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Like our judicial system, the real estate committee is an adversarial system.  But when you look carefully, it is a really weird one, though I will argue, one that can work pretty well.

real estate committee meeting

In US courts, each side fights to win and the goal of having the verdict come out in your favor completely trumps getting a ruling that is “fair.”  While imperfect, we (mostly) accept this approach as the best we can do. With something as contentious and high-stakes as a lawsuit or a criminal prosecution, asking all sides to be fair and focus on getting to the truth is simply unrealistic.

I wonder how many people in retail real estate have stopped to ponder how strange an adversarial system the real estate committee meeting is.  We have tasked a group of people with growing the chain (the real estate reps) and reward them based on the number of new deals they get done.  What we don’t do (or at least I’ve never seen anyone do) is reward them for how successful the store is after it opens.  While there is certainly professional pride at work - wanting to claim responsibility for a record setting store and not wanting to be responsible for a disaster- at the end of the day, the rewards are usually based on getting the deals done.

This means that it’s someone else’s job to reject the opportunities that aren’t going to be successful and this is usually the job of the research people. They must look for the hair on the deal being presented and, if the deal is not up to snuff, make a compelling case as to why they should pass at the expense of store count. The real estate committee itself is analogous to the judge and jury.

It’s unquestionably an adversarial system. But it’s really weird for two reasons:

  1. The real estate committee has a very strong bias toward finding the truth, as many of them will live with the consequences of the deal – good or bad.  Judges and juries must live with their consciences, but their verdict won’t affect their bonus or future prospects. This is good thing, but it does tend to color the decision making based on what they perceive as the more pressing problem – lack of store count or underperforming stores.

  2. The research people don’t get the same credit for killing a deal as a defense lawyer does when beating a charge.  No one can ever prove that a deal that was rejected would have failed had it been built. So the research team can never truly “win” when killing a deal even though this is their most important job. Because of this, research can get painted as the “deal-killers.”   However people are happy to blame research when a deal that they approve goes bad.  The bottom line is that research really wants real estate to bring in deals they can confidently approve. It’s like a lawyer wanting only clients that will be found guilty – weird!

The good news here is that, to varying degrees, everyone wants the same thing – great retail sites. So the easiest way for a real estate rep to get a deal through committee is to present the deals that both research and the real estate committee will love and approve enthusiastically.  The way to help with this is to give the real estate reps the tools to see the sites from the perspective of the research team.  This means that they will have a better idea how a given site will be received and can focus on the ones most likely “charm” the researchers.

From the perspective of an adversarial system, the real estate committee meeting is a strange process.  But it’s a good one. It‘s crazy not to embrace its weird nature and make it as effective as possible.

Please share your experiences with real estate committees in the Comments Section below?

Author
Joe Rando