There is a paradox in the world of flexible office space brokerages – how are coworking brokers paid?

On the one hand, coworking brokers position themselves as non-salesly consultants who will do everything they can to help you find “the right space at the right price” (which used to be my favourite positioning hook because it doesn’t actually mean anything… right for whom etc?) by comparing all the possible available serviced office options out there and making sure they fight over your business.

On the other hand they are incentivised internally through monthly commission ratchets and their commission tends to be linked to the fee secured by the brokerage that employs them. This is most commonly a percentage of the overall contract value entered into by the client.

How are coworking brokers paid? Money, or client experience?

This creates a really complex and competing set of priorities and emotions. How do you square offering a service that by its very nature (comparison and competition) drives down price with a reward system that is linked to the size of the underlying contract (the more the client pays the more the broker earns).

When the better you do your job, the less commission you earn?

Many in the sector are very good at this – but it requires a conscious disconnect between your money-hungry sales side and your moral compass, customer-centric, consultative side.

If you can’t achieve this disconnect then you’re going to struggle with feeling like you’re either letting the client down by chasing the bucks, or letting yourself down by not caring about the client enough. Unless you don’t care either way, which is also OK. I guess.

Coworking operators are also focusing on different priorities. For them, the holy grails are a highest possible profit-per-workstation alongside a high building occupancy driving margin in tandem. So their ideal broker is one that gets lots of deals done and actually makes customers pay more – this is typically achieved through selling on value as opposed to selling on price.

But selling on value is a very complex art form that does not necessarily sit well with short-term commission targets. If as a broker you have 30 days to hit a number and get whacked on the head with performance management if you don’t, it’s much easier to sell on price. And since the path of least resistance is the one most trodden, this is what tends to happen.

Prioritising sales pipeline

Another unintended consequence of all this is that it forces agents to make snap judgements on the value of their clients linked to how coworking brokers are paid – typically either this month or the following month because, again, the path of least resistance means clients with the ability to convert quickly get priority.

It’s important to quantify this a bit more. A typical brokerage that tends to deal with a high volume of client enquiries is likely to convert them into deals at anywhere between 8% and 20%, depending on how they define what a lead actually is, since this is quite diverse in the sector.

These conversion percentages make sense – a lot of clients are just having a look at what’s out there, hedging for the future, unable to make commitments immediately. But equally a lot of them will have very valid requirements, only with a conversion further in the future than fits the individual’s / brokerage’s sales model.

But that (say 80%) percentage of clients that don’t contribute to the short-term bottom line financially, they still expect the service advertised: consultancy, support, coworking market knowledge, hand-holding, all those good things. After all, when they looked around all the websites, that’s what it said on the tin, so to speak.

Unfortunately there are not many internal mechanisms within flex brokerages to cater for this, and it’s understandable. Resource costs money and profit margins aren’t easy in the first place.

Impact on customer experience

Those clients generally end up in similar storylines which go something like this:

• They go through the qualification process with a serviced office brokerage and do not come across as a “converter”
• They are sent a wide range of options in the market by the brokerage, but at the same time their contact details are sent to those flex office operators as part of the introduction
• The customer doesn’t necessarily know this will happen. It doesn’t tend to be given much air-time on intermediary websites but it’s definitely in the privacy policies if you look
• So the client will then start getting calls and emails from coworking operators asking about their office needs without necessarily expecting it
• If the requirement was poorly qualified, as is often the case if they’re not seen as a hot prospect, the flex operator needs to re-qualify it
• The client therefore needs to repeat their needs multiple times to multiple people, when they already explained it to an intermediary
• Some operators are more proactive than others in reaching out to the client
• If the broker introduced the client to 20 options (for a major central conurbation, this would not be unusual) then they might get 10 to 20 emails / calls in the first 24 hours

So the client is potentially in a position where, without realising it, an entire day will be dedicated to fielding approaches from a range of coworking operators. Needless to say, this pisses them off if it’s not what they signed up for.

And that’s generally the public’s perception of coworking brokerage services. The 20% or 15% or 10% (or whatever the conversion rate is) that end up signing a serviced office contract are generally glowing about the service. After all, brokers are very good at getting the client a good deal. There’s no denying that. But how coworking brokers are paid often influences the whole process.

But the rest tend to be less than complimentary. Mainly because their expectations around service delivery were directly interrupted by the way flex brokerages make money and how individual sales people are remunerated.

There is also a lot of frustration from not realising how the process of introduction actually works and what it means in real terms. If properly explained at the initial point of engagement, clients are actually mostly OK with getting introduced to offices directly. It’s when their expectations are not managed that fireworks fly.

“OK, OK, that’s all well and good and it’s easy to say what’s wrong, but what about ways to fix things” I hear you cry.

That’s fair.

How about designing the process with customer experience, not revenue, as the origin point?

How are coworking brokers paid – can things change?

I’m not saying the brokerage doesn’t have to make money, they do. And neither should they accept lower margins. They shouldn’t.

But here are a few ideas that you won’t really find in the flex space sector that might be steps in the right direction and could get discussion moving:

1. Brokers, make sales agents’ commissions or bonuses linked to customer net promoter scores. Imagine if positive customer experience had a direct financial impact on a brokerage employee. Wouldn’t at least some of the “great unwashed” non-converting 80% of clients get an improved experience?
2. Brokers, split your sales force into short-term and long-term deal specialists in addition to dividing by geographical area of responsibility and enquiry size, as is typically the case. This would allow you to keep more customers engaged and happy across longer sales cycles when agents are not obsessing about hitting their 30-day number. It would also give you an opportunity to create a more varied team dynamic where different temperaments of your sales people could be put to best effect.
3. Brokers, make the mechanics of what really happens during the introduction process very explicit to the client before they register. Or give clients that are not in a position to convert quickly other ways to interact with market information without going through the meat grinder of explaining themselves over and over once introductions have been made. Sure, it will probably reduce the overall number of people registering. But it will do wonders for your lead-to-deal conversion ratios!
4. Operators, stop throwing enhanced fees at brokers willy-nilly. Link enhanced commission to up-selling on value as opposed a mechanism for filling up problem spaces which by their very nature will be “priced to sell” anyway. I won’t go on about this one too much because enhanced commission is a topic all of it’s own so see other articles for that hot potato.

To conclude – in a sector that prides itself on providing space-as-a-service, too many processes still start with the “£” sign as the strategy origin. No-one is saying that the pursuit of profit is somehow bad – that’s the holy grail of all business so we should maximise those margins where we can.

But when looking at the engine parts of an operation, especially one as delicately balanced morally as a coworking brokerage, customer experience has to play a huge role in how an agency is designed and how it operates.

If you want help finding a coworking broker that will work with you in the right way, our unique directory of individual profiles an help you pin-point the perfect match.