Download affiliations of independent firms who have voluntarily chosen to

A Note on Affiliation
In the course of my consulting I have gained quite a bit of experience with commercial
real estate networks: affiliations of independent firms who have voluntarily chosen to
become partners under a common brand. These affiliates aim to support each others’
market initiatives and to transact business exclusively with one another when the
occasion arises. Unlike national firms, who directly own or franchise local offices,
affiliates operate with some degree of autonomy, but usually a lower level of support
services from the “parent” company.
As a matter of due diligence I require my clients to look carefully at the value of their
present affiliation compared to other alternatives (including not affiliating at all) as part
of their strategic planning process. What I’ve discovered is that the need to affiliate is not
automatic and the benefits to be derived from affiliation no self-evident. Affiliation is a
sensible strategy for some companies and not for others; all affiliations do not present the
same advantages to the affiliate.
Here’s what I’ve learned. There are really only two reasons to affiliate, generally dubbed
offensive and defensive strategies.
Offensive affiliation is based on the belief that being part of a network will increase
business coming into one’s market from referrals from other network members and/or the
assumption that a national brand will stimulate business from local clients who seek
access to other regions or see a national firm as a safe choice. A few, but not all,
recognize the obligation to send business out if the model is to work.
Defensive affiliation is based on the notion that local clients expect their commercial real
estate provider to have a connection to national business, that an affiliation is indicative
of the firm’s professional stature in the same way that a website, blog or membership in
the local Chamber of Commerce is viewed.
Both see training and networking opportunities through conferences as a benefit
In my experience with GVA, ONCOR and NAI the majority of members are affiliated for
defensive reasons. The costs of their annual licenses are seen as a write-off for
marketing. These networks are destined to under-perform, because the majority never
make a commitment to use the interconnections to make deals. Too often they wait for
business to come in or do little more than pay their dues, brand their signs and attend
meetings.
I, of course, have tried to make the networks work. To be honest, however, unless the
affiliate is very knowledgeable about how to use its membership many of the benefits of
joining under a common brand go unmet.
One would think that the managers and owners of these networks would be frustrated by
their continual underperformance. They are, but for most network owners the network is
sufficiently lucrative in terms of annual subscriptions that the incentive to spark office-tooffice business is not that great. I’m not saying they wouldn’t want to get their cut of
cross-office transactions, but that to achieve such a model would require significant more
investment in advertising and support than they want to give. Much lip-service is paid to
b-to-b business, but little is done to make it happen and when it does occur (usually
through the initiative of a couple of entrepreneurial brokers) it is treated by network
owners and operators more as “found” money than the by-product of a well thought out
strategy.
All this is preface to the more salient question: should a firm affiliate?
The answer is that the choice to affiliate depends on the strategic direction of the firm and
the degree to which the office is clear enough about what it is trying to do and attempting
to become to take full advantage of the benefits offered by the network.
That presumes, of course, that there are benefits to be derived from a particular
affiliation.
Put simply, a commercial real estate affiliation is not a marriage or friendship. It is
pursued solely because it is in the strategic self interest of the firm as a business. And is
not cynical to say that the owners of the network look out for their interest.
I believe, however, network owners and operators have a much better idea of what their
members can provide them then do the members have of the networks they join.
If a potential member knows exactly what can be derived from the network then they can
decide whether its annual fee to affiliate or a long term contract to brand makes sense.
What can be derived falls into several categories:
Direct business benefits: business across the transom from outside one’s market or
from within one’s market.
Indirect business benefits: visibility, reputation and credibility from branding and
from the advertising and promotion provided by the network.
Direct operational benefits: information systems, access to data, training, shared
best practices, technology, tools, buying-power (derived from the economy of
scale becoming part a volume consumer).
Indirect operational benefits: the ability to recruit and retain brokers who would
benefit from the services and connections the network provides.
All this presupposes that:
The firm has clients who seek or think they might seek out-of-market business.
The firm has brokers who are interested in handling in-bound network business or
finding partners for out-bound business.
The firm needs the promotional power and credibility of a national brand.
The network provides technological or training enhancements that leverage the
firm’s internal resources.
If any of those conditions hold, affiliation makes sense.
If affiliation makes sense, the choice of the network comes down to which one provides
the most value for the investment (fees, time, commission splits, autonomy).