Lukas Krause, CEO of Real Property Management, joined the podcast to share how he’s helped his business scale by focusing on continuously improving the people strategy – including hiring the right people for the right roles and ensuring all employees are culture fits.
Connect with Lukas on LinkedIn.
Speaker 1: Welcome to The Best Team Wins podcast with Adam Robinson. He’s talking to today’s industry leaders and entrepreneurs about the people side of their business.
Adam Robinson: Welcome to The Best Team Wins podcast, where we feature entrepreneurs and business leaders whose exceptional approach to the people side of their business has led to incredible results. My name is Adam Robinson, and for the next 25 minutes I’ll be your host as we explore how to build your business through better hiring. Today on the program, Lukas Krause, co-founder and CEO of Real Property Management, located in Salt Lake City. It was founded in 1986. Lukas and team have been franchising since 2004 and have 320 locations across North America and US and Canada. Lukas and team have 100 employees at the franchisor level. And across the company’s franchisees, over 32 hundred employees out in the network. Recently the business was acquired by Dwyer Group, and we’re going to talk about that as well. Lukas, welcome to the show.
Lukas Krause: Yeah, thanks for having me.
Adam Robinson: So we are here to focus on the people side of your business. To set the stage for our listeners, give us 30 seconds on Real Property Management.
Lukas Krause: Well as you captured, Real Property Management is the largest single family property management company in the United States with over 320 locations across North America. Our core purpose is really about wealth creation. What our franchise do is help individuals participate in the real estate arena with allowing them to outsource all the property management activities. And so that allows individuals to focus on buying or their other careers and treat this like an investment. And so our whole job is to provide an end to end solution that allow those individuals who own the rental properties to not be associated with or tied into the headaches that come with it, whether it’s a maintenance and repairs, or the screening and placement of tenants. Those are the kind of things that we do.
Lukas Krause: And my role as president is really to further our growth and support our innovation as we aspire to elevate the property management category as a whole. And as you talked about, very passionate here personally about professional development and grooming talent. So much so that I wrote a book titled, The Business of You, and it’s really designed to help individuals manage their careers like thriving businesses. And so it’s funny that I see a lot of parallels between careers and running well-run businesses. And so I’m excited to be a part of this and talk about not only the people side of the business, but even strategically how you should attack different categories.
Adam Robinson: Outstanding. And so if listeners want to learn more about the business or about franchise opportunities, what’s the best way for them to do that?
Lukas Krause: RealPropertyMGT.com is our website, and it really will drive you anywhere you need to go, whether you’re learning about our services, whether you’re a resident or a potential homeowner, or even on the franchising side, it’s all there at RealPropertyMGT.com.
Adam Robinson: So Lukas, it sounds like you came aboard in 2012 to help scale the business operationally. Take us back to when you started. What was the state of the organization and the team, and what were some of the first things you knew you had to focus on.
Lukas Krause: It was definitely on the people side where the focus was. Two true entrepreneurs who start the business, and were almost of victim of their own success, did a lot of things well, but they had this huge tailwind. The property management space exploded after the housing bubble where a lot of individuals couldn’t sell their homes, and so on the staffing side, it was an area where I won’t say it was shortchanged, but it was rather aggressive and just throwing bodies at it to kind of plug holes, and not as deliberate as you would hope. And so there was quite a bit of retooling we needed to do. And starting with the HR and the people side especially. And so it was getting the right people in the right seats and transitioning those out, who are very talented, well-intended individuals, but often they were ill-equipped to handle some of the challenges that were in front of them.
Lukas Krause: And so that was where the primary focus was was kind of restoring and restocking our bench to get that in place to ensure that we could really scale to get to that next level. The individuals thought that it was some of the operational elements, but it really was more of a talent issue and just trying to grow too fast and really not screening as thoroughly as you should, or having the right people in the right seats.
Adam Robinson: So it sounds like in periods of high growth, the mindset may have been, “Fill the spot, we need the help,” versus, “Wait for the absolute right fit.” Was that the case, and if so, how do you change that mindset?
Lukas Krause: Oh, I think it’s spot on as you describe it. Because they were just growing so fast with the explosive growth and not having much of a background in HR, the individuals were just kind of plugging and going. And it was working, but it really didn’t see the challenges and the issues that were popping up. I had fortunate enough to have some perspective coming in with a fresh pair of eyes and start to see where the bottlenecks were and assess it from a true 30 thousand foot view. Where the individuals who are living in the day to day, it’s very difficult to get perspective. On the change side, it really is almost like triage.
Lukas Krause: You go through and look at the priorities and you understand what your market is. In Salt Lake City, it’s not an overly large market with a lot of big companies, but there’s some extremely intelligent individuals here that are well-educated. And so what we did is we started to put a process in place on onboarding to be much more thorough and go deeper into the types of individuals we need so you’re going through aptitude testing, personality profiles. But you’re also looking at what kind of personalities you want from a cultural fit to ensure you’re really building something here special. And its taking the time and doing the work.
Lukas Krause: It’s kind of like anything, right? Anytime you’re trying to, whether it’s losing weight, you have to chip away at it. Every decision will impact you losing weight. Well the same thing with bringing in talent is finding those right people, but spending the time rather than doing a quick surface level, 30, 45 minute interview, you got to dig deeper into it and see how their mind works, what’s their attitude, how they fit culturally. Do those reference checks and that background and it’s forcing that discipline, especially when it’s painful. When you’re growing and exploding as a business, you kind of can fall into those traps, not only on the HR side, but any parts of the business where, “It’s good enough, let’s just keep moving along.” But the HR side, I mean that’s where to me the people are your product and you need to make sure you invest the time there, because if you don’t, you can get yourself in a lot of trouble.
Adam Robinson: And did you find that these issues were pervasive at all levels of the organization? And I think about that line level versus senior leadership team. I mean, what was the magnitude of the fit challenge that you were facing?
Lukas Krause: It was across the organization. It was just as the group was growing, it didn’t matter if it was in the leadership role or even down to the junior role. Again, just various levels of talent, but it’s just getting people in the right seats. And so it was a pretty hefty overhaul. The majority of the staff I can say only a handful of individuals have been there longer than me. And so it kind of gives you an idea of what kind of turnover we had to experience.
Adam Robinson: Sure. One of the most challenging conversations is almost always when you have to let someone who was previously a go-to player or even a member of your senior team has just not scaled with the business. Their skills have been outgrown. How do you have that humane, fair, but necessary conversation?
Lukas Krause: Well, I think you nailed that. And to even amplify it [inaudible 00:08:03] times, there’s personal connections with the owner founders, and so there’s even a larger emotional entanglement. I always believe I’m tackling things head on and treating everyone with integrity. But when you’re going into that, you need to help understand why. A lot of times it can be very talented individuals who are just in the wrong seat. And so it is painting that vision on the front end with the organization of where we’re going and what we hope to accomplish, and what we need from that given role, because it’s kind of any time when you’re providing feedback, you’re attacking the behavior not attacking the individual. And there’s a lot of parallels when you go through that and have this difficult conversations with individuals of, “Here’s what we’re trying to accomplish as an organization, and here is ultimately what we need out of this role in order to accomplish it.”
Adam Robinson: Very good. So you talked about a hiring process that needs to be followed. Take us through your hiring process. What works now at Real Property Management?
Lukas Krause: It is an interesting process. We believe it evolves over time. I would love to say that we’re perfect, but we still make our mistakes. What we first is we work with the hiring manager to build out what the job description is and what the objectives for that position. And spend a fair amount of time on that because it’s important to get a clear picture of what you need and what you’re looking for. From there, then our HR team would do a little bit of … Or would post the job and then they’d go through a pre-screening process. After that initial pre-screen, we would have individuals take an aptitude test and a personality profile. And then, we’d bring in the hiring manager for them to meet with. Then, we’d go through a series of interviews with different team members focused on different elements, because we like to get a well-rounded perspective of the individual.
Lukas Krause: Sometimes, we have follow-up, just depending on the role and how deep we want to go in the interview process. But the last one then is kind of, as I joke with the culture I think’s very important, is they meet with the team they’re going to work with, and it’s kind of a group interview. I think that’s very important because we’re very try to be protective of that culture, and this individuals have a big say on whether people get voted on the island or not.
Adam Robinson: Yeah, absolutely. And so when you think about someone making the cut or not making the cut in the organization, what today most often prevents that thumbs up from taking place?
Lukas Krause: Well, I think a lot of times it’s just how they gel with the team. You need to make sure there’s a personality match. And it’s making sure the individuals who come in to that on the team understand what we’re trying to accomplish the role. Because it can be, if you don’t front load that work effort on the front end, it might just be simply a personality conflict that just doesn’t work, and again, an hour or two meeting with someone can go get off on the wrong foot and lead you down the wrong path. So I think it’s important that you educate the team on what you’re trying the accomplish because we went through this situation with our ops team when we were rebuilding it, we had these, I don’t know how familiar are with kind of the DISC profile, but these high D, these drivers.
Lukas Krause: And it was getting so aggressive, they were great output, but we needed to round that team out because you were getting a lot of groupthink. And so when we were going and recruiting roles, we were making sure that we were encouraging diversity from a personality profile to round that team out. And so again, I think a lot of times it’s making sure that the team knows what we’re looking for and what the end goal is so that it is accomplished, because if they don’t, individuals may be looking for someone similar to them to continue kind of plowing ahead. And so it’s a delicate balancing act as you educate, but you don’t want to taint their view because some of the most valuable insights come from those team members because they will see something that maybe myself or the hiring manager wouldn’t see.
Adam Robinson: What role does core values match play in the assessment of somebody’s fit for the job?
Lukas Krause: It’s a big piece. I think it’s an area where we’ve been working on improving. To wire the organization we require is a big core values in group. Same here as an organization and so what we’re going through is a little bit of a kind of an assimilation of what we do with our core values and how they blend with a larger organization. But it is important. If an individual isn’t going to be excited about what your core values and what your objectives are and vision as a business, there’s a real problem because you want individuals passionate about it who are going to drive towards that objective. And so early on, I always try to share the vision when I’m meeting with individuals. I try to interview with everyone of what we’re trying to accomplish. And if that’s not something folks are going to get excited about, there’s probably a better position for them somewhere else.
Adam Robinson: Take us through your philosophy about rewards and comp at your company. I mean, how do you approach what you pay people and what their total value of working in the organization may be? Both monetarily and non-monetarily.
Lukas Krause: Yeah, philosophy for compensation’s always been pay well and align incentives, which is idealistic and great to say, but you also have to balance that with some of the situational limitations. You can imagine, as I mentioned, a bit of a turnaround when I came in in 2012. We didn’t have as deep of financial reserves to pull from as we can today. And so there is somewhat of this evolution of getting winds when you can. And so simple things is starting to add benefits, and getting the 401K launched, having more of a social committee where there’s individuals invested in it. But there’s a lot of things you can do with team building events and having the team own it. And I’m a big proponent of that where we have a culture committee where they’re planning the social activities.
Lukas Krause: What we do is we do a field day here where our employees are planning out what we’re going to do and it’s almost a competitive day and it’s probably one of the most popular things we do. And it’s rather inexpensive. But the other side of it too is creating a culture of recognition. That’s not really costly. And it’s important and people want to feel valued. So it’s a great way to do that and you do it in public. You do it formally and you do it informally and you get a lot of returns on that. And it’s good because people want to feel good and get that pat on the back for job well done. So it is funny that you have to look at it from a lot of different fronts, and I know where I believe philosophically and what we should be doing, but at the same time, I run into it like any business owner. Their challenge is, “How do I balance that with the financial constraints I have?”
Lukas Krause: And so it is always a delicate balance and the goal is always to kind of take a step forward and improve it every year, and it’s served us well, and we’ve gotten to a good place. We’re not where we need to be in my opinion. We’ve still got some room to grow. But we got some good progress thus far and we’re going to continue to get better.
Adam Robinson: Let’s talk about the book. Sounds like your results and experience inspired you to share what you’ve learned with a broad audience. Tell us about the decision and just give us a sense of what you’ve learned and what you’d like others to know.
Lukas Krause: Yeah. The book is titled, The Business of You, and so it describes kind of the premise is to treat yourself like a business. I’m a very passionate person about professional development. It’s what I’ve enjoyed most in my career is getting to work with individuals, and I’ve been so fortunate to have some amazing mentors and people who’ve looked out and help develop me personally, and I always want to try to pay it forward. And so looking around and a lot of organizations with I’d say employees bouncing around seem to be cutting a lot of the professional development initiatives and going to undergrad and going to grad school, it seemed like there was not a lot of things out there about how do you manage your career?
Lukas Krause: And so the whole premise of the book is to treat yourself like a thriving business, have a vision and a mission, what you want to accomplish. Conduct a gap analysis of what you need to do and provide a road map on how you’re going to get there. And really the goal is to ultimately help individuals take ownership of their careers, find … Tie it into their passions so that they can find fulfillment and their definition of success. And so it truly is a road map of how to manage your career as a business. And so I love it and I’ve had some great feedback about it.
Lukas Krause: And it was funny, I was going through … At this time, we have a portfolio of companies and a lot of businesses, but this book was like a creative outlet. And so even though I was probably running four different businesses and working obscene hours, I could always find every night at least 30 minutes to chip away at it. And it just kind of flowed out of me. And a lot of ways because over the last 10, 12 years, I’ve just been pulling together all this information and going to different conferences and all the information that kind of accumulated, and have packaged it into this book really designed as a guide to help individuals maximize their career success if they have those ambitions.
Adam Robinson: Fantastic. And so tell me about the impact. I mean, you said you’ve had some great feedback. What do you think more than anything else, perhaps philosophically, would change from what you see businesses doing to what they should be doing based on what you’ve learned?
Lukas Krause: I think businesses are starting to realize that talent is such an important piece where it was the economy has changed, and the labor market has tightened, and they need to find ways to retain talent again. I feel maybe people took their eye off the ball with retaining talent and developing and grooming them after 2008 when people were more desperate for jobs. And hate to use that word, but there was that element of desperation because your gainful employment was removed. And so I think employers who are struggling to make ends meet, they cut certain things, and they employees weren’t as sensitive to that, because they were just happy to have their jobs.
Lukas Krause: And now, that supply demand dynamic has flipped on its head. I think organizations are starting to realize as employees are jumping, it’s not just because of compensation. Obviously, that’s a big piece, but it’s creating an environment where I feel connected to the bigger picture, I feel like I’m going to grow. And especially even the younger generation of employees. The millennial generation is now the majority of employees in the workforce. And that’s important. They’re early in their career and they want to grow and be challenged. And so I think you’re starting to see a little bit of shift, and I’m hoping that’s the case, so that companies get back to helping groom and develop talent, because I think it was sorely missed over the last I’d say five to eight years as kind of the recovering from kind of the economic downturn.
Adam Robinson: You just went through a M and A process and I can imagine that was as fun as it sounds. Tell us about what you needed to do to get ready for that and what you learned as a result of the transaction.
Lukas Krause: You captured it well. I think it took some years off my life going through the due diligence process, being poked and prodded from accounting firms and law firms and the parent company and their different departments. I learned quite a bit of just planning. If you’re going to go down that process, to lay that groundwork early. Start those conversations with the groups who are reaching out to you. We were getting called on a weekly basis. Start to understand what they’re going to be looking for. Obviously, clean books on the financial side are very important. But documentation of all your processes and documentation of your staff and what you’re doing is very important.
Lukas Krause: Now, we were pretty good as we went through and refining and codified a lot of processes, but we still had a ton of work to do. As an individual company of our size getting acquired by a firm like Dwyer, there was a lot they wanted to see, and so it felt almost painstaking at times, but I understood it was completely necessary. And so there’s a lot of preparation you can do from preparing your business, but it’s also just the documentation of your process, your people, all that information, making it easily accessible. But there’s also a mindset that you go to embrace that you know they’re going to poke, prod, and look underneath every rock.
Lukas Krause: And I’ll tell you, you’re trying to run a business day to day while you’re getting those calls, it becomes another full time job on top of it. So you have to be prepared and committed to spend that time, because it started to get to a bit of a tiring at the end when I’m starting to get asked the same question for the seventh time, but there’s a little different slant on it. And it’s well-intended, but they’re also trying to cover all their bases and there’s different people coming in and out of the process. And so it will test you, not only from your organizational skills, but your patience as you continue to get more data requests from those individuals who are looking to make sure they assess the business appropriately and manage out the risk the best they can.
Adam Robinson: So you mentioned documentation of team and the talent. From your experience in doing this, what are some things that business owners, or founder-led businesses can do now to avoid having to retrace steps later in a transaction as it relates to human capital and people?
Lukas Krause: Well, fortunately enough, the HR side was in pretty good hands. Our HR director did an amazing job of having all the census information available. On top of that, just the retaining all docs, information, personnel profiles, and having them in an organized place, whether it be performance reviews, performance improvement plans, having those files organized made such a difference. So that was one of the easier sides of I’d say the due diligence process for us because our human resources director did such an amazing job of it.
Lukas Krause: But if you don’t have all that documentation as you go through individuals comp and where they’re at, that will be a lot of work. And it doesn’t sound like a big deal, but if you have 10, 20, 50, 150 employees, going back and going through their pay history and going through their … Try to track down their performance reviews, trying to track through anyone who was put on warning or had a performance improvement plan. You times that by 100, 200, whatever number of employees you have, that can be a lot of work. And you can imagine the administrative burden associated with that as you start to go through your emails and files if you weren’t organized from the get go.
Adam Robinson: We’ve covered a lot in a short amount of time here. If you were to summarize your body of learning and experience as it pertains to managing the people side of the business, is there one overarching philosophy that you live by when it comes to people?
Lukas Krause: Yeah, I’ll tell you, it’s treat people how you want to be treated when it’s all said and done. And I always believe that everything is a journey. And the HR side, it’s all about the journey of improvement and working on. And as I looked at it as a leader, it’s funny, what’s the most important quality. At first, I’d probably have some misguided information early in my career. I’d say, “Oh yeah, you want to be the smartest person in the room.” And I realized how foolish that really is. To me, it’s more about the ability to connect with people is the most important piece of it.
Lukas Krause: Because as a leader, you must inspire or move obstacles. Keep spirits up in tough times, because you have to help pull that brilliance out of others. And if you can’t connect with people, you’re going to fail on all of these fronts. And remember, the people side of the business are the ones doing the work, and so as a leader, to me, your ability to connect is almost that most important piece because you’re going to help bring that brilliance out of those individuals, and if you can do that, you’ll thrive.
Adam Robinson: Ladies and gentlemen, that’s the final word. You’ve been learning from Lukas Krause of Real Property Management. Lukas, thank you for being with us on the show today.
Lukas Krause: Thanks, it was a treat. Really enjoyed it.
Adam Robinson: That is a wrap, ladies and gentlemen from The Best Team Wins podcast where we’re featuring entrepreneurs and business leaders whose exceptional approach to the people side of their business has led to incredible results. My name is Adam Robinson, author of the book, The Best Team Wins, which you can find online at www.TheBestTeamWins.com. Thanks for tuning in and we will see you next week.
Speaker 1: Thanks for listening to The Best Team Wins podcast with Adam Robinson. You can find out more information about Adam and his book, The Best Team Wins: Building Your Business Through Predictive Hiring, at TheBestTeamWins.com. Thanks again for listening, and we’ll see you next week.