First Quarter 2017 Benchmark Results for Mystery Shops and Resident Surveys Executive Summary

Ellis, Partners in Management Solutions is proud to offer an integrated solution to improving performance for your onsite teams, increasing lead conversion and resident retention. For 33 years, we have been assisting apartment management companies and owners to achieve their business goals. Our mystery shops, resident surveys, and training are resources that can be used either independently to address specific needs or together as a turnkey program for ongoing performance optimization. They’ll help you complete the cycle of understanding what the customer wants, to defining and focusing on what the customer needs, to measuring if the customer is actually getting what they desire. As we approach the year 2020, the ability to give external customers what they really need and want will depend on how well supervisors do the same for their internal customers – the Millennials. This generation of employees is trending to comprise more than one in three adult Americans by 2020 and 75 percent of the workforce by 2025. What seemed like lightyears away is now quickly approaching. Our letter series this year “Millennials: Identifying Missing Pieces in the Workplace” will focus on four key areas: basic needs, need to contribute, feeling of belonging, and personal growth. In an effort to help our customers attract, engage, and retain this powerful group of talent, we will begin by answering the question on basic needs, “Do we give them what they want and need at work?”

We thank you for joining us each quarter as we convey combined Benchmark results and sales trends, and offer practical improvement ideas.

ELLIS’ FIRST QUARTER 2017 BENCHMARK: OVERALL RESULTS

Mystery Shops

Ellis benchmarks mystery shop performance on the 10 key Benchmark questions and the Customer Experience. Companies can qualify for platinum, gold, silver, or bronze level based on their company’s overall Benchmark score for the quarter.

In 2016, the overall average Ellis Traditional Multifamily Industry Benchmark score across Ellis’ entire database of eligible shops¹ was 85%, representing 41,894 shops; the score remained stable in First Quarter 2017 at 85%, representing 11,536 shops. In 2016, the overall average Ellis Customer Experience Benchmark score was 3.5; First Quarter 2017 also reflected an average of 3.5. The Benchmark results for your tier and rank are included in the chart below. (Note: No tier or rank is provided if minimum requirements² are not met.)

Resident Surveys

The Ellis Loyalty Benchmark identifies and recognizes the customer experience performance of companies subscribed to the Ellis Resident Survey Program. It evaluates performance on 5 key touch points (lead conversion, move-in, maintenance, renewal, move-out) of the prospect and resident journey. The percentage of surveys responded to by the onsite team and the average number of days it took for the team to respond are also measured, as these two factors impact the customer relationship and overall loyalty. Utilizing customer loyalty as a metric allows customer-centric companies the ability to forecast three specific customer behaviors: likelihood to convert/renew, willingness to pay more, and likelihood to recommend.

Effective Second Quarter of 2017, Ellis changed the loyalty score to a scale of 0%–100% from a scale of -100%–100%. The change in scale is reflected in the scores for this quarter (see chart below):

The overall average Ellis Loyalty Benchmark in 2016 was 73%; the score held at 73% for First Quarter 2017. In 2016, the on-site response rate averaged 78%; First Quarter 2017 reflects an increase to 85%. Teams took an average of 5.4 days to respond in First Quarter 2017 versus an average of 7.8 days in 2016.

CONGRATULATIONS ELLIS BENCHMARK TOP PERFORMING COMPANIES 1ST QUARTER 2017

Mystery Shops

Ellis Traditional Benchmark Platinum Level AchieversTier 1 (70 or more completed shops)

• Gables Residential Services
• Western National Property Management

Tier 2 (30 – 69 completed shops)

• IMT Residential
• Legacy Partners Residential, Inc.

Ellis Customer Experience Benchmark Gold Level AchieversTier 1 (70 or more completed shops)

• AMLI Residential
• Windsor Property Management Co / GID

Tier 2 (30 – 69 completed shops)

• Cardinal Group
• Griffis Residential
• IMT Residential
• Legacy Partners Residential, Inc.
• LMC, a Lennar Company
• Richman Property Services, Inc.
• ZRS Management, LLC

Resident Surveys

Ellis Best in Class AchieversTier 1 (1,600 or more units)

• Block Multifamily Group, LLC
• CWS Apartment Homes, LLC
• Lincoln Property Company
• LMC, a Lennar Company
• Manco Abbott
• Olympus Property
• Simpson Property Group

Tier 2 (1,599 or fewer units)

• Carlisle Property Management
• Eastern Property Real Estate
• Mack Urban Communities
• Richmark Properties
• Sunrise Management & Consulting
• TM Realty Services

*Companies are listed in alphabetical order
**Customer Experience Benchmark gold level achievers are recognized as there were no platinum achievers for this period

ELLIS’ FIRST QUARTER 2017 BENCHMARK: QUESTION/TOUCHPOINT RESULTS

Mystery Shops

How did we do?
The charts below reflect the average score of Ellis’ entire database of eligible shops1 for each of the 10 key benchmark questions and the Customer Experience by category, as well as the combined overall Benchmark scores for First Quarter 2017.

Resident Surveys

How did we do?
The chart below reflects the average scores across all Ellis Resident Survey companies for each survey touch point for First Quarter 2017, as well as the combined overall loyalty score and average accountability performance results.

MILLENNIALS:  IDENTIFYING MISSING PIECES IN THE WORKPLACE

Millennials (aka Gen-Y), those born between 1977 and 1995, may be the most studied generation in history. While colleges have taken great strides to ensure these students instantly feel welcomed and fulfilled, integrating, engaging, and retaining Millennials is a continual challenge for business. Something is missing in the workplace. Responsive companies have picked up on the mass exodus of Millennials from traditional environments and have made changes to their policies, buildings, and even culture to welcome the younger workforce. But is it enough? Identifying Missing Pieces in the Workplace, our letter series for 2017, will explore and present a combination of trending data, industry insight, and honest feedback from Millennials who are willing to share their multi-family industry experience with us.

Why are Millennials more likely to job-hop and move freely from one company to another as compared to other generations? While there are many potential reasons, low engagement in the workplace could be close to the top of the list. Recent Gallup research shows that only 29% of Millennials are engaged at work and 16% are actively disengaged. The majority of Millennials (55%) are not engaged. Is it possible that many Millennials actually do not want to switch jobs, but companies are not giving them enough compelling reasons to stay? According to the Gallup poll:

• 21% of Millennials have changed jobs within the past year and 93% left the employer to change their role.
• 60% of Millennials are open to a different job opportunity and 36% report that they will look for a job with a different organization in the next 12 months if the job market improves.

In the multi-family industry, the Leasing Consultant position is the entry-level position which attracts many Millennials coming straight out of college or simply seeking a change or a new opportunity. When the initial excitement fizzles, some set their eyes on a quick advancement, while others begin to realize that it is a tough high-paced job with intense responsibilities which might not match the level of pay or time investment. According to strategic planning consultant Leigh Branham, there are seven main reasons why employees leave a company:

1. The job or workplace is not what they expected.
2. There is a mismatch between the job and person.
3. There is too little coaching and feedback.
4. There are too few growth and advancement opportunities.
5. Employees feel devalued and unrecognized.
6. Employees feel stress from overwork and have a work/life imbalance.
7. There is a loss of trust and confidence in senior leaders.

While members of the Baby Boomer Generation and Generation X are more likely to put their head down and work through most of these reasons, the same cannot be said for the Millennials; they will leave. Yet, if they stay, the Ellis Resident and Employee Survey data provides us with a refreshing piece of detail; they are less likely to take out their job dissatisfaction on the customer. When these employees stay, it is because they love helping residents and making a difference and love the people they work with – in other words, they are engaged.

1. Do Millennials receive the support they want and need to excel at their job?

While many companies in our industry offer training, promote a unique culture, encourage flexibility when it is feasible, and attempt to provide an aggressive compensation package, the Leasing Consultant position has an extremely high annual turnover rate. Although it is not uncommon for entry-level positions to experience higher turnover, there may be ways to reduce this by strengthening the direct supervisor/employee relationship. Location Labs, a mobile security solutions provider, enjoys a 95% employee retention rate. This is remarkable regardless of the industry or pay-scale. COO, Joel Grossman believes that you must make the employee-employer relationship personal, “You can have only one kind of relationship with people: a personal one. Use any other lens, and everyone you meet becomes just a metric.” Could this be a missing piece in our industry? Interestingly, when they screen resumes, they do not look for specific technologies or skills. They look for results. Over 30% of their hires in 2015 started their careers in completely different role or field. “We’ve found that candidates with this type of background have the underdog grit that allows them to be successful here,” says Grossman. “We’re not overly impressed with pedigree. We let demonstrated growth be our primary filter.” Their leaders are ready, willing, and able to provide employees the support they need to excel in their field.

Do Property Managers have the time, patience, experience, and skillset to mentor and encourage their employees? One of the Millennials we interviewed shared frustration with non-Millennial supervisors who do not understand their incessant desire for continuous feedback and development; “I hate the thought of complacency. A weekly one-on-one meeting to develop skills and discuss growth potential or succession planning would be incredibly valuable to me.” She went on to share, “I am always thinking about what I can do to better develop myself in my current position. I get antsy very easily.” This Millennial clearly debunks the whole “they are lazy” theory, yet her responses speak to the Gallup numbers listed above and the importance of the personal side of business. When it comes to providing support in the workplace, employees are depending on their direct supervisor. If there is no leadership, or tension exists in the office, the enjoyable work becomes a job, and then they are likely to leave.

“The single biggest decision you make in your job…is who you name manager. When you name the wrong person manager, nothing fixes that bad decision. Not compensation, not benefits – nothing.” – Jim Clifton, CEO Gallup

“Employees quit managers, not brands. Promoting someone because they get things done isn’t the only criteria. Those managers with poor interpersonal skills will be tolerated by a certain type of employee, but the best employees will move on quickly. A manager’s main job is to develop a crew who feels it is their business, and not leave them feeling like they are a cog in a wheel.” – Bob Phibbs, The Retail Doctor

The right tools and the right support come from the right leader. Too often we see successful Leasing Consultants or Assistant Managers promoted to Property Manager. Some of these individuals know how to keep the engine moving and keep the business profitable, yet they lack compassion or emotional intelligence. They simply know how to keep their boss and owner happy. Then there are Property Managers who know how to lead, communicate, influence, inspire, and build up their employees to do things that align with the company’s goals regardless of their experience or generation. They make things happen without a carrot or a stick. Is this the missing piece in your leasing office?

2. If you were to quit your job tomorrow, what would be your reason?

We asked our Millennial group this question and the answers did not include money. Overwhelmingly, they revealed lack of opportunity and growth potential as primary reasons. They shared a common desire to be exposed to the things they did not know, and to experience the bigger picture first hand. One individual stated, “If I quit my job tomorrow, it would be because I could no longer see any growth potential for myself within the company. I refuse to be complacent or labeled as a Millennial who is impatient.” It is interesting that the “impatience” label many choose to paste on this generation often stems from a generational difference in workplace expectations. They simply are not willing to wait 20 years to climb the corporate ladder. In fact, our interviews revealed that very often they are willing to jump into an unknown industry just to gain higher exposure and greater opportunity. “Currently, there is little growth for me where I am, and it is at the cost of waiting until ‘I am older’ to get where I need to be,” shared one of our interviewees. It is not worth the wait. Still another shared a story about a friend who achieved great success with a well-respected investment firm, yet they did not receive enough exposure at a high level. They were not able to participate in the things they were not knowledgeable about. This discouragement led them to leave their position and transition into entirely different industry. Employment ads which highlight “excellent room for growth and potential”, move to the top of their list. To a Millennial this means opportunity for exploration and exposure to any piece of the company puzzle they desire when they believe they are ready for it, regardless of tenure, age, or experience. Their parents, who are mostly Baby Boomers, told them, “You can be anything you want to be,” and they believed it.

If you want to take a bite out of turnover, great talent and potential should be embraced and explored quickly. The first three months of employment is the honeymoon period, according to HR consultant Astron Solutions. They have discovered that how a person is treated during their first 90 days has more impact on retention than rate of pay. Retention rates are higher when employees feel respected, appreciated, and understood. This can be attained by developing a relationship of mutual understanding and ongoing one-on-one communication. Only then can early burnout, a mismatch in person/job, and a desire to explore additional opportunities in the industry be easily detected. What is your new-hire strategy during the first 90 days? Is it simply a probation period where direct supervisors simply manage with the “will they make it” mentality?

3. What can our industry do that would better meet Millennials’ wants and needs in the workplace?

The Millennials we interviewed all had previous multi-family industry experience, yet they moved on to different career paths. The insight they provided was invaluable. One particular individual shared, “I want to be in a position where my pay and growth are based on my production and not how long I stay in the office. I moved to a job with no earning ceiling but also no guarantee of income or security. It was the right move for me and has exceeded my expectations.” They seem to have no fear in taking a career risk. Unlike their parents, they are more fearful of remaining at a company too long, becoming stagnant or insignificant, or not achieving their full potential. We have summarized some of their additional comments below:

• Training is #1. We need it and we want it! It should be ongoing.
• We love teambuilding. We would like opportunities to collaborate and wrestle with some big ideas.
• Leasing Consultants do not want to work every weekend. They have and want a life outside of work. The Manager, Assistant Manager, and even a Regional Manager should work one weekend a month to cover the office.
• It would be really nice to foster community within each team. Closing a community down for the day to enjoy a day with the team would be great. You could partner with a nearby office to coordinate coverage, too.
• PTO for maternity leave is a huge perk for those wanting to start a family. It is becoming the norm in other industries.
• Wellness programs are a value but will not determine if I stay or leave.
• Managers should be able to quickly identify those who wish to remain in leasing and those who wish to promote. There should be a constant focus on preparing the next generation of leadership at all levels.
• Avoid the “desert island” effect at the onsite level. Corporate leaders need to establish stronger relationships with the onsite teams. The Leasing Consultant job has a high burnout rate. They often feel alone and overworked, especially on the weekends. Monthly and weekly meetings with each team member would be helpful.
• If someone wants to remain in the Leasing Consultant role, do not ignore or think less of them. If they are highly successful, offer additional opportunities within this role such as relocating to a new community, experiencing a lease-up, or even moving to a different state.
• Education reimbursement is a huge perk. We would be willing to stay longer if we received more support in this area. Do not base employee perks on the budget allowed by the community owner. If the company truly values employees, they need to consider offering these benefits from the corporate level to make them available to all employees.

Millennials want to be highly engaged by what they do, and smart leaders will harness their sense of mission or risk losing these employees to more purpose-driven companies. As they move into different seasons of life, their wants and needs will change, but the words ‘instant’, ‘limitless’, and ‘open’ will undoubtedly always carry a different meaning for them than they do for their parents. Join us next quarter when we continue to explore our series Millennials: Identifying Missing Pieces in the Workplace, and focus on Millennials’ contribution.

We thank you for your ongoing participation and feedback, which help make this report informative, fresh, and a reliable resource. We hope you will find Ellis Partners in Management Solutions to be not only the finest source for mystery shopping and resident surveys but also a training resource (including our partner Edge2Learn) for your organization. Additional support and information can be found on our website.

April 30, 2017
Prepared by Joanna Ellis, Chief Executive Officer and Francis Chow, Chief Strategy Officer
Ellis, Partners in Management Solutions (EPMS)
1333 Corporate Drive
Suite 266
Irving, TX 75038
888.988.3767 telephone
[email protected]
www.epmsonline.com

Footnotes:
1 See Ellis website for Benchmark eligibility, tier level, and recognition requirements for mystery shops and resident surveys.
2 No tier or rank is provided when minimum requirements are not met.