A full one-third of the compensation paid to non-controlling shareholder real estate CEOs is variable, according to the 2021 RealTrends Brokerage Compensation Report. This is up considerably from 2016, when the last report was published. “A great thing happened over the past five years,” says Steve Murray, senior advisor to RealTrends. “Brokers have shifted to more variable compensation based on performance. Non-controlling CEOs are getting bonuses based on brokerage profitability.”
That’s true in many of the leadership positions at a brokerage today. Regional sales managers, general sales managers and office sales managers have a much higher variable compensation — earning bonuses and benefits — than they did when RealTrends published this report in 2016.
Breaking down the numbers
The RealTrends Brokerage Compensation Report offers a compensation analysis for 12 leadership positions within a real estate brokerage firm. The report is broken down by region — Midwest, Northeast, Southeast, West — as well as size of the firm. In the survey, large firms have $54 to $400 million in gross commission income (GCI) and 850-1,700 agents. Medium-sized firms have $37-$53 million GCI and 390-415 agents, and small firms have $4 to $28 million GCI and 174-350 agents.
“When we started publishing this report in 2001, we found that variable compensation for sales managers, who are focused on recruiting, was about 15% to 20% of their salary,” says Murray. “So, they had a relatively high base pay. How do you expect them to perform in certain measurable areas like recruiting and production? In the beginning, compensation wasn’t structed that way. The good news with this current survey is that it’s changing.”
Sales managers’ comp hasn’t changed much
Compensation for sales managers as a percentage of gross margin hasn’t changed much since RealTrends first did the Brokerage Compensation survey in 2002. The national average is 9.9% of gross margin, with a high of 16.5% found in the Southeast region. Medium-sized firms paid about 12.6%, while small brokerage firms paid about 9.2%, the lowest of all sized firms.
When you look at sales managers’ compensation as a percentage of gross margin, it is highest among medium-sized firms. Regionally, sales managers’ compensation is highest in the Southeast. But, in terms of total dollar compensation, the West region is the highest and large firms paid the most in terms of actual dollars.
Higher base, lower bonus
One area where variable compensation hasn’t changed, however, is that of chief marketing officers (CMO) and chief technology officers (CTO). Bonus compensation as a percentage of gross margin was surprisingly low, possibly because performance for these positions is much more difficult to measure compared to sales managers. Other positions where bonuses make up a much lower percentage of compensation include human resource director, director of training and in-house legal counsel.
For chief financial officers (CFOs), the best place based on compensation was in the Northeast region, but pay was nearly equal to those in the Southeast region. Large firms, of course, paid out the most in terms of actual dollar compensation.
Chief Marketing Officers/Directors of Marketing were paid 1.2% of gross margin on a national average basis. The Western and Southeastern regions both clocked in at 1.5%.
To dig into all the numbers, including base, bonus, benefits broken down by region and brokerage size, go to https://preprod.housingwire.com/broker-study/.