When running a business, what matters and what really, really matters?
Fairness, diversity, well-being of staff, contribution to society, governance, ethics and sustainability must all be a priority. However, the two really, really big things are our clients and profitability. The latter is perhaps not always a popular word, but without profitability driven by our people and the relationship they have with our clients, all the other things become very difficult, if not completely unsustainable, and, crucially, investment in the business becomes impossible unless one borrows.
Why, therefore, the obsession with turnover? We are driven by providing our clients with the best possible service, which now requires an absolute need for a global platform for residential and commercial property, but it does not in itself dictate a demand for focusing on turnover, not least because I cannot fathom where that leads, or indeed who benefits.
Our five-year group strategy, agreed more than three years ago, had as one of its targets an aspiration to reach a certain turnover by the final year of the plan in 2016-17. However, this was strictly in the context of ensuring our margins were protected at every stage of our development, accepting that, on occasion, investment in the business, our people and the technology that supports them would constrain the growth of those profits. With kind markets in certain areas we are on course, but this is not because of our focus on turnover; it is because of our absolute focus on our people and our clients. Our business is constantly evolving, and there are always bumps along the way. The most important thing is that we listen and learn from them.
I know there are those in our industry around the world who question our structure. An independent partnership with a global platform – and one that is debt-free – is in today’s real estate advisory world a rare breed. Indeed, I believe we are the only one. However, it still resonates with me that partnerships and professional services run hand-in-hand.
When assessing success, we need to reflect on how this is best achieved, and whether turnover is the best indicator. I still spend a good portion of my time with clients and it is very clear to me how they see things. Fundamentally, they want enthusiasm, they want relevance (market research, track record, market experience), they want follow up, they want ideas and ultimately, of course, they want honesty and delivery. Too often forgotten, and especially in an industry that is not a science, they want to build relationships, which in turn will produce outperformance.
The advisory side of our industry has transformed over the last generation.
The vast majority of long-established names have disappeared. Consolidation continues, not least evidenced by recent, very significant, announcements.
I will leave it to those involved to answer the question of why this consolidation has occurred. But what is clear to me is that the consolidation will continue, driven principally by an aspiration for the big to get very much bigger – to increase their turnover. It will thus be increasingly important to stand out and differentiate ourselves from the crowd, and, I hope, turnover will not be the only thing that achieves this. It is important to retain those qualities that separate the property industry from others.
So, the question remains: what is important?
The answer could not be clearer to me: ensuring our clients get the best possible service and guaranteeing our business is able to thrive while making a contribution in a broad range of areas. Eschewing an obsession with turnover in favour of a focus on providing exceptional service and creating a fair and diverse workplace. It is these priorities that will most benefit our clients and our people.
Alistair Elliott is senior partner at Knight Frank
