Talent Management: MN Real Estate Service Corporation - 75557

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Description

 

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:

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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

Website design

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

Appraisal services

Property condition audits

Contract and emergency repair services and contract maintenance (property management)

And more.

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

1998

188

2007

222

1999

191

2008

231

2000

195

2009

238

2001

197

2010

249

2002

200

2011

265

2012

275

2003

202

2013

296

2004

206

2014

312

2005

213

2015

323

2006

217

2016

332

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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

shown inelasticity.

Revenues per year in $ millions.

* = estimates based on business plan

 1998

$15.50

 1999

$16.10

2000

17.6

2001

18.1

 2002

$19.80

 2012

$32.0*

 2003

$23.70

 2013

$34.1*

 2004

$24.40

 2005

$26.00

 2006

$27.40

 20072008200920102011

$27.00 $25.50 $27.8* $28.0* $29.9*

 201420152016

$35.9* $37.5* $40.0*

In similar fashion, the organization’s profits generally kept pace with revenues and employee head

count.

Profits per millions. (EBITDA)

*=estimates based on business plan.

1998

$2.10

2007

$4.00

1999

$2.30

2008

$3.00

2000

$2.50

2001

$2.80

2002

$2.95

 2012

$7.10*

2003

$3.77

 2013

$7.65*

2004

$3.90

2005

$4.42

2006

$4.88

 200920102011

$4.10* $5.75* $6.44*

 201420152016

$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.

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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.

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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

employment opportunity.

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

industry were:

--Succession Planning

--Recruiting and Selecting Talented Employees

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--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.

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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

effective.

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

contracted training.

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

detailed recommendations!

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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

   management system”.

5. Other operational/business recommendations to help with the projected revenues and

   profits.

Age distribution

• Over 30

  percent of

  employees are

  55 and older.

• In 2010, 39

  percent of

  today ’ s

  employees will

  be 55 and

  older.

25%

20%

16%

15%

10%

5%

0%

Less than 30

30-34 35-39 40-44 45-49 50-54 55-59 60-64

                                   65 and above

8%

5%

2%

13%

10%

9%

20%

20%

N=222

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Minnesota Real Estate Service Company

   (Privately Held Service Company)

Advertising

  Board

President Judy Malder

Director IT

Electra Bits

Director

Marketing

Open

Director Media and

Print Production

Sam Simpson

Finance/

HR Director

Jack Pratt

Director

Appraisals

Karen

Kusak

Residential

Appraisals

 Manager

(18)

Commercial

Appraisals

Manager

(15)

Director and

Maintenance

Operations

Fred Fixit

Contracts

Maintenance

 Manager

(15)

HIAC

Manager

(10)

Plumbing

Manager

(10)

Electrical

Manager

(10)

Software

design

Mgr. (14)

Software

training

Mgr. (3)

Website

design

Mgr. (4)

Multiple

Listing

site Mgr.

(18)

Marketing

Research

Manager (3)

Print Shop

Mgr. (22)

Accounts

Receivable

Mgr. (3)

Accounts

Payable

Mgr. (3)

Contracts

Manager (3)

Creative

Manager (14)

Graphics

Design

Manager (9)

Audio/video

production

Manager (14)

P.R.

Manager (3)

Controller

(3)

Contracts

Manager (2)

Recruiting

HR Files (1)

Security

Systems

and Low

Voltage (6)

T.V., Cable,

Stereo,

Media

Manager (6)

*The President and each Director has an Administrative Assistant.

( ) indicates total employees in unit, including manager.

Total (223)

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MN RESC Case Study – Areas of Consideration

Areas of Consideration:

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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

Leadership concerns

Other areas that might be considered by an HR strategic partner in analyzing the problems of

the organization

Potential Goals/Metrics:

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HR:

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Employee turnover

Compensation/market data

Time to fill (openings)

Cost to recruit

Lost $ and productivity due to turnover

Training time and return on investment

Financial:

    ? 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

Process:

   ? Customer satisfaction data by department/profit center

   ? House sales, time on market v. competitors

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©Dr. W.F. “Duke” Fuehrer 2008

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