55 years of age and older.
To fulfill existing contracts and strategic priorities, the Company will need to create 10-12 new
jobs over the next year.
Based on new contracts, changes in services required by customers and strategic (growth)
priorities, the Company will need to redesign 20 existing jobs for these positions to remain
Based on historical data, there will be a number of people leave the organization due to
voluntary and involuntary turnover.
Age demographics suggest an increasing number of retirements over the next few years.
And you have just encountered an unprecedented mass exodus from your IT department.
In addition to Pat’s comments, Judy and Jack had not had time to consider how they were going to
accommodate a request by one of their new customers The new customer wished to have the MRESC
provide internal training for their 90 employee real estate company. The new business opportunity
would include providing training to all 90 employees on a variety of systems, but a far greater amount of
training for the realtors and the back-room employees involved with MRESC’s software product. This
was a great opportunity but MRESC and they were not prepared or had experience at providing
Judy and Jack began to find themselves in new and uncharted territory. They had been able to provide
“leadership” to MERSC in the past without lots of planning and forethought. Their intuition had always
seemed to get them through the difficult spots in the company’s growth. Now there were many new
variables they had previously not experienced and several old variables that suddenly seemed to have a
strangely different “face”.
Following Pat’s short and succinct speech to Judy and Jack that summarized the status of MRESC’s
current situation, and their past errors in managing their human resources, he found them with a blank
stare and a question. Pat, “what do you think we should do”? Pat noted that his company, H&S, was a
professional recruiting organization and not a management or HR consulting organization. He could
certainly attempt to help them locate talent, but he and his company were not HR/Management
consultants equipped to deal with the many issues that had been revealed through their data and their
discussion. However, Pat responded to their question by suggesting they complete a detailed audit of
their present situation through the eyes of a qualified HR/Management consulting organization. He
noted that a qualified consultant would certainly have many recommendations for how they should
begin to restructure the organization for success and would critique and recommend changes or
additions to their operational systems to better assure they had the right people in the right place at the
right time based on their projected growth. Pat recommended BUCAPS/GSMBA. He could not remember
what all the letters stood for but recalled they were good consultants and would make thorough and
Judy and Jack immediately contacted BUCAPS/GSMBA based on Pat’s recommendation and asked for
a proposal to analyze and correct their current company problems. They expected and hoped to get
proposals that would include:
1. An analysis of MRESC’s current situation
2. Detailed recommendations concerning any proposed changes in the organization structure
3. Recommendations for hiring and retaining employees
4. Recommendations for long-term HR management, including components of a “talent
5. Other operational/business recommendations to help with the projected revenues and
• Over 30
55 and older.
• In 2010, 39
today ’ s
be 55 and
Less than 30
30-34 35-39 40-44 45-49 50-54 55-59 60-64
65 and above
Minnesota Real Estate Service Company
(Privately Held Service Company)
President Judy Malder
Director Media and
HR Files (1)
*The President and each Director has an Administrative Assistant.
( ) indicates total employees in unit, including manager.
MN RESC Case Study – Areas of Consideration
Areas of Consideration:
An analysis of MRESC’s current situation
Recommendations concerning changes in the organizational structure
Recommendations for hiring and retaining talented employees
Recommendations for long-term talent management
Other operational/business recommendations to help with the projected revenues and profits
Other areas that might be considered by an HR strategic partner in analyzing the problems of
Time to fill (openings)
Cost to recruit
Lost $ and productivity due to turnover
Training time and return on investment
? Department profits/margin
? Expenses/employee v. competitors
? Profit margin year over year (monthly measures compared to previous year)
? Lost revenues due to unavailable employee manpower
? Customer satisfaction data by department/profit center
? House sales, time on market v. competitors
©Dr. W.F. “Duke” Fuehrer 2008
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