Managing Multiple Constituencies
May 06, 2011
Case categories include: Strategy & Planning
By Robert Sher
We all know that “being the boss” doesn’t really mean we get what we want. Some companies have a simple ownership structure with clarity on who has the last word. But Alliance member Jim Harrison, CEO of MLSListings Inc. (Group 310), has multiple overlapping constituencies which blend ownership, industry associations, governance, sales channels and customers.
Multiple listings service (MLS) companies provide a service all real estate agents must use to telegraph to the world that real property is available for purchase. Jim Harrison’s firm, one of 70 geographically bounded MLS companies in California, covers the South Bay down to Monterey, the Peninsula and parts of the Central Valley. MLSListings is owned by eight real estate associations (“the shareholders”) whose members include brokerage firms and agents. It is governed by a board of 15 directors, who are chosen by a nominating committee consisting of five members from the current board and four members elected by the eight associations who are shareholders. (Confused yet?)
Jim’s typical board consists of brokers, real estate company owners and corporate officers of real estate brokerages, many of whom are in the leadership ranks of their own associations (both shareholder and non-shareholder associations), and all of whom are subscribers and users of MLSListings services. The brokerage firms make the decisions about which MLS listing service their agents must use, but the agents pay the $50 monthly dues. The seven MLS companies in the greater San Francisco Bay Area have arrangements with each other, which provide for the sharing of listings data. In southern California, another seven large MLS entities have a similar reciprocal arrangement.
The 70 California-based MLSs are primarily owned by their local real estate associations, which are very dependent on them for survival. This has been especially true during the recent economic downturn, during which the number of REALTORS has dropped nearly 40%. Consequently, MLSs are experiencing a decline in subscriber memberships, so their revenues are lower as well.
After Jim Harrison had successfully turned around a multiple listings service in Dallas, Texas, he was hired in May of 2005 at MLSListings (formerly RE InfoLink). The firm had been without a CEO for a year, and their online service had recently crashed and stayed off-line for three weeks, causing chaos in the industry. With no leadership, the many different interests of the shareholders made them feel at odds with one another, so decision-making was impaired. Into the fire stepped Jim Harrison.
He didn’t sit around in his office. He hit the road, spending 60% of his time visiting brokers, shareholders, agents, and association leaders. He established a task force and educated them on how other successful MLS companies worked.
In all situations, but especially complex ones, people work well with people they like, those with whom they feel they have a relationship. Jim’s dedication to creating all those relationships was a most critical piece of effective leadership. Astute leaders connect widely and listen carefully to really understand those around them. They are generous, whether it’s giving out a nice bottle of wine, some free advice, a round of golf, or treating you to a fine dinner. When you remember something about the people you meet, it makes them feel special, and giving tokens of appreciation creates the desire to reciprocate. Making these kinds of connections long before you need to call upon them is crucial.
Jim knew what was required. The shareholders of the best multiple listings services had long since given up control, instead sharing governance with strong regional brokers. They even gave the users – the agents – a role in governance.
When he arrived, the board was elected by the shareholders directly. Getting them to vote to dilute their own power seemed an impossible task. But Jim didn’t try to impose it. Instead, he worked with the task force to help them come to this conclusion in their own time. He met with leadership of the shareholder associations, slowly helping them understand. At the same time, he began talks with six adjacent multiple listings services concerning mergers.
The bigger the group, the more variation there will be in how people react to change. The patient leader listens to everyone, never reacts impulsively, and works in the interest of building consensus.
He or she keeps everyone at the table talking. Progress is made incrementally, but knows that with each small step, the ultimate goal comes closer.
Six months later, in November of 2005, the shareholders had reached an agreement that change in governance was necessary, and that control of MLSListings would have to be shared. But it took another two years to complete the process. During that time, four of the adjacent regions chose not to merge, but a Central Valley multiple listings firm did agree. In October of 2007 the new governance was official.
Two and a half years might seem like a long time, but MLSListings lives in the tightly woven real estate industry. Acting in a fair manner is critical since everyone in the community is interdependent, and keeping a good reputation is essential. Yes, there are situations which require pressure to achieve important objectives, but that pressure is best turned up incrementally, to insure full support for these changes. In addition, it’s always much easier if there is social pressure to make the change—not just one versus one. Building a majority consensus of people who want change can make all the difference.
Nothing is for sure with such big, broad constituencies. Jim never gambled his whole position. He knew that it’s a marathon and he’d most likely succeed if he stayed in the game over the long term, moving the ball forward as he could, but never risking it all. He lost four of the regional multiple listing companies in his effort to merge, but everyone is still friendly and willing to talk.
If you’re used to a command and control environment, or accustomed to the basic dysfunctional board full of investors, you may want to think twice about stepping into a CEO role like Jim’s, with multiple, overlapping, intermingled constituencies. Patience is mandatory, and a large part of the CEO’s skill set is necessarily political. But if you enjoy being the conductor of a complicated symphony of personalities and agendas, it can be quite gratifying to help so many different people find value in your organization.
Robert Sher is principal of CEO to CEO, specializing in assisting CEOs and business leaders as they navigate critical passages. He is the author of The Feel of the Deal; How I Built a Business through Acquisitions. He may be reached at Robert@ceotoceo.biz.