There are four elements to the program. The first is to reward high performance, the second to build an asset for the future, the third is to create an annuity stream and the fourth is a share plan.
The first one is a high-performance bonus commission plan.
“Essentially, it is a commission plan that is designed to be long term for the agent and long term for the business,” McGrath Estate Agents’ head of company sales Kon Stathopoulos said.
“What we wanted to do was to make sure that we rewarded high performance and, more importantly, that we can do that sustainably for the business and sustainably for the sales agent.
“It’s basically a shift in thinking from being an agent that just turns up and does their business to be able to go, ‘Hang on, I actually want to own and operate my own business within a business.’”
The second element is a property management partnership program.
“We tend to exit interview a lot of our agents to understand some of the reasons why people were leaving, and it is often to build their own business,” Mr Stathopoulos said.
And property management is normally key to that, he added.
“We thought as a business – and it’s unique to the industry from what we understand – is that we wanted our agents, every time they refer a property in, that that forms a part of an asset that they can sell back to us at a later time.”
Mr Stathopoulos described the arrangement as a partnership with the agent.
“They own it 50 per cent and we own it 50 per cent,” he said.
“After a certain period of time, we can vest it. They can sell it back to us and therefore they are building a long-term asset.”
The third element is a business referral program.
Mr Stathopoulos said McGrath wanted to understand where it was attracting its agents from.
“The fact is that 90 per cent of the agents that start at McGrath are referred by our own internal agents.
“That’s confidence in what we’re doing in terms of cultural leadership, and we wanted to be able to reward those agents that are bringing like-minded people to the business.”
Mr Stathopoulos described the third element as a recruitment trail, which provides agents with an annuity income.
“One of our agents, and this is pre the program being established, referred a top-performing agent to us last year. Over 10 years, the annuity trail on that agent would be close to $300,000.”
The fourth element is a shares scheme that is designed to attract new talent, and is aimed at what McGrath calls ‘pinnacle agents’, those who write between $750,000 and more than $2,000,000 in their first year.
The share offering takes the form of an interest-free $75,000 loan account to buy shares in the listed company.
“It vests for three years. At the end of three years, whatever the issue price was on the day that they were issued, if there is a profit, they take the profit. If there was a loss, they don’t take the loss,” Mr Stathopoulos said.
About a year ago, a McGrath management delegation travelled to New York, San Francisco and Texas to meet with several the real estate groups. These groups – which included Douglas Elliman Real Estate and Corcoran Group Real Estate – were already taking the lead in the advanced US market.
“The basis of that trip was to research remuneration plans, training plans, cultural plans and leadership plans,” Mr Stathopoulos said.
He added that the network wanted to provide the capability for its agents to build “long-term, sustainable” businesses that sustain through different market conditions.
“And, more importantly, we want them to shift from being traditional transactional real estate to being more solution-based business owners and operators.”