When Howard Hanna Real Estate Services acquired Realty One in October 2008 it was a deal that made Howard Hanna the fourth largest real estate company in the nation — but as it unfolded, it also gave Howard W. “Hoby” Hanna IV, president of Howard Hanna Midwest, some daunting tasks.
The first was to take two sales forces that had competed fiercely with each other and bring them together under one roof with strong leadership.
“By three years later, we had gone from 69 to 47 offices, which was the goal number that we wanted to reach, and did that much faster than anticipated without breaking obligations,” Hanna says. “We paid every rent we had to pay, we made every obligation we had to make, and because we just felt that was the right thing to do as a corporate citizen, but we also had to bring synergies together within our business.”
But another task was a Catch-22.
“The group would not allow us to utilize any of its accounting or CRM software because they were owned by the holding company and the group claimed it was proprietary,” Hanna says. “So we had to rebuild the CRM files and re-educate our agents to use the products we had, which was quite frustrating.”
The solution, as Hanna puts it, required some laborious tasks.
“We had to communicate that we weren’t forcing our platform on them — that their former owner didn’t allow us to have the platform,” he says. “So there was a lot of heavy lifting, moving management players and putting them in different offices, and add to that the fact that the first quarter of 2009 was probably the worst quarter in the history of real estate sales.”
When faced with multiple challenges that add a lot of stress and pressure to the organization, level heads must prevail.
“Everybody kept very cool, everybody had their eyes on the focus of bringing two great companies together in the marketplace . . . But the CRM for a significant number of agents became a morale issue,” Hanna says.
“We just had to put our arms around people and say, ‘Hey guys, we’re not causing this for you, but we’ll have a solution. We’ll work through with you. We’ll train you on what’s there.’”
You may lose some employees in an acquisition or merger who leave because they were frustrated, but at the same time those who depart may well have to learn a process like a new CRM platform wherever they go.
“We had the vast majority of folks who just said, ‘Hey, is this great, this is exciting, and there’s all these challenges with consolidation, but I’m going to move forward.’”
Here’s how Hanna focuses on solutions to the challenges of mergers and acquisitions so the transition is as smooth as possible, and customer-centric core values reign supreme.
Don’t take due diligence shortcuts
Hanna has seen some companies in the real estate industry and elsewhere that come in after an acquisition and want to dismantle “everything and anything” that was part of the previous organization.
That is not the way he approaches a newly acquired business.
“We haven’t said, ‘Hey, forget everything you’ve ever learned — this is who we are,’” Hanna says. “It’s more of, ‘There are great things that we can pull out of this organization and expound upon, but we also want you to learn why Howard Hanna in its own rights has had great success.’”
Howard Hanna Real Estate Services’ success now includes 167 offices across Pennsylvania, Ohio, Virginia, Michigan, New York, West Virginia, North Carolina and Maryland, many of which were acquisitions.
Home sales for Howard Hanna Real Estate Services, the No. 1 real estate company serving Pennsylvania and Ohio, hit an all-time high in 2013 of almost $10 billion. Howard Hanna has more than 5,700 sales associates, management and staff across those eight states.
In Ohio, closed sales volume was $4.4 billion for 2013, an increase of $772 million compared with 2012. There were 24,349 home sales in Ohio last year, a 16 percent increase over 2012.
When it comes to how acquisitions contribute to continuing growth and strong performance, Hanna says it all boils down to due diligence on the acquisition, communicating the company’s customer-centric core values, how quickly he can get leadership of the organization to be on board to believe in those core values and as Hanna puts it, “How well I communicate all that at the top.”
Cultural fit is foremost in the due diligence process: finding the right talents, but also people who believe in the new company’s philosophy and mission.
“That’s been the biggest challenge over the years in Cleveland specifically, as we acquired Smythe Cramer and Realty One, which were two companies that for years competed with us — it was bringing that philosophy together, and we think we’ve done a great job of bringing the best of those two cultures and people and overlaying it with the mission of Howard Hanna Real Estate Services.”
Find a similar culture
It’s easy to get locked in on the financial benefits you expect to realize through the acquisition of or merger with another company. But if you ignore the cultural implications and the ability of the two sides to mesh into one organization, you’re asking for trouble.
“We’ve been pretty lucky in terms of merging and acquiring companies that had, at their core roots, a very similar philosophy and culture to ours,” Hanna says. “Most of the companies we’ve acquired have been consumer-centric in their focus, like us.”
An overriding principle of Howard Hanna is that throughout the whole operation, the most important aspect is how consumers would be affected by a merger or acquisition and does it make their experience better.
“You try to identify the companies that, at least at their core, have that,” Hanna says. “They may have grown up with other focuses, in terms of where their marketing is, in terms of how they listen or don’t listen to their salespeople or their customer base, but there should be something at the core that you can resonate and build upon.”
So much of due diligence is tied to numbers, but you can’t skimp on talking to the ownership group to determine what its new role will be.
When Howard Hanna purchased the Smythe Cramer Co. in 2003, owner L.B. McKelvey had had a relationship with the Hanna family for 20 years.
“And so with that relationship — outside of ever thinking about doing something together — we were able to get an inside look at what their company did do well, and we could share a lot of best practices,” Hanna says. “But I found that when I shared an idea with some brokers, they’d look at me as if, ‘I would never do that.’ You start to see that your culture doesn’t fit because they would not accept your concepts or say that it wouldn’t work in their organization.”
The relationship between the two families over the years made for a nearly seamless transition.
“There were changes, there were subtle differences that people would see, but at the core value level — even post-closing, we agreed so much on the direction of where we were going,” Hanna says.
While some private equity companies may take over to trim the fat right away, Hanna doesn’t believe in that.
“We’re pricing it as a valuation: ‘Here’s what it’s worth based on how it operates,’” he says. “But you can’t change the culture by laying people off and reducing the workforce just because of the numbers. Those people have a role in the full structure and organization. It’s more knowing that the leadership group will buy into your plan and agrees with it philosophically, and has no problem after that transaction moving forward, with everybody and the focus to achieve sustained success.”
One mouth, but two ears
When companies are acquired or merge with another, people are often afraid of what might happen. Management’s best shot to ease those fears is to over-communicate its core values and drive home how they relate to what the workforce already believes in.
“But also spend a lot of time just to listen; you can talk all you want, but there’s a reason you have one mouth and two ears,” Hanna says. “It’s because sometimes if you listen to what the concerns are, they’ll start answering themselves.
“Let them ask the questions and by the way you give the answer, they’ll see that those values are a commonplace that, ‘Hey, I can — this resonates with me; it’s not that much different than what I believe in, so now I can support the leadership and support the team.’”
The listening process may be difficult at times because you are in the position of hearing people share their deep concerns as they discuss solutions.
“It’s hard because you’ve got to listen, and you want people to be positive about the situation, and you’re positive and proud of your own organization, but sometimes you have to go through the growing pains of allowing people to challenge what’s been more status quo just to get a greater understanding,” Hanna says.
If your workforce believes you are willing to listen, that opens a line of communication. Another key is for the leadership team to have an open door atmosphere, Hanna says.
“Every employee and sales associate in our organization has my home phone number,” he says. “The way you build culture is that people follow great leaders, so you have to be out in the front, and you have to really resonate with a relationship.”
Fundamental to a relationship is a high level of trust.
“In our organization, our employees and sales associates have to trust us just as much as we have to trust them,” Hanna says. “It’s a two-way street. And it’s not management versus the sales force or employee base — it’s together we’re really achieving great stuff. It’s just communication over and over, and listening at the same time. If you say you’re going to do something, actually fulfill and finish it.”
Evaluate the ideas and suggestions that are made, but watch for knee-jerk reactions to them. In other words, don’t make an emotional rather than an analytical response.
“We try to keep an open mind, and we try to learn, but your hope is that if you’re buying good, existing operations, there’s a reason that they had success,” Hanna says. “You just don’t want to throw away everything they’ve ever done. You want to ask, ‘What are the best practices?’
“Then you want to continually try to find the best practices, the best products, and then take those best practices where you can into new markets and take them across the whole footprint of an organization.”
- Find a similar culture when scouting for acquisitions.
- Open the lines of communication and listen.
- Expect a glitch or two and plan solutions.
The Hanna file
Name: Howard W. “Hoby” Hanna IV
Company: Howard Hanna Real Estate Services
Title: President, Howard Hanna Midwest
Born: Pittsburgh. My father is Howard W. “Hoddy” Hanna III. The business was started by Howard W. Hanna Jr. in 1957.
Education: University of Pittsburgh. I studied not business administration, but political science and history! But I worked every summer, while growing up, at our family business — I did everything from putting signs in the ground to just learning different aspects. There was some part of me that never expected to go into the business, but I think I was exposed to it so much that it became natural.
What was your first job, and what did you learn from it? When I was in college, I had a couple of different businesses that I started with some friends. We sold college novelty items, T-shirts and other items to fraternities and sororities. But I guess my first job actually was delivering newspapers. I learned how tough it was to collect from some people who never were home when you went to collect. So I figured it was better to automate and get people to pay you ahead of time.
Who do you admire in business? I’d say first and foremost is my dad. He’s been an incredible influence to me in terms of how he operates his business and how he communicates with people and just has been not only a father, but a great teacher.
What was the best business advice you ever received? To under-promise and over-deliver. It was earlier in my career when I was really enthusiastic and excited about wanting to do something and maybe set the bar too high. d I had a mentor of mine say who said you’re better off to not over-promise and just to over-deliver, and that’s resonated with me, especially on big projects, especially on audacious goals. But don’t brag about the expectations, you deliver the expectations. Deliver the result.
What’s your definition of business success? From my prospective, it’s sustained positive results. I think there’s a lot of businesses that put a lot of energy, a lot of excitement, into — you know, had one flash in the pan and had a big year or a big quarter, but it’s to continue to sustain that success year after year, decade after decade, and just have a consistency of results.