In business, it's often helpful to think about the "say-do" ratio or the frequency with which organizations do what they intend. There are many reasons why things might not pan out the way we expect, as I observed while researching the current industry hot topic of centralization for this year's 20 for 20 White Paper.
For those unfamiliar, 20 for 20 is a piece of research based on 20 interviews with senior multifamily executives: 10 leaders of operations and 10 leaders of technology. This year's deep dive into centralization unearthed a disconnect between what companies prioritize, or at least believe they prioritize, and what they are doing. It throws light on the realities of centralizing decades-old property management functions and offers a few clues about how to do it successfully.
What the Data Tells Us
Let's start with the context. Centralization of property management functions is a 2023 priority. We know this because 11 out of the 20 leaders interviewed cited changing property roles as their biggest highlight of 2022. The same number saw their biggest 2023 priority as delivering a new operating model or changing property roles. That is the clearest prioritization of a single issue in the five years of performing this research, so we know how important centralization is, at least conceptually.
To get specific about the 20 companies' plans and activities, we divided the domains of centralization into three buckets: leasing, maintenance, and property administration. The interviews followed two lines of questioning: the "top-down" view of executive priorities and the "bottom-up" perspective based on specific projects that they either delivered in 2022 or planned to in 2023. As we will see, the answers are different.
First, the executive priorities regarding centralization—summarized in the chart above—seem clear. Leasing is the highest priority, maintenance is the lowest, and property admin lies somewhere between. It is not surprising that leasing attracts this much focus: Its effectiveness can impact revenue performance significantly. Leasing is also the function that dominates the industry conversation about centralization.
However, a different picture emerges when we ask for details of current centralization initiatives. The three charts below summarize the activity in each of the companies interviewed. Based on detailed responses, each company fell into one of four groups describing their process toward centralization:
- Implemented or in the process of implementing a centralized model;
- Implemented some elements of a model but without changing any roles;
- Planning to plan (i.e., interested but not yet committed to a plan); and
- Not planning to centralize.
With leasing (the highest executive priority), only three out of 20 companies were making meaningful progress toward centralizing their leasing models. Many companies were implementing technologies that support centralized leasing (e.g., AI leasing assistants, CRM) but without making or planning to make tangible changes to their organization or processes.
Property admin, meanwhile, tells a contrasting story. Of the 20 companies, almost half were at some stage of implementing a centralized model for delivering admin tasks (here defined as any non-maintenance post-leasing services).
Admin: The Real Story of Centralization
The chart above shows that in the case of property admin, unlike leasing, there is relatively little between the stages of not planning to execute and execution. That suggests that progress is relatively quick once a company plans to centralize admin functions.
There are a couple of potential explanations for that. First, admin functions generally lend themselves to shared service environments. We see this throughout the business world, not just in multifamily. Second, once a multifamily operator considers moving admin off-site, they probably realize that it was never that good of an idea for those roles to be on-site in the first place.
Operators have traditionally promoted capable leasing agents to assistant property management roles that entail a lot of bookkeeping. That practice feels increasingly like a bug rather than a feature in our multifamily operating model.
Companies taking steps to centralize admin roles are removing some of the least compatible tasks from their property management functions. That allows remaining staff members to focus on sales and service delivery, which is a better fit for their skill sets. They also create new and more specialized roles for team members who are good at, e.g., accounting. With greater specialization, operators can offer more meaningful career progressions.
Maintenance is perhaps the slowest of the service categories to change, but that is unsurprising for several reasons, not least that different property types require different skills. For example, the skill sets of an accountant or a leasing agent are transferable from one property to another. The skills needed to maintain a garden-style and a mid-rise property are quite different.
It's interesting to compare the executive view of the world and the realities of how companies evolve. The industry hype cycle may incline leaders toward leasing as a priority, but when the planning and execution start in earnest, admin roles are the more logical first step.
What we notice from companies that are achieving results in centralizing functions is that they are doing so by focusing on people rather than technology. There is a lesson in that for all operators.
If there's one piece of advice for operators considering centralizing the leasing model, it would be to start not with leasing but with property admin. There is less friction in moving these roles off-site than moving a function like leasing that relies on personal contact. And an operator that figures out how to centralize admin is more likely to succeed in centralizing more complex functions. This year's evidence indicates that this is the preferred route for an increasing number of successful companies.
