Track2Realty Exclusive: There is a school of thought within the sector which suggests the nature of the business is more suitable to be carried smoothly as promoter-driven. Though officially no one wanted to be quoted but some of the developers admitted to Track2Realty that the nature of real estate business demands more grounded entrepreneurs and not high flying professionals for whom more money in the sector is the only traction for job hopping.
“Most of the families now have second generation coming into the business and they are themselves well educated and qualified professionals. It is better to invest in them and groom them, since they are not coming on board as a stop gap career choice of a lucrative sector. Of course, this second generation qualified promoter also prefers to have professionals around him, but then the management control must be vested with the promoter only,” says a Noida-based developer requesting anonymity.
Another Mumbai-based developer agrees with this line of thought. According to him, when the market sentiments were bullish and foreign investors testing the Indian realty market, many of the relatively not-so-polished developers started hiring these white collared professionals to negotiate with their global counterparts in a language that they understood. Problem started when this skilled workforce started colouring the vision of the promoter and hence driving the management decisions.
The downturn, however, exposed many of them since they were enjoying the benefits of being in the right place at the right time. With sales nose diving, many of these strategists and marketing experts had no answer to offer.
“Look at the branding aspect of the business. For a promoter it is a mix of short-term goal of selling the project as well as the long term goal of creating top-of-the-mind-recall value. Whereas for a marketer, it is short selling the project which is the benchmark since he may not be looking forward to a long term career in the same company,” says the developer.
A Vice President with a leading MNC agrees to this premise saying unlike other sectors like FMCG, where a continuous brand campaign is directly proportional to the sales graph, in real estate dynamics of selling either through brokers, under writers or just plain marketing gimmick, is different.
Most of the professionals who joined real estate from other organised and professionally managed industries never felt at home. And hence their vision was to sell the project, and not create iconic brand, and then move away.
Some sector analysts believe it only makes sense for promoter-driven real estate companies to search for professional CEOs if companies have grown organically and have built a platform. Then only they would like to grow and probably list on the bourses. However, a survey of senior executives by Track2Realty at some leading and emerging real estate companies across the country shows that most believe the industry as a whole is ill-prepared for the management succession process, which could jeopardize a smooth transition of company leadership.
Ninety two per cent of the survey respondents said that real estate firms do not have adequate management succession plans, and nearly two-third do not feel confident that their firm could immediately select a new CEO if the promoter is forced to be out of operation. This suggests a disturbing lack of preparedness for management succession. Companies who claim to have succession plans in place are the ones where the children of promoters are having their studies abroad or trained on job.
“I see this as a huge challenge for the real estate industry. Not only does effective management succession planning reassure investors and employees of the firm’s ongoing and uninterrupted success, it drives the engagement, development and retention of top talent and strengthens the overall leadership bench of the firm,” says a consultant hired by some of the leading realty companies for HR services.
The nature of realty business demands one to get the hands dirty into every aspect, right from land purchase to material procurement and project execution. Many believe this is something that only a promoter can do. This is a fact which has been realised by even some of the fund managers and hence their foray into the business as a developer. However, the role of a professional in the realty companies has mostly been confined to their individual department alone.
…..to be continued
