The Indian real estate industry has seen its fair share of changes over the last three years. While the macro-economic changes have been a mixed bag for the industry, what seems to be consistent are the reforms that are required in the people strategy for the road ahead.
While the liquidity crunch and revenue impact started with demonetization, the challenges have continued in the GST regime. In addition to the changing regulations, the global fear of recession has not been good for the industry either. Whether recession will hit the economy is still a matter of speculation, but the fear has pushed the customer spending towards a more conservative pattern. The industry, which was used to price increase every year, has not seen any significant rise in prices in the last five years. In fact, in some micro-markets, prices have come down due to the slowdown in the sales velocity because of the structural changes discussed earlier.
However, all is not lost – there are still good reasons to cheer. The middle class is increasingly looking to invest in affordable housing. Reforms and rebates have only reiterated the government’s intent to boost this segment and the sharing economy has given the industry new segments to explore. In addition to residential spaces, commercial buildings have seen high demand – thanks to the ever-growing demand for office spaces to accommodate the human capital servicing the world economy, sitting out of India.
It is now apparent that the context of business in the real estate industry is transforming. Given this reality, the biggest concerns of real estate businesses are fairly consistent; one, reducing risk by updating and aligning the internal systems and processes with the new regulations, and two, improving profitability by increasing internal productivity.
While the first point on reducing risk seems evident, given the systemic changes, it requires organizations to invest in systems, processes, and controls that align with these changes and investing in only processes may not lead to optimal results. More often than not, these changes are driven by people, and hence investing in people could accelerate the results. That brings us to the second point on improving profitability. Again, organizations could use the lever of changing the employee mindset to focus on productivity, thereby leading to better business results and increasing the competitive advantage in the marketplace.
At this stage, what seems to take the focus in real estate businesses is their human capital (which normally didn’t warrant focus when all was well). However, given the times, it seems more relevant now than ever before. Here are some suggestions for real estate organizations to align their people strategy with the changing business paradigm:
A good place to start is to take stock of the as-is. How do you currently drive performance and productivity? Understanding the underlying culture of performance and rewards is a must. While a few tenets of culture may be available through formal documentation, it wouldn’t be a surprise if practices in promoter-driven organizations drive most of it.
Articulate the vision
The next step is to map where you want to be. What is it that you are trying to achieve through people? How can you best align the people strategy to the changing business needs? What worked yesterday may not work tomorrow. Hence, it is essential to realign the vision to the new business environment.
Identify the performance drivers
Identify the right performance metrics that would drive the business priorities of tomorrow.
If you are looking at reducing risk, then do your performance metrics drive compliance and reward alignment? Or do they measure only output, without considering the means?
If you are looking to improve productivity, do your performance metrics lead to significantly differentiated rewards for going above and beyond?
Reinforcement through leadership behavior
We all know that behavior changes are driven through a top-down approach. So, the starting point of a change in the mindset of employees should be with leaders imbibing and emulating the changes. Do the leaders have a well-defined action plan? Do they have the necessary support?
Measure changes using metrics
Identify metrics that best capture the change management and continuously track progress. How much of the people strategy change has led to better results for the business? How often do you measure the difference? What levers can be modified to achieve your goals more effectively?
It wasn’t long ago when the real estate industry was booming, and it wasn’t uncommon to hear of an acquaintance in the industry bringing home a lucrative incentive at the end of the year. Times have changed, and businesses in the sector is going through a transformation. At this juncture, aligning people's strategy with the changing business landscape is not only a key to survival but a definite path to flourishing.