Thursday, September 14, 2017

Management and Transactions Costs

About two and half  years ago I began working for my local apartment complex where I lived as a student. I got an interview as a sophomore in college and immediately started working about a week after my interview. Working for this organization really gave me an understanding how big management and transaction costs are related and affect an organization overall in terms of effectiveness and productivity.

The first few weeks we can say were a bit rough and unproductive. The main reason for this was due to the leasing manager (my superior) that was in charge of training me (a housing consultant). My job consisted of opening up the models and making sure they were well kept, opening the leasing office, preparing coffee and cookies, answering phone calls, persuading people to sign a lease, explaining the lease agreement, entering new prospects into the computer software, following up with prospects, creating folders for people that signed, giving prospects tours of the apartment, filing paperwork, making keys, receiving packages, closing, and always trying to resign current residents. Let's such say that the housing consultants had more than enough work to do. Because of this, we can say that the Leasing Manager had quite a bit of training to do with new employees. In my case, however, that was not the case at all. I pretty much had to learn everything by myself with hardly any training. When I did have questions, I had to ask my fellow housing consultants because there was a bit of tension between my manager and myself at the time that arose because of a lack of communication. All of this led to this slow productivity in my first weeks of "training".

This personal example allowed me to understand transaction costs a bit better. Had I been properly trained in a much timelier manner, I would have been able to close leases a lot better and sooner, instead of losing a prospect for good and not signing a potential lease at all. This would have added to faster and more revenue to the organization in a shorter period of time. Also, the fact that once I got the hang of things meant that I was almost at the same level of knowledge as my Leasing Manager. Meaning that she often did not know common leasing knowledge and had to ask us for help leading to a further lack in productivity and time management.

Had this manger been more qualified and had the interview process been more selective, this domino affect of transaction costs could have been avoided. This lack of leadership also caused tension and lack of motivation which made for a pretty tense working environment overall.

A couple months later, this manager was finally let go for a silly mistake she had done and was rightfully replaced by one of the housing consultants. Immediately after this we saw an increase in closing effectiveness and an immediate increase in productivity. We eventually started reaching and passing our leasing goals which were previously hardly met. All in all, we see here how management plays a big role when it comes to increasing or decreasing transaction costs for an organization.

1 comment:

  1. Something that might be of interest to you in telling this story is that the nature of the off-campus student housing market changed, somewhere between ten and fifteen years ago, when the campus embarked on a policy of expanding undergraduate enrollments. The high rises that are all over Campustown now, didn't exist then. Not that landlords were ever saints, but I believe things changed when property management companies that were not located in Champaign began to run these rather large apartment complexes. It really did change things.

    On the flip side of this, some international students, particularly from China where there was the one child policy, had a fair amount of income to spend on housing. These factors, if you will, are part of the background that provides a setting for your story.

    One other factor not in your story (which was pretty much from the personal view only) is what the occupancy rate was in the building where you worked and what it was like in other properties your company ran, as well as in rival companies' apartments. You said you lost some potential closes because you weren't trained properly. But perhaps there was an excess supply situation with apartments. It would be good to consider those underlying market conditions as a separate but important factor for determining the outcomes your report.

    I did have one question about what you wrote in the last paragraph. My impression is that the student housing market is quite seasonal. If that is right, how does the timing of when the manager was let go compare to when the market is active? Also, I don't really understand how the housing market works for transfer students. But if they are only getting to campus a few weeks before the semester starts and they need a place, I'd imagine the market is pretty active then.

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