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Aug 24
2009
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The average rate of turnover in apartment rentals reported by the NAA is 60%. Who can make a profit with such a rate of turnover? Not only is customer retention built on quality leasing, it's also built on your staff. Buildings and grounds don't maintain themselves, people do that work; apartments don't lease themselves, people do that work too.
Often, management resorts to using a "rule of thumb" for determining an appropriate level of staffing. A "rule of thumb" is kind of like knowing that the average depth of a lake is 2 feet - a person can still drown in the part that is 20 feet deep. No two properties are alike; there are so many variables - location, unit composition, design, age, amenities, demographics, etc., along with special characteristics that affect its operation (we can get as much as eighteen feet of seasonal snowfall).
An assessment of staffing requires a comprehensive analysis of staff work load and your expectations, arriving at an optimal configuration of contracted work and in-house labor.
MAINTENANCE. We have 346 apartments and a full-time maintenance staff of five. One person is dedicated to performing daily customer service requests. Three people prepare vacant apartments for new customers. The supervisor coordinates contractors, troubleshoots, and takes care of those maintenance issues no one else can. Painting, vacant cleaning, carpet cleaning and most lawn services are contracted out. Snow plowing and snow shoveling is performed in-house.
In most cases we expect to provide same-day service to our customers. Further, we do not differentiate our service from business hours and non-business hours. If a customer needs a light bulb replaced on Christmas Day or midnight tomorrow, we will do so. At the conclusion of most customer encounters we ask: "is there anything we can take care of for you in your apartment?" Consequently, we perform about 2,500 service requests a year. Each service request is an opportunity for us to prove we are worth what we charge. We know that if we were 99% perfect in performing these service requests we would still "tick-off" 25 customers - and we are not 99% perfect.
LEASING. We have a full-time leasing staff of two. They respond to some 1,500 rental inquiries, perform 500-600 showings, process about 150 lease applications and prepare about 95 or so new leases, amounting to more than 2,250 encounters with prospective customers. At the same time, they're also involved with the 2,500 customer service requests performed by the maintenance staff. How long does it take to successfully respond to a rental inquiry, perform a showing, process a lease application, prepare and explain the lease documents, and assist with 2,500 service requests? Someone needs to estimate the manhours needed to do this work. The leasing staff also collects, processes and performs accounting functions for millions of dollars in rental income. Those manhours need to be calculated too.
Does it bother you if the leasing staff is unable to follow-up, in a timely manner, on email or telephone rental inquiries, wasting investments in marketing? How about if the leasing staff is unable to follow-up on customer service requests, possibly losing customers? Investors need to realize that there is a hidden cost to "rule of thumb" management.
We pay some of the highest wages for maintenance and leasing staff in our area. What it buys us is longevity of employee service, what it saves us is the upfront and hidden costs of employee turnover, what it gets us is higher quality personnel. How can a business meet its customers' expectations for service and quality in the face of a revolving door of employees? Our customer turnover rate is about 28%; 1 out of 3 customers stay 5 years or more, about 70 have stayed more than 10 years, 17 more than 20 years.
What are your expectations for customer service, customer retention and staff retention - are you satisfied with being "average" or do you want to be "extraordinary"? The cost of low customer retention is measureable and unmeasurable.
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Comments (3)
@Johnny: your absolutely correct that there are a variety of lifestyle and other factors that management cannot change, meaning that there will always be a certain amount of customer turnover.
Management needs to come to grips with the fact that retention is affected by a multitude of factors that are within management's control, including a level of staffing that is capable of achieving customer expectations. There is a measurable and unmeasurable cost to high customer turnover.
Management needs to come to grips with the fact that retention is affected by a multitude of factors that are within management's control, including a level of staffing that is capable of achieving customer expectations. There is a measurable and unmeasurable cost to high customer turnover.
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Great topic! We've found in our research that 60% of turnover is controllable - meaning our teams can have an impact on 60% of the reasons resident give for not renewing their lease. A focus on those basics, like what Rick is sharing, makes all the difference. It's that service delivery, that confidence the residents have in the staff, that will make or break the level of turnover. Thanks for sharing your 'secrets' Rick!
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Also; we need to understand that, for many people, housing costs are very likely to be the single biggest line item on the budgets for many households. We need to treat that decision as such and strive to build a strong relationship. There are 2 classifications of reasons for resident turnover: 1) those things that cannot be controlled by management such as: changes in household size and changes in employment status which may make relocation necessary and unavoidable, or the resident actually purchases a home. In tax credit properties, another reason can be that the resident has had an increase in income such as to make them no longer eligible for assistance at recertification. And 2) things that management could or should have been doing and didn't; these are the myriad of customer service related issues that we face on daily basis.
Resident turnover reasons in the first category need to be accepted at face value and management needs to wish the resident well; however the latter category is where management needs to review, revise protocols; and intervene as necessary as there may be hope of 'rescuing' that resident's decision to relocate at renewal time.