A real estate broker and Roger Staubach reflect on sales-force compensation.
United Systems Integrators Corp. (#428) sounds like a company that builds computer networks or something equally tech-y. In fact, USI is the very definition of bricks and mortar: a commercial real-estate-services company based in Stamford, Conn. But it's OK that it doesn't sound like a traditional commercial real estate firm -- it doesn't broker transactions the way a traditional commercial real estate firm does either.
Founder and CEO Ed McLaughlin founded the company with two partners in 1991. Previously, he'd led a start-up group within the Trammell Crow Co. that billed itself as a one-stop shop for large clients. Services went beyond just buying and selling office buildings and included facilities management. Convinced that adding more services, like design and project management for tenants, would change commercial real estate, McLaughlin struck out on his own. "I bet on a trend," he says.
Today USI installs as many as 26 of its employees at the corporate headquarters of big clients, which include First Union and Walt Disney. Those architects, construction managers, financial advisers, and IT experts work on multiple projects for each client. USI charges a flat monthly fee. "Ninety percent of our revenues come from recurring revenue streams," McLaughlin says -- highly unusual in this transaction-driven industry.
The recurring-revenue model necessitates changes to long-standing industry norms. Because USI employs a lot of folks who don't earn revenues directly -- those who lay out space plans for new buildings, for example -- McLaughlin doesn't have plump margins to split with commission-hungry brokers. Instead, he pays his people a typical salary. "We knew the corporate-services model would only work on a salary-and-bonus basis," he says.
McLaughlin's maverick methods have landed him on the Inc 500 list. But will USI's sales continue on pace to pay for its cumbersome overhead? And, perhaps more important, will USI's ace salespeople migrate to rival companies where they won't have to share their bounty with a large, multidisciplinary staff?
Number of employees
United Systems Integrators (#428)
Staubach Co. (#91 in 1985)
Staubach Co. (2000)
The Salary Cap
If CEOs won huge, diamond-encrusted rings for making the Inc 500, Roger Staubach would have four. His commercial real estate firm, the Staubach Co., made the list every year from 1985 to 1988. A 31-year industry veteran, the former football star agrees with USI's Ed McLaughlin. "It's not just a broker trying to show a customer a building" anymore, Staubach says. "It's not really a transaction; it's providing some strategic thinking up front." About 20 % of Staubach's revenues come from the long-term contract-type business that USI courts; the other 80% come from transactions like a local client moving across town.
Staubach believes that reports of the death of the commissioned broker are greatly exaggerated. "Salary plus bonusing is the way to do it, but our industry is not there yet," he says. If you don't pay some of your veteran brokers on commission, "they might go work for someone else."
Still, Staubach notes that upstarts like McLaughlin are definitely changing the commercial real estate industry. Perhaps because he has seen a similar pattern in professional sports, the former quarterback recognizes that a young, muscular competitor can come along and change the way the game is played. Great entrepreneurs, as they mature, don't hold that longevity makes them wise. Instead, they regard brash newcomers with a wary, expectant, and respectful eye.