No matter the field, top talent is highly coveted, not easily found and costly when you bring them onboard.
The Starbucks Example: A High-Stakes Hire
Take the example of Starbucks which recently poached the CEO of Chipotle, Brian Niccol, and they are paying him a whopping $100 million, the ability to work from home in Southern California and access to a private plane for those occasions when he decides to come to the Seattle office. This sounds excessive, but is it?
Investor Confidence and Market Reactions
Starbucks may have gotten him on the cheap, at least according to investors. When the news broke of his pending arrival, shares in Starbucks shot up 25%, increasing the market cap by $20 billion in a single day—and Niccol hadn’t even started. These are venti-level expectations for one person amongst an employee base of 380,000. That said, if his past performance at Chipotle is indicative of his future at Starbucks, it’s not a bad bet. Under Niccol’s leadership at Chipotle, the stock increased nearly 800%. His record of significantly increasing revenue, profitability, and market share at Taco Bell only adds to his credibility.
Superstar Paydays in Different Industries
Superstar paydays are nothing new. Legendary basketball player Michael Jordan earned $33 million in his final ‘97-’98 NBA season, equivalent to about $60 million today, surpassing even today’s highest-paid player, Steph Curry, who earns $55 million. Jordan’s Nike contract reportedly still pays him $100 million annually. In the financial sector, hedge fund titan Bill Ackman of Pershing Square Capital Management earned over $1 billion in 2020 through performance and management fees. These astronomical figures span multiple industries.
Valuing Top Talent: A Complex Equation
Whatever industry you work in, there’s always the question of how to value and reward top talent. Whether you’re a prospective employee determining your economic worth or an employer making a hire, it’s important to think about these things.
The 80/20 Rule in Real Estate Brokerage
In the real estate brokerage space, it’s often said that 20% of agents originate and handle 80% of the deal volume. If true, brokerages need to find ways to attract this top 20%, but identifying who they are is no easy task. It’s not uncommon for multiple agents to claim sole origination of the same transaction.
Challenges for Boutique Brokerages
As a boutique brokerage, you face the question of whether to home-grow junior agents or hire experienced agents (which is easier said than done). Do you pay a signing bonus for a multi-year lock-up for a superstar and throw in a guaranteed base salary? Perhaps, but that requires an agent to leave behind a more established firm and take a chance on you. It also requires significant capital, which many boutique brokerages may not have. Another challenge is how much of an agent’s success is tied to the brokerage they work for, making the hiring decision even more complex.
Cushman and Wakefield’s Approach to Hiring Talent
Even Cushman & Wakefield—which previously paid significant signing bonuses to relatively unproven junior agents and jaw-dropping figures to megastars like Doug Harmon and Adam Spies—has reportedly pulled back from the practice. Perhaps the old adage that money can’t buy love, loyalty, or happiness holds some truth, or maybe loyalty only lasts for the duration of the contract.
A Different Path Taken By Top NYC Broker
Some were surprised when Bob Knakal—arguably one of the best investment sales agents in NYC—decided to launch his own brokerage rather than accept a lucrative signing bonus from a larger firm, like Harmon and Spies did. It’s possible he missed the window of opportunity, as his departure from JLL came during a significant market slowdown.
The Debate: Ideal Compensation Structures in Commercial Real Estate
I’d love to hear from agents in NYC’s commercial real estate space about the ideal structure from both the agent’s and the brokerage’s perspective. What’s the right mix of fee splits, signing bonuses, and perks?
Source: There’s a New $27 Billion CEO—and He Might Actually Be Worth It – WSJ
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