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435-604-7244 FAX
1776 Park Ave.
Park City, Ut 84060
High Performance Organizations:  From Myth to Magic
Page 1
Myth #1
Revolving Door Theory
A Case Study
In this real situation the manager recruited better than
projected.  Around February-March, he made a decision
that he was "full", stopped and lost his momentum.
We held a meeting with him in May pointing out con-
cern and predicted a minimum of 6 months in lost
revenue and an equal shift in the break-even phase.
He adamantly denied saying we would not see this.
He asserted that he was substantially ahead of sched-
ule; he needed to take care of the people he had so
they wouldn't leave.  They left!  He went back to re-
cruiting aggressively.
Number of Associates by Month
Managers recruit until they "think" they are full, be-
lieving they don't want to artificially create turn over
or have a revolving door.  Recruiting typically takes 4-
6 months lead-time; 4-6 months for agent productiv-
ity; 1 1/2-3 months for closing:  10-15 months for a
return on investment.
Profitability Cumulative to Date
This represents money involved in a new, start-up of-
fice, from day 1 until all invested money is recovered.
Break-even occurs at the bottom of the curve.  Break-
even for the office occurs when the invested money is
recovered.  There were two projections by the man-
ager.  The first was the manager on his own.  The sec-
ond, more conservative, occurred after we had
"couched" the manager on what we felt to be more
accurate assumption.
The manager was very competent and dedicated.  We
consider him to be an excellent manager who simply
made a single error in his decision.  His decision cre-
ated what is called a phase shift.  The best he could do
given this phase shift was to recover 6-7 months later.
Notice the illusion of current positive performance in
February and March justified a bad decision.
Total Expenses Cumulative to Date
The other variable this could cause profits to shift is ex-
penses (the market remained the same).
Barring increases in expenses and a shift in the mar-
ket, we must look to number of agents & recruiting.
It is interesting to notice how well expenses are fore-
cast in 1-2 to actual.
MYTH1.PM3 TM 11/90
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