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Lessons from Counterinsurgency Pt. 1: Petraeus on Integrity

February 19, 2009
In all sincerity, the best and the brightest our nation has to offer.

In all sincerity, the best and the brightest our nation has to offer.

It may be completely inappropriate to compare the life-and-death work of our military in Afghanistan to the buying and selling of real estate ensconced in our safety… but I could not help but read this with interest:

We also must strive to be first with the truth. We need to beat the insurgents and extremists to the headlines and to pre-empt rumors. We can do that by getting accurate information to the chain of command, to our Afghan partners, and to the press as soon as is possible.Integrity is critical to this fight. Thus, when situations are bad, we should freely acknowledge that fact and avoid temptations to spin. Rather, we should describe the setbacks and failures we suffer and then state what we’ve learned from them and how we’ll adjust to reduce the chances of similar events in the future. (Emphasis added)

General David Petraeus

General David Petraeus

That is from a recent speech that General David Petraeus gave at the Munich Security Conference talking about the very real, very serious problems of fighting Al Qaeda and Taliban in Afghanistan.

But if he were speaking at just about any real estate industry conference, I don’t know that those words would be any different.

How often have we heard condemnations of NAR, and specifically of David Lereah, former Chief Economist for NAR?  There are even whole websites set up to rant at Mr. Lereah.

And according to at least one real estate professional, David Lereah and the whole ‘head-in-sand’ approach to the RE market hurt her directly by undermining the credibility of the profession, forcing her to un-educate then re-educate consumers, and establish her own credibility as a realtor.

What’s more, not one big brokerage or big brand in real estate was sounding the alarm back in 2005 or so, while individual realtors were starting to get real skeptical of home values, and blogs like Patrick.net were in full bubble-warning mode in 2005.

What has that done to the brand image of all Realtors?  What has the failure to freely acknowledge that situations are bad, the failure of so-called ‘real estate experts’ to warn about the housing bubble, the failure of so-called ‘mortgage experts’ to warn about the credit bubble, and the failure of so-called ‘ethical professionals with fiduciary duty to clients’ to properly advise buyers during what was obviously a bubble done to the industry?

Post-bubble, has there been any major statement by NAR or by a major brokerage acknowledging the “setbacks and failures” and stating “what they’ve learned from them and how they’ll adjust to reduce the chances of similar events in the future”?  If so, I missed it.

The Importance of Integrity

One of the paramount challenges for Big Brands — and I do include NAR itself in this, as it is the biggest possible brand for real estate — today is restoring brand integrity.

Quite a few of the underlying problems faced by big brands — such as the continued encroachment onto turf traditionally held by big brands, and the continued exodus of talented agents from the folds of big brands — are attributable at least in part to the loss of integrity.

To illustrate, let’s imagine that one of the major brands had in fact started issuing advisories and guidance to its buyer clients to hold off on purchases back in 2005.  Say that Prudential had its chief economist directly contradict David Lereah, and directed all of its brokers and agents to start advising clients not to buy but to rent instead, or to buy only with caveats, only use standard fixed-rate mortgages, and the like.  Imagine that Prudential agents had been steadily advising people to sell immediately at the peak, because the bubble was going to burst, and buyers and financing were going to be hard to come by in a couple of years.

Imagine the advantage they would enjoy in today’s market with an advertising campaign that stressed how they were right on the Housing Bubble while their competitors buried their head in the sand.  Prudential could then rightly point out that they took losses during the bubble years by turning away business, by not doing transactions that could have been done, in order to protect their clients.

Prudential would be swamped with client inquiries, its agents would have leads flowing through the door, and its people could proudly wear the Prudential flag knowing that they alone in real estate had the stamp of “Integrity”.  Recruiting people away from that brand would be a difficult task indeed.  And go-it-alone folks would have to really think about losing the value of the Prudential brand, which stands for “Integrity and Foresight” in real estate.

Marc Davison of 1000Watt often sounds the theme that big brands have lost their identity.  Here is Marc in the comments section of one of my old posts:

What is sad it how diluted these upper brands have become in both their value propositions to the agents and their sorry attempts to extend value to the consumer.

Marc is not an agitator trying to destroy real estate.  He’s a guy who cares about the industry, who wants to see it improve, and is working to help improve it.  When he criticizes big brands for the loss of brand value, it’s worth paying attention.

So how does a big brand go about restoring integrity?  And where does David Petraeus come into this?

We turn to an overview (far too brief, and far too amateurish, but hey, this is a blogpost) of the current U.S. military doctrine on Information Operations (IO).

Information Operations

The main points are in Gen. Petraeus’ speech excerpt above, but here’s what the U.S. Army Counterinsurgency (COIN) Manual FM 3-24 (PDF – 282 pages in case you clickthru) has to say on the topic:

5-19. The IO LLO [“Information Operations Logical Lines of Operation”] may often be the decisive LLO. By shaping the information environment, IO make significant contributions to setting conditions for the success of all other LLOs. (See JP 3-13 and FM 3-13 for IO doctrine. IO include elements not addressed here.)… Major IO task categories include the following:

  • Ensure that IO are synchronized at all levels and nested within the interagency strategic communications operation.
  • Develop common, multiechelon themes based on and consistent with HN government policies and the operation’s objectives. Sustain unity of the message.
  • Remember actions always speak louder than words—every Soldier and Marine is an integral part of IO communications. IO are executed every day through the actions of firm, fair, professional, and alert Soldiers and Marines on the streets among the populace.
  • Work to establish and sustain transparency that helps maintain HN government legitimacy. (Emphasis added)

From the FM 3-13 on Information Operations (PDF), we also get this:

2-107. PA [“Public Affairs”] principles that support IO are as follows:

  • Truth is paramount. Successful and effective public relations depend on credibility. The quickest way to destroy PA credibility is to misrepresent the truth. Close coordination within the IO cell is required to ensure that the media and the US and multinational publics are not deceived or lied to, and that such a perception is not created.
  • Deploy PA assets early. The media may be in the AO before Army forces arrive and may be well established there. Media interest is intense during initial force deployment and the onset of operations. PA assets are needed at the earliest stages to ensure effective IO.
  • Speak with one voice. PA assets are integrated at all echelons. Commanders train soldiers to talk only about what they know within their own responsibilities and not to speculate about other areas. (Emphasis added)

The key themes are synchronization, rapid response, and transparency.  And the all-important insight that actions always speak louder than words.  There are several lessons that can be learned here.

Synchronization: “Speak with one voice.”

The single biggest challenge for any large organization — including the U.S. military — is to synchronize and coordinate the message.  Unity of message is impossible to achieve in a ‘strong form’ — meaning censorship, Corporate Communications, and so on — in the modern networked era.  If the ARMY can’t do it, then a corporation certainly can’t do it.

Rather, what the U.S. military wants to achieve — and what all companies should strive for — is unity of message from top to bottom by education, information, and indoctrination. (Note re: “indoctrination” — if you’re dedicated to telling the truth, dedicated to customer service, and so on, then “indoctrination” is not a bad thing at all.)

If the strategic message of the United States in a counterinsurgency is “America is your friend”, then it would be infinitely better to kick a racist soldier out of the military than it would be to let him contradict the strategic message — no matter how competent he may be otherwise.

Similarly, if your company’s strategic message is “friendly service”, then you are better off firing the high-performing agent who is surly, unresponsive to clients, and an all-around prick.  When your people — every rank and file employee — believes in your multiechelon message of “friendly service”, then even if you allow unlimited blogging by employees, unlimited twittering and so on, your organization continues to speak with one voice.

Rapid Response: “Deploy PA assets early.”

The lesson here is to be proactive when it comes to information.  For the military, it may mean getting army public relations people into the field early.  For real estate companies, it means ahead of the news cycle.

Consider a recent example: rumors about Realogy’s bankruptcy.  Eventually, Realogy put out corrective information, and the CEO Alex Perriello sent out an email to affiliates.  Why wait until the story got published?  Why not send the email out early and post it on the Realogy blog?

Being reactive to the U.S. News story meant that commentators were able to attack the credibility of the Realogy spokesperson as a shill, a PR hack.  It meant that its hundreds of thousands of affiliated people heard from the media that their brand was going bankrupt, before any of them had heard a thing from their own company.

Had Realogy been proactive in releasing the info showing that in fact, it wasn’t in that bad a financial situation, then it could have much more easily set the grounds for debate, controlled the message, and utilized its hundreds of thousands of employees, affiliates, and member agents to get the message out to the public.

For big brands in real estate today, I believe that “deploying assets early” must include some sort of a social media/blog effort.  That’s good advice for all companies generally, but in our industry where restoring trust and integrity is a critical challenge, and where the media is neither friendly nor educated, it is even more imperative to have an alternative channel of communication.

Combined with the insight from Gen. Petraeus’ speech, I believe getting ahead of the curve is especially important when the information is unfavorable.  Acknowledge mistakes, talk about lessons learned, admit bad news early on, and do so proactively.  It’s better to control the dialogue and the message, especially for big real estate.

This connects directly to…

Transparency: “Truth is Paramount”

It is absolutely imperative that big brands embrace the doctrine that Truth is Paramount if they want a chance at restoring trusth and integrity to their brands.  All the proactivity and all the unity of voice won’t mean a thing if you lie to people.  Because it will be found out.

Furthermore, in the current information/media environment, active deception is not required.  Simply trying to spin the truth can have devastating repercussions.  I believe that the real estate profession as a whole has the same relationship with the mainstream media as Republicans have: fair treatment is possible and does happen, but cannot be assumed.

So not only do real estate firms have to be proactive, not only do they have to speak with one voice (though not literally a single spokesperson), they absolutely must become obsessed with transparency and the truth.

I wrote recently that realtors need to tell their war stories, with this observation:

It’s actually amazing how few consumers know what you realtors do for a living.  I know I didn’t know until I started to meet and talk with many of you.

None of us see the behind-the-scenes phone calls, negotiations with the other side, the wrangling with the mortgage officer, the calls to appraisers, to attorneys, etc. and so forth.  We have no idea.

All we know is what we can see.  And what we see is not very much.  You show up, get the listing, then stick a sign on our lawn.  Then maybe you hold an open house or two.  Miraculously, some weeks later, the house sells, and you take $45,000.  No wonder consumers think you’re all overpaid.

Since the public perception is that big real estate is a giant conspiracy in cahoots to keep monopoly pricing and screw consumers, it is imperative that the entire process be made as transparent as possible.  And big real estate absolutely must resist the urge to spin.

A solid corporate communications strategy and practice are essential, of course.  But Big Real Estate in particular has to undertake a more authentic, more human social media based strategy to let consumers know exactly what it is that realtors do, how compensation is structured, what the cost factors are, what the actual process looks like, and so on.  A tour of the sausage factory, if you will, is the best counter to the argument that sausages are overpriced.  [By the way, if a firm actually does believe that sausages are overpriced, then it needs to be transparent and honest about that as well.]

Actions Speak Louder than Words

Finally, while IO is important in COIN, what is evident is that IO is not simply the job of the PR officers.  The military recognizes that the actions of each and every soldier deeply impacts IO at a strategic level.  More damage was done to the American cause by the idiots at Abu Ghraib than by all of the mistakes on the field of battle.  The actions of one bad soldier can wipe out the good works of thousands of others.

I believe this principle applies with full force to real estate with its distributed, independent contractor workforce.

It’s one thing to claim that your organization stands for local expertise.  But the people in the field, the agents themselves, have to be able to back that up with action.  Training, resources, and recruiting all have to be focused on ensuring that each and every agent is able to deliver on the promises of the unified message.

If “local expertise” is the multiechelon message, then by golly, each and every agent had better be trained in local markets, interpretation of data, writing research reports, advising clients using local data, and so on.

One of the biggest failures of Big Real Estate, as pointed out by numerous realestistas, is the failure to enforce standards of ethics and professionalism.  So even while the “official brand message” of a particular firm or of NAR in general might be something like, “We’re ethical professionals”, the actions in the field do not match the words.

Hello, instant loss of credibility as to that consumer, and the ten people that consumer will go on to tell.

Just like a single instance of intentional deception destroys your entire IO effort, a single agent who can’t walk the walk that your talk is talking destroys your brand credibility.

One Recommendation

While those are principles to think about, I do have one specific recommendation.

It is high time that NAR, big brokerages, and big brands in real estate publicly — and through all media channels, including social media — acknowledge that mistakes were made, that the so-called experts in real estate failed to spot the bubble and to warn the public/their clients about the bubble, and that these major institutions have learned valuable lessons.  It is time to sketch out what those lessons were, what steps these institutions will take to prevent them from happening again, and how the public can assist.

I don’t know that such a step will by itself restore integrity to the big brands in real estate.  But it is a crucial first step.

Counterinsurgency in Real Estate

I wrote this because I feel that many in the RE.net have more or less given up on Big Brokerage and Big Brands.  As a recent comment on Twitter said, “The Big Brokerages/Brands could win every battle and still lose the war….”  Now doesn’t that sound familiar?

I continue to believe that Big Brokerages and Big Brands can turn things around, with smart, enlightened leadership willing to take risks and do what’s right instead of what’s easy.  That belief is sometimes easier to maintain, and sometimes very difficult to hold on to.  But on balance, I think they can do it.

However, in order to become truly relevant, Big Brands in real estate must understand that they are no longer fighting the battles of the last market cycle when competition was clearly defined and big like themselves.  The whole “Coldwell Banker vs. RE/MAX” competition is as relevant to real estate as the Cold War is to the U.S. military.

I believe that Big Brands are today engaged in a sort of industrial counterinsurgency struggle that will require re-examining and rethinking nearly everything they know.  And what better authority on counterinsurgency than the men and women of the American armed forces, and the author of the doctrine, Gen. David Petraeus.

Even if you have never been in the military (I have not), if you have strategic responsibilities for a big real estate organization, you owe it to yourself to at least skim through the U.S. Army Counterinsurgency (COIN) Manual FM 3-24.

I know this post got even longer than my usual.  But there are several other parts that bear examination.  I look forward to the conversations.

-rsh

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6 Comments leave one →
  1. February 19, 2009 11:05 pm

    Hindsight is always 20/20 and good luck with the big box brokers embracing this idea!

  2. February 20, 2009 3:40 am

    Love the way you connected these time tested communications principles to real estate’s real-life problems of today. One thing I’d add to this is that in addition to using social media to “get real” with its constituencies, big real estate needs to rethink it’s entire advertising model. Sun-filled commercials showing young families moving into their first home and touting the benefits of home ownership don’t ring true in today’s environment. The $$$$$ spent on print and TV could be better directed to re-thinking their communications strategies to recognize that the market has fundamentally changed, instead of continuing to go along on auto-pilot assuming that the status quo will return.

  3. February 20, 2009 7:47 am

    Rob- Regarding “Imagine that Prudential agents had been steadily advising people to sell immediately at the peak, because the bubble was going to burst” – If it were that easy to call tops and bottoms we’d all be Warren Buffett. Forget about calling the top of the real estate market, we would have called the top of the internet bubble and bought put options on Pets.com and made millions.

    Unfortunately when everything’s going great and the money’s pouring in, no one wants to say “stop, we should sell now”. Greed is part of our nature, whether it’s real estate, stocks, or tulip bulbs, everyone wants to hold out for that last nickel. We’re all human (I think), and as a society in general, our propensity for greed will never change. Without greed we’d all still be gathering nuts and berries in the forest!

  4. February 20, 2009 9:17 am

    Hi Patricia – thanks for the comment.

    No doubt that advertising needs to be looked at carefully in the context of the message environment. One of the future sections I’m working on deals specifically with adaptation, and I think it’s a critical point.

    @John –

    I’m not suggesting that greed isn’t part of nature. What I am suggesting, however, is that greed impacts a professional’s image and integrity in profound ways.

    When the Internet bubble happened, and it came out that Wall St. analysts were providing favorable reviews of dotcom stocks their firm was peddling, that destroyed in-house research.

    Wall St. learned from the debacle, and came back with statements of conflict or ownership or whatever. All of a sudden, reporters and guests on financial news channels were divulging information about their stock ownership, their company’s client rosters, etc. when talking about a stock.

    I don’t think they ever truly recovered from that initial blow, and certainly this latest bubble in real estate destroyed whatever credibility they had built back up. At least this time around, we’re not accusing Wall St. of evildoing — just of stupidity. /shrug

    No one wants to say “hey, this ride is gonna end soon — you should sell now”. What provides professional integrity is that you did it when you didn’t want to do it. If you want to justify the failure of real estate professionals to sound warnings back when they knew the market was unsustainable, then… well, that’s fine, I guess. But then you gotta answer this:

    If a realtor didn’t know the market was unsustainable, then in what way is he an “expert” for whose advice I should be paying?

    If a realtor did know but didn’t advise me out of greed, then in what way is he an “ethical professional” I should trust?

    Idiot vs. Crook are the only labels available if you just “went with the flow”.

    Individual agents — like Jay Thompson — did sound the warning in 2005. Individual agents have advised their clients to sell, or to hold off on getting that $1.5m house on $35K of income. I’ve heard the stories from them. But not one Big Real Estate that I know of has ever done anything like it.

    Bye bye, brand integrity; bye bye, brand value.

    Either way, repairing the damage from this is going to take some of the steps I’ve outlined above, and a lot of time. If you look at the history of the American engagement in Iraq, you’ll note similarities there: initial strategic failure, horrible info ops failures (Abu Ghraib being the biggest one), reform and a new COIN-based strategy, followed by years and years of work to restore credibility.

    Two conclusions I draw from the military experience. One, things can be turned around. Two, it will take a lot of hard work, and a fair amount of time.

    -rsh

Trackbacks

  1. Notorious R.O.B. and Counterinsurgency | The Hotlist
  2. Lessons from Counterinsurgency, Part 2: Petraeus on Local « The Notorious R.O.B.

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