2004 GMAC REAL ESTATE ANNUAL BUSINESS CONFERENCE
NEW ORLEANS, LOUISIANA
MARCH 16, 2004
I. Introduction and Welcome
Good morning, everyone, and welcome to our conference! What a terrific turnout! It’s great to see you all. Is everybody ready to “Jazz It up in New Orleans”?
Good – I’m glad to hear it! Because you know... this is where jazz actually began. About 100 years ago, right here in New Orleans. And given our theme this year – “The Power of Partnership” – I can’t think of a better place for us to be... because when you are witnessing a jazz performance, you are seeing a perfect example of partnership in action.
That’s why jazz musicians can play the way they do, improvising and staying together, all in perfect time. They’re all working from the same piece of music, the same plan, if you will. Also, and very importantly, they’re totally, unselfishly committed, individually and as a group, to the success of the performance.
Doesn’t that sound exactly like what we’re doing at GMAC? It does to me. Together we – you and I – are drawing upon the power of partnership to transform GMAC into the most respected and successful organization in this industry.
We’re now over a year into this great adventure. Together, we’re creating the premier real estate services company in North America. ... a company whose Sales Associates will be looked upon by the rest of the industry as the standard of excellence to which all others aspire... a company whose brokers are eminently successful, with strong and growing businesses ... a company where consumers will always experience service they deserve, from people they trust.
No, we don’t want to look like all the rest. We’re going to set the bar very high. We’re going to be different – we’re going to be better.
We’re committed to creating a brokerage company ...
! where customer satisfaction levels are number one in the industry;
! where per-person productivity is number one in the industry; and ...
! where average profit per transaction is at least five times the current industry norm!
How’s that for setting the bar high with a serious commitment?
So thank you for your commitment to being here. Thank you for being engaged in the transformation of GMAC into the most respected company in the industry. And on behalf of all of my colleagues at GMAC Home Services, thank you for giving us the opportunity to build rapport with you and to identify our sheared opportunities as strategic business partners.
You know, we have a lot in common with you, because we’re in the same business as you are. Our company-owned brokerage businesses, which we call our Keystone Companies, comprise the eighth-largest brokerage firm in North America. We’re on both coasts and in the heartland. And today many of the executives, managers, and agents from our Keystone Companies are here, and I’d like all of you to stand up so that we can recognize you.
Good to have you here! I guarantee you... that we’re every bit as dedicated to the brokerage business as we are to the franchise business.
So yes, we’re partners – but we’re more than partners. We’re all going to be very successful together over the next decade, I’m convinced of it. And success becomes much easier when the business relationship is built upon a foundation of friendship. That’s what we’re creating here.
II. Progress Since Our Last Meeting: How are We Doing?
My task this morning is very simple: I want to brief you on the progress we’ve made since our last meeting, in Las Vegas... and I want to tell you what it’s going to take to get us the rest of the way... to put us over the top ... to make us a leader in all the ways I’ve described.
First, the progress report. I’ve got to tell you, I am really excited about the way the new GMAC is taking shape.
Customer satisfaction ratings are very, very high. That should make all of us feel very good. We’re probably the only company in the industry that focuses on customer satisfaction as a top priority, and our efforts are paying off.
On the qualitative side, if you talk to people at all levels and all around the country, as I’ve been doing, you get the distinct sense that a great momentum is building. The light bulbs are going off in people’s heads. They’re having that “Aha!” moment when they really, truly get it.
Brokers and Sales Associates alike are starting to really grasp the fact that Premier Service, in addition to being a mechanism by which we build a reputation and personality in the eyes of the consuming public, also has tremendous economic power, because it will attract customers.
And, in an environment where, as we all know, discounting commissions is becoming more and more prevalent, because not enough people know how to sell their value propositions...Premier Service will enable Sales Associates to earn premium commissions.
And you are making it all happen! I said last year that the value of our brand – as with any service operation – comes largely from the interactions of service providers with their customers.
What this means is ...you are the brand – it’s as simple as that. Your work and your commitment to the customer are making the value of our GMAC brand grow, week after week, month after month.
I see it happening all over the country. You should be proud of yourselves and the way you’re building something completely new in the industry. And I’m proud of you! I’m going to applaud you, and why don’t you to give yourselves a hand as well!
Now, in terms of the business strategy, it’s probably going to be about a three to five-year development project... to re-create the real estate business model, to transform it into a “home services” model. That’s not something you can just jam together overnight. It’s a complex, longer-term project.
BUT – we are definitely making progress in our own company-owned operations. We’re seeing more and more consumers using our own mortgage company for their home-buying services.
And we’re going to give them even more reasons to do that. We’re introducing new programs that are centered around the core of the transaction: this year, we’re rolling out a Home Warranty product; also, a Home Insurance program – all GMAC-branded. All of that goes into the increasingly impressive bundle of services that we offer.
As far as the company itself is concerned, we’ve brought in a lot of good people. We were darned good before, but the talent we now have is incredible.
So yes, there’s a lot of momentum that’s been building up. How do you describe it? I’m not sure. It must be akin to what the folks at Southwest Airlines or Starbucks or E-Bay or Amazon.com felt as they started to get their new concept off the ground and get some traction.
It’s that distinctive blend of fiery enthusiasm and playful fun that happens when you know you’re building something really new and different, something with the potential to transform your whole industry.
Outside the company, we’re starting to get some visibility and some credit for what we’re doing. Here’s a great example – and a recent one too.
The cover story of January 2004 issue of National Relocation and Real Estate magazine is entitled “GMAC Real Estate: Leadership and New Partnerships... and Redefining the Industry.”
The lead sentence of that article reads, and I quote,
“In the midst of one of the longest home sale booms in history, when many companies seem content to simply ride the figurative coattails of their agents’ success, GMAC Real Estate’s company-owned division is instead reinventing the very way it does business. And quite possibly, the way the entire industry should do business, as well.”
I couldn’t have said it better myself!
III. Transition: Where do We Go from Here? Partnership, Leadership, and Cultural Transformation
Well, where do we go from here? What will it take to get us to number one in customer satisfaction...number one in per-person productivity? What will it take to create an average profit per transaction that’s at least five times the current industry norm?
It’s going to take partnership. It’s going to take leadership. And it’s going to take cultural transformation. Let me talk about each one of these separately.
IV. The Power of Partnership
Partnership is our theme, so let me start with that. It’s all about that different kind of relationship with the Sales Associate that we seek to build.
Just as in every other business, success begins with understanding the consumer.. Everything starts with the home buyer, the home seller. All of us who are under the GMAC umbrella are partners in serving the ultimate customer.
Last year I quoted an article from Forbes magazine. It was entitled “Partner or Perish,”1 and its message was that partnership is one of the next hot trends...one of the drivers of the next wave of business progress... and that in industry after industry, partners across the value chain are finding new ways to work together to satisfy the consumer.
Has it happened in the real estate industry? Not yet. But it will. At GMAC, we’re starting to make it happen. We – you and I – are literally changing the rules of competition, shifting the paradigm, from the industry’s agent-centered brokerage model...to a consumer-centered Home Services model.
And in that model, there’s a whole different relationship between the agent and the broker. They’re now interdependent partners in delivering a world-class Home Services experience to home buyers and home sellers.
And you know what? We’re all going to be better off if we create a business partnership to better serve the ultimate customer. And if we do so in the way that they’re asking...if we listen to them and give them a Premier Service experience... all of us working together as partners... then everybody wins!
Consumers win because they get what they’re asking us for, which is a full-service experience, delivered by someone they can trust, with all the information that they need.
Sales Associates...you’re going to win because you’re going to be more successful and more productive. You’re going to earn more commission income. You’re going to be better at capturing clients in a competitive situation...because Premier Service positions you as trusted advisers, skilled negotiators, and expert facilitators.
And GMAC companies are going to win too...whether it’s a local franchise company or our national organization...because in an industry where, very frankly, profit margins are not good at all, they will actually have the opportunity to increase their profit margin
So that’s what’s kind of neat about this whole thing, don’t you think? And what’s even neater ... is to see it actually happening. More and more, our agents see themselves as career professionals in partnership with our company and our family of service partners.
They recognize that they’re not alone – quite the opposite: we’re surrounding them with people they can trust – people with the financial backing, the technological support, and the knowledge, products, and commitment to make the home buying and home selling transactions happen.
Of course, agents and brokers have always worked together – but partnership introduces a whole different dimension. The change from Sales Associate to Sales-Partner is not about semantics. It’s a philosophical change. It means new behaviors....and a new level of trust...a new spirit of cooperation.
Which brings me to the second piece of “how we’re going to get from here to there”: leadership.
V. The Power of Leadership
In order for the power of partnership to work, branch managers can’t just manage – they must lead. That’s why we call them “branch executives.”
Today at GMAC, branch executives are providing leadership through selective recruiting, intensive training, and individual coaching that challenges our Sales Associates to
meet goals they set for themselves. Our branch executives share with their agents the simple secret of successful business – plan your work, work your plan – and they help them do both.
They help agents identify their income goals. They work with agents to create a written business plan that leads to an action plan. They manage activities that will deliver the desired results, and they monitor progress on a weekly, bi-weekly, or monthly basis to ensure that the agent is reaching the predetermined goals.
Now that’s leadership!
That’s leadership at the personal level. But there’s even more to it than that.
As a result of these new partnerships forming all across our company, GMAC will rise to a position of undisputed industry leadership. That’s the goal, nothing less. We’re going to be to the real estate industry what Microsoft is to software...what Procter & Gamble is to consumer products... what Pfizer is to pharmaceuticals...what Intel is to semiconductors... what du Pont is to chemicals... what Nike is to sportswear – the company that broke the mold, changed the rules, and showed others the way to success. The industry leader.
VI. The Power of Cultural Transformation
So there you have the power of partnership, and the power of leadership. Now let me turn to the third piece of “how we’re going to get from here to there” – cultural transformation.
Last year, I talked about one of my favorite business thinkers, consultant Jim Collins, who wrote the books Built to Last and Good to Great. I quoted Collins’ comment that the greatest obstacle to greatness... is being good. Good is the enemy of great.
Sure, we’re good, you’re good, GMAC is good, were all supremely competent at what we do. But today with the real estate industry in the state that it’s in, good is simply not good enough. We’ve got to move from good...to great.
So how do companies go from good to great?2 Collins and his researchers devoted enormous effort to answering those questions.
They examined over 1,400 companies that had been in the Fortune 500 over a 30-year period. They were particularly interested in the ones that had a record of sustained mediocrity...followed by at least 15 years of outstanding performance.
They finally got it down to 11 – companies like Abbott Labs, Circuit City, Gillette, Philip Morris, and Walgreens. These companies meandered along for years, sometimes decades, then they suddenly became star performers.
What happened? It wasn’t any particular strategy, and it wasn’t charismatic leadership. It was the culture and personality of the organization itself. “Culture” is a word for shared assumptions about how things are to be done. “Personality” simply refers to the spirit in which things are done.
The organizations that went from good to great developed a distinct personality and culture that were right for them. They fearlessly faced their shortcomings and the realities of their industry. They came to understand, over time, the forces that governed their universe.
They evolved, slowly but surely, an agenda of what they needed to do to be successful. After settling on a course, they never lost sight of what they did best, and they maintained high standards for their people.3
Momentum builds slowly – Collins compares this to a person turning a big, heavy flywheel [make turning motions] – until at some point the wheel starts turning faster and faster on its own, everything comes together, and the company’s performance just takes off.
Is this relevant to GMAC? You bet it is! Many of you out there are beginning to understand that not only is Premier Service here to stay as a brand strategy...but also that there is value to Premier Service if you can also embed it in your local, individual culture. And that’s what we want to do.
We’ve got a great brand strategy and a great business strategy. But in order to have those things come to life and really mean something to our brokers, our agents, and our customers, we’re developing a culture that supports the business strategy. We’re building a “Premier Service” culture, not just externally with respect to the consumer, but internally as well, throughout our organization.
So the relationship between the broker and the sales associate... parallels the relationship between GMAC and the customer. They’re both built on the Premier Service concept.
Inside the company, the idea is to understand each individual’s aspirations...to communicate about them...to set the expectations for the relationship between the individual and the company...and to commit to a plan. Then everybody goes and performs their various roles in that plan, and you continue to track and measure progress.
So now you see that the whole Premier Service process that we’re creating externally... is also applicable internally. That’s why, in our company-owned operation, we’re trying to create a model that our franchisees will emulate. We’re creating a culture founded on partnership and leadership, just as I described them to you a few minutes ago.
We’re moving to a real partnering/coaching kind of relationship with our Sales Associates, a relationship in which your branch manager understands your aspirations, creates a plan to meet those aspirations, holds you accountable to the plan – and contributes significantly to your success.
We’re also finding ways to reinforce and strengthen our Premier Service culture we’re building. One way in which great companies create a sense of common purpose... is to celebrate successes. Traditionally in the real estate industry, the way you celebrate success is to honor the top producer. What we want to do is celebrate not only the people who are top producers... but also the ones who deliver the finest customer experience. It’s a different way of looking at the business, but one that flows right out of our Premier Service philosophy.
VII. Summary and Conclusion
Well, I’ve covered a lot of ground of this morning, so let me step back and try to wrap it all together for you.
What you and I are involved in is nothing less than a transformation of the way the real estate industry does business. We’re reinventing the business by ...
! providing a broad range of home services and offering a one-stop shopping experience;
! committing to – and measuring – the satisfaction of our customers; and...
! aligning the interests of agents and brokers, thus creating partnerships across the value chain.
As a result, we will ...
! create for GMAC a strong brand image and substantial brand equity;
! enjoy intense customer loyalty, such that customers recommend us, over and over and over, to their friends and family;
! ... and, because our services are so superior to what everybody else is offering, we will command a premium price.
Sounds good, doesn’t it? And it’s happening – it really is. We’re moving toward the transformation of our business... and a leadership position in the industry.
And the great thing, the exciting thing about this is that, as this transformation occurs – not if it occurs...but as it occurs – everybody wins.
Sales associates win because they’ll have more customers – and more loyal customers...brokers win because they’ll be more profitable...we as a national company win because we’ll become like other great companies who companies that rose from “good enough” to become respected industry leaders, by transforming the way business is done.
And consumers win because they get a completely different kind of real estate experience ... because when companies really focus on customer satisfaction, amazing things happen.
Of course, the prime example of one-stop shopping is car dealerships, which for many years have sold you not only the vehicle, but arranged your financing, provided your tire warranty, your license paperwork, and so on and so forth. Wouldn’t it be bizarre if you had to buy your car at one place, but then go somewhere else for the title work, and to a third place for the tire warranty? It’s just taken for granted that that’s not the way things happen in the car buying process.
But today, many dealerships have gone way beyond one-stop shopping ... to offer an automotive service experience. They’ve got comfortable lounges with a big-screen TV and coffee and snacks, where you can wait for your car. They’ll drive you home and come pick you up. They’ll wash your car when it’s finished, and I know at least one dealership where the cashier offers you a long stemmed red rose on the way out.
That’s the kind of experience you and I are going to create for our customers.
How will we get there?
Partnership – a whole new relationship between the brokers and agents, all over our organization.
Leadership. Within our organizations, leaders have got to lead. And that ties right back to partnership, because true leadership has nothing to do with position. It has everything to do with the relationships you build with your people...and how the interaction, the relationship, takes all parties involved to a different level of performance, achievement, and satisfaction.
Finally, cultural transformation – a transition to a culture of partnership, leadership, and one more thing: ownership.
You see, cultural transformation really happens when the things we’re trying to achieve on the outside, in terms of organizational structure and business process and relationships... actually take root in here [point to heart]... when each of you truly understands that you are an integral part of this Premier Service project, this new way of thinking... and that you stand to reap enormous rewards from it.
One of the characteristics that I observed of companies that have turned the corner, transformed to their business or their industry, or enjoyed sustained success ... is that they’ve been able to engage the mind and heart of every employee and every independent contractor who represents the brand.
That’s what we’re really trying to do: to give you a sense of ownership in what were trying to create, with you and for you... because every single Sales Associate and independent contractor ... every one of you... MAKES A DIFFERENCE. An important difference, in the success of our company and in the lives of your customers.
And why would you want to take ownership in this process? Because of all that’s in it for you. As our Premier Service philosophy takes root and spreads throughout the company, your life as a sales associate will be quite different – and not just because you’re making more money, nice as that is.
For one thing, you’re going to have a business plan that links your business goals with your life goals. Yes, you do need to make a good living, and you will make a good living, but there’s more to life that. We all need balance in our lives, so when you sit down with your branch executive to lay out a business plan, one of the first questions that gets asked is “What you want from life?”
Mike Pierson, one of our Chicago-area branch executives, says it very well: “A business plan that flows from the agent’s short-term and long-term goals for life is positioned to be successful. Anything else is just paper.”
So that’s one important difference: a plan for your success, a coach and partner who helps you achieve it. But there’s more. I said that each one of us makes a difference. Whether you’re a sales associate our broker, you’re going to be much more effective at making a difference, a positive difference, in your customers’ lives.
Because it’s not just a business transaction we’re involved in. Take a step back from your focus on the real estate business per se... and take an objective look at what we’re selling. Look into very essence of it, not as a business transaction but from this standpoint of the consumer’s life.
A residential real estate transaction is an intensely personal event, the way the buying a box of cereal or a tube of toothpaste can never be. Buying or selling a home is almost always a major event in life, a milestone of major importance to the people initiating the transaction.
As you all know so well, the people involved in a real estate transaction are typically undergoing significant life changes. There may be geographical relocations, job or career change, perhaps major upheavals for one or more family members. In addition, large amounts of money and uncertainty are involved. Customers have to negotiate complex issues with complete strangers. They have to sign a pile of documents they barely understand.
What a blessing it is to have someone to guide you through all this and provide all the related services ... and to have pleasant, positive memories of what is, after all, the most important purchase you’ll ever make.
Twenty-five years ago, Herb Kelleher reinvented air travel when he founded Southwest Airlines, where the planes are painted to look like killer whales, a typical company maxim is “Hire people with a sense of humor,” and in-flight meals are never served – just 60 million bags of peanuts a year. He and his company are the subject of a book called, appropriately enough, “Nuts!”, subtitled “Southwest Airlines’ Crazy Recipe for Business and Personal Success.”
There are many parallels between Southwest Airlines and the GMAC you and I are building, and I urge you to read the book, if you haven’t already done so. One of the things that caught my attention was the idea that behind every great company is a moral imperative – an obligation, a sense of duty that compels the company to operate in a certain way.
What’s our moral imperative? I think you know the answer already: it is to give the consumer the kind of experience they’ve never had before from this industry... in fact, to make buying or selling a house...a simple, easy, enjoyable event!
I’ve talked about a lot of positive things that are going to flow out of our Premier Service philosophy: a new partnership between agents and brokers...higher commissions and income...the opportunity to take part in an industry transformation, to work for an industry-leading company, and to provide a customer experience that is second to none.
But I’ve saved the best for last.
Let me share something with you. Before I came to the GMAC headquarters in Chicago area, I wrote in my journal and identified the characteristics that I wanted to live the rest of my life with, and there were two: one was passion, and the other was a sense of humor. If I could take only two things on my journey through life, I think I’d like to take those two with me: passion... and fun.
I hope you’ve seen that passion this morning. I – and so many other people around the company, more and more all the time – really believe in this dream, this journey we’re on.
But there has to be fun too, don’t you think? George Bernard Shaw said that “Life is too short for [us] to take it seriously.” How right he was!
Those of you know me...know that I like to enjoy myself. Somebody recently told me that he noticed I was the last one to leave the dance floor at night, and I take that as a compliment.
And how about work? Can’t that be fun too? We’re onto something at GMAC; it’s really big, it’s going to be fun...and all of you...every single one of you in this room is a part of something very special! It’s going to be a wild, fun ride.
Creating something completely new and making it grow – that’s fun. Working together for mutual benefit – that’s fun. Acquiring new skills and competencies and being excellent at what you do – that’s fun. Putting those skills and competencies to work serving customers and ensuring that one of the most important transactions in their lives...is also one of the more enjoyable experiences in their lives – now that is what I call fun!
What we’re trying to do is something very different, very special. And we’re trying to do it for you as much us for us. And if you could just find your way to come along with us – as my friend Lamar Alexander used to say in his election campaigns, “Just come along with us” – you’re going to experience something that may be different and new for you: you’re going to enjoy yourselves and have fun in this profession as never before!
I hope this year’s conference will be the best ever for each and every one of you. And I think it will be. Thank you again for coming together in New Orleans...and thank you for all your wonderful contributions to this incredible new company we’re creating together.
I look forward to meeting each of you, if I haven’t already...to helping you to be even more successful... and to working with you....to build the finest Home Services company in North America!
2“Conquering Vertical Limits,” Fortune, February 19, 2001.
3“Breaking Free of the Corporate Pack,” review of Good to Great in Business Week, October 29, 2001.