Every month, Kate Teves, HR consultant, recruiter and founder of The HR Pro, answers Realtors’ questions about anything and everything related to human resources. Have a question for Kate? Send her an email.
Q: How should real estate business leaders respond to the growing gap between rising talent expectations and shrinking margins?
Kate: That’s an excellent and increasingly pertinent question. We’re witnessing a subtle yet significant standoff within real estate businesses across Canada, and indeed, globally.
This isn’t a phenomenon that appears on market reports or in listing presentations. Instead, it’s playing out behind the scenes, impacting critical areas like hiring discussions, compensation negotiations, and the often-uncomfortable silence that follows when a prospective candidate reveals their salary expectations. On one side, broker-owners and team leads are grappling with a challenging economic landscape: softer sales volumes, increasingly tight margins, and steadily escalating operating costs. On the other, the talent pool – encompassing both seasoned agents and essential administrative staff – is demanding more: higher commission splits, more robust compensation packages, greater flexibility in work arrangements, and more comprehensive support systems. The traditional financial models that once sustained the industry simply aren’t yielding the same results.
A Real Estate Market That Has Shifted, Not Simply Paused
The past few years have unequivocally demonstrated that the real estate market does not rebound merely on command or historical precedent. Following the unprecedented highs experienced from 2020 through early 2022, the industry has embarked on a period of significant recalibration. While brokerage operating revenues showed nascent signs of modest recovery in 2024, the sobering reality is that expenses concurrently increased at an even faster pace. This imbalance has placed additional, critical strain on margins that were already precariously thin.
Furthermore, current economic projections strongly suggest that while an element of stability is gradually returning, transaction volumes are likely to remain below long-term averages well into 2026. This isn’t just a temporary dip or a seasonal slowdown; it signals something far more profound: a sustained, fundamental shift in operating conditions. This is no longer a pause from which we can expect a swift return to previous norms. This is a new economic and operational environment for the real estate sector, demanding a proactive and evolutionary response from its leaders.
Despite this clear evidence of a paradigm shift, many entrenched hiring and compensation strategies within brokerages continue to mirror a very different market dynamic—one characterized by high transaction volumes, rapidly closing deals, and sufficient momentum to effectively mask underlying operational inefficiencies. In that bygone era, these inefficiencies might have been tolerable, even invisible; today, under tighter margins and heightened scrutiny, they have become glaring liabilities that undermine profitability and talent retention.
To thrive in this new landscape, real estate leaders must acknowledge and adapt to these enduring changes, moving beyond temporary fixes to implement sustainable, forward-looking strategies that align with current market realities and future projections. Ignoring this fundamental shift is no longer an option; proactive evolution is imperative for long-term success and competitiveness.
Navigating the Modern Real Estate Talent Paradox
Real estate has always possessed a unique, often intricate, relationship with money. Agents, by their very nature and the structure of their compensation, are highly fee-conscious and possess an acute understanding of financial negotiations. This inherent discipline is, in fact, a cornerstone of what makes them effective and successful businesspeople. However, this also introduces a natural, often subtle, tension: these same professionals, who meticulously negotiate around commissions and brokerage fees, simultaneously expect robust support systems, responsive administrative services, cutting-edge technology infrastructure, and a reliable, enabling environment behind them.
Meanwhile, the employee side of the business – the vital administrators, marketing professionals, transaction coordinators, and office managers – has been profoundly shaped by a broader, evolving labor market. In this wider landscape, wages have seen significant increases, and employee expectations have evolved dramatically. Flexibility, once considered a desirable perk, is now widely viewed as a fundamental baseline expectation. This includes not just flexible hours, but also hybrid work options, opportunities for professional development, and a supportive, inclusive work culture.
The convergence of these two distinct trends creates a significant pressure point that many real estate leaders are now acutely feeling. Talent expectations are rising across the board, pushing demands for better compensation and more accommodating work environments, precisely at a moment when available financial resources are becoming increasingly constrained due to market pressures. As one experienced broker recently articulated, only half in jest, “We’re trying to deliver a full-service, premium experience on a discount margin, and everyone’s surprised when it feels incredibly tight and challenging.” This encapsulates the core dilemma: balancing the need to attract and retain top talent with the imperative to maintain financial viability in a leaner market.
Successfully navigating this paradox requires innovative thinking beyond traditional compensation models. It necessitates a holistic approach to employee value propositions, emphasizing non-monetary benefits, career growth opportunities, and a strong organizational culture that can attract and retain talent even when direct financial incentives are limited by market realities. The ability to articulate and deliver on this comprehensive value proposition will be a key differentiator for successful brokerages in the years to come.
The Core Issue: It’s Not Just Hiring, It’s Strategic Design
What frequently emerges from in-depth conversations with real estate leadership teams isn’t merely a “hiring problem” in the conventional sense of finding qualified candidates. Instead, it points to a much deeper, more pervasive structural issue. Many real estate businesses continue to operate with team models and organizational designs that were originally conceived and built for the pace, volume, and inherent profitability of a previous, more buoyant market cycle. During those busier periods, roles were often created and added quickly, sometimes haphazardly, solely to keep pace with an overwhelming demand. New responsibilities were frequently layered onto existing positions without a fundamental re-evaluation of workflows, efficiency, or overall strategic alignment. Consequently, teams often grew—not through deliberate, strategic design or careful planning—but through a process of accumulation, where functions were added reactively as needs arose.
This incremental, accumulation-based approach can function adequately, even thrive, when revenue streams are consistently strong and plentiful enough to absorb inefficiencies. However, when the market inevitably slows, and revenue flows become constrained, that very same organizational structure that once facilitated growth can rapidly transform into a significant financial liability. The excess capacity, redundant roles, and blurred lines of responsibility become unsustainable burdens that eat into already thin margins.
The natural, often knee-jerk, instinct during these slower periods is to implement sweeping cost reductions. Yet, experience shows that across-the-board cuts—such as reducing all support staff by a certain percentage or universally lowering commission splits without strategic thought—rarely deliver the intended long-term results. More often, they introduce new operational strain, negatively impact employee morale, and can inadvertently compromise critical functions that are essential for future recovery and growth. Such cuts can lead to a loss of key talent, a decrease in service quality, and ultimately, a weakening of the entire organization.
A far more effective and sustainable response is typically less dramatic but significantly more strategic: a meticulous process of understanding precisely where true value is created within the business, and then intentionally protecting, nurturing, and optimizing those core areas. This involves a comprehensive review of every role, process, and expenditure, identifying opportunities for streamlining, automation, and reallocation of resources to maximize impact and efficiency. This strategic approach shifts focus from indiscriminate cost-cutting to intelligent resource allocation, ensuring that every dollar spent contributes directly to the business’s strategic objectives and long-term viability.
Identifying and Plugging Business Leaks: A Strategic Imperative
In the current challenging market, it is not just advisable but absolutely imperative for real estate broker-owners to undertake a thorough and critical review of their existing operational frameworks. This begins with a meticulous examination of all compensation structures. Are they competitive enough to attract top talent, yet sustainable given current margins? This goes beyond mere commission splits to include benefits packages, performance-based incentives, and non-monetary perks that contribute to a holistic employee value proposition.
Equally vital is the need to ensure that roles and expectations are clearly and unequivocally defined. Vague job descriptions and ambiguous responsibilities lead to inefficiency, frustration, and a lack of accountability. Every team member should have a crystal-clear understanding of their contributions, key performance indicators (KPIs), and how their role directly impacts the brokerage’s success. This clarity forms the foundation for honest, constructive conversations with team members about individual performance, productivity, and the evolving realities of the market.
Procrastination in addressing these issues is a costly mistake. Waiting until a problem becomes undeniable, or a crisis emerges, invariably makes the problem exponentially more expensive to resolve, both financially and in terms of lost opportunities and morale. Early intervention allows for considered, strategic adjustments rather than panicked, reactive cuts.
Beyond compensation and roles, it is crucial to methodically examine where the business might be “leaking” time and money. This involves scrutinizing operational inefficiencies, redundant processes, and underutilized resources. If the current workload or market conditions no longer support the existing salary or commission model for certain roles, owners must be prepared to adjust how support is structured. This could involve consolidating roles, leveraging technology for automation, or even considering outsourcing non-core functions to specialized providers. Tightening accountability policies, implementing clear performance metrics, and conducting regular performance reviews become non-negotiable elements of efficient operations. Furthermore, a critical evaluation of whether certain roles should be fundamentally redesigned, or even eliminated and replaced with more strategically aligned positions, is essential.
The overarching key to navigating this shifting landscape is to initiate changes early, document them meticulously, and communicate them transparently to the entire team. Crucially, leaders must resist the perilous assumption that yesterday’s arrangements, compensation models, or team structures will continue to function effectively in tomorrow’s fundamentally altered real estate market. A proactive, adaptable, and strategically designed approach to human resources and organizational structure is not just a best practice—it is a prerequisite for sustained success and growth.
