funnel lease CEO, on common centralization myths and how to avoid centralization pitfalls.
If the multifamily industry shared a list of trending topics, I think centralization would trump it. As with any buzzword or trend, there is a lot of confusion about what centralization is, its potential benefits, and what parts of a business can actually be centralized.
This misunderstanding of the basics of centralization is causing a rush of “solutions” by vendors rushing to prescribe answers to centralization without diagnosing the underlying goals of operator centralization.
To be clear, centralization is a complete business transformation that involves three key elements: organizational change (how teams are structured), operational change (who does what), and technological change (technical solutions needed to implement these changes). Think of centralization as a three-legged crutch; without a full commitment to all three components, it will fail.
Let’s debunk five common centralization myths to get you on a smooth centralization journey.
1. Centralization is only for major operators.
This is a ubiquitous myth in multi-family homes and a close cousin to the “grass is always greener” idea. For any multi-family property management company, regardless of size, centralization requires operators to transform the way teams are structured, which teams do what, and the technology solutions needed to drive the changes.
In other words, centralization is not a quick fix and it is a business transformation, regardless of company size. In some ways, centralization is even more relevant for smaller and medium-sized businesses because it levels the playing field for those who operate with fewer resources and back-of-house capabilities. A centralized model — powered by the right technology — leverages resources and maximizes marketing budgets, resulting in cost savings for the owner, less work for the team, and a modern apartment shopping experience for the customer.
By centralizing, operators are often able to endure tumultuous external forces with greater ease and outlast their weight.
2. Centralization is not for external operators.
External administrators are responsible for properties belonging to different owner groups. Lead sharing is where many of our thoughts go when we think of centralization, and this association has led many remote managers to believe that centralization wouldn’t work for them.
Again, centralization is complete corporate restructuring and transformation. Centralized teams can work on the portfolio and ownership groups to perform back-of-house administrative tasks such as leasing, renewals and follow-up. Centralized sales teams for multiple properties can work with different property groups to conduct tours and provide excellent customer service to potential tenants. You can use centralization to create a better experience for the tenant by helping them find their next home easily, which in turn increases their propensity for loyalty.
I would also urge operators to think bigger. Within the hospitality industry, lead sharing between owner groups is a common practice within loyalty programs. Like Marriott Bonvoy’s loyalty program, with lead-sharing agreements between group owners, tenant loyalty programs wait for outside managers to take charge.
3. Centralization equals automation.
Centralization and automation provide different efficiencies. AI reduces lead follow-up time because it is built for speed. But harnessing AI is not the same as fundamentally restructuring the intersection of people, processes and technology to create efficiencies. Properties will still be staffed the same way with the same proportions, and your teams will not always play to their strengths. AI is an essential part of any tech stack, but equating it with centralization is a mistake.
4. Centralization is not good for lease teams.
Everyone competes for the best and brightest in the labor pool. I believe that companies that centralize are often better positioned to attract top talent. With the big layoff underway, retaining and hiring talent is a top pain point for many property management companies.
Let’s rewind for a moment to understand the context. The workforce model for property management companies hasn’t changed much in decades. The status quo ratio is one leasing professional per 100 units in an apartment community. However, technology has changed dramatically since this workforce ratio was introduced.
Many tasks can now be optimized through AI and automation or managed remotely by centralized teams. Administrative functions such as processing lease papers and applications can be handled more efficiently by teams dedicated to those unique functions, allowing the sales force to focus on leasing and customer service. This creates a workforce model that aligns roles with strengths rather than roles with number of units. This can help create a career path that rewards team members for what they are good at.
5. All centralization is the same.
When business intelligence (BI) was new to multifamily (around 2012 to 2015), it seemed that every existing vendor claimed they could provide their customers with business intelligence tools, from real solutions to simple spreadsheets. It became clear that reports are not BI. I am sharing this story as a “buyer beware” warning.
History repeats itself. As multiple families embrace centralization, there is a stream of technology that claims they can too. Many of the centralization solutions are workarounds – linking guest cards or moving guest cards from community to community – that cannot create the streamlined centralization that operators demand.
Most multi-family technical solutions are designed around the property, creating double records for tenants of multiple properties in the same owner’s portfolio and limiting the ability of operators to centralize administrative tasks to a central team. Centralization is still out of reach because the technology is designed in such a way that teams must either open 17 tabs in an incognito browser or log in and out of property-level systems across the portfolio to understand what’s going on.
Centralization is a future business model.
This one is not a myth. Operators are the driving force behind the centralization levy. They are restructuring every facet of their business, from how they staff their properties, to which team members do what, reducing costs, increasing productivity, all while introducing technical solutions that enable them to work in this new model.
I believe that centralization is the future default multi-family model. Prepare your business for success on your centralization journey by avoiding the common misconceptions about centralization I’ve covered.