Governance and leadership training within the real estate industry in Canada has become a staple for directors and leadership at all levels of organized real estate.
I have had the privilege of being an instructor for the Leadership 200 and 300 courses offered by CREA to all directors across Canada. I have always enjoyed being able to facilitate conversations for new and returning directors about all things governance. Though, I sometimes question how much of it actually gets put into practice, especially when it comes to the roles, responsibilities and fiduciary obligations of directors.
Leadership vs. governance: Understanding the difference
First, it is important to differentiate leadership and governance in the context of a director’s responsibilities.
I would suggest that governance is related to the decisions you make at the board table, and leadership is the influence you have beyond the table. While industry experts may have differing perspectives on traditional governance structures, I am interested in exploring the role of leadership.
When we evaluate a leadership role in organized real estate, any leadership role, there are three areas that a leader can take into consideration as they navigate the decisions in front of them and their opportunity to influence change: the members, the organization and the industry.
“The decisions you make as a director should be what is best for the organization, full stop.”
First, the members. Generally, the constituent that gets the most consideration and the only one of the three areas that can actually provide feedback, which results in a desire to keep them satisfied.
Second, the organization. Based on a ruling by the Supreme Court of Canada, the legal obligation of all directors in Canada is to the organization (not the members or shareholders). The decisions you make as a director should be what is best for the organization, full stop.
Finally, the industry. Typically given little consideration, if any at all, and rightly so. Leadership tends to think that a decision being made at their board table could not possibly have any influence on an entire industry, leaving them to ignore it in their decision-making. This is not true at all.
So, let’s start with the members. This is not going to be a popular opinion, but I would suggest that leadership not make decisions based on what members want. The members’ needs and opinions are a vital component of an organization. However, it is important to recognize that leaders should not make decisions based solely on what the members want.
The members want a decision that is going to be best for them, which might not necessarily align with what is best for the organization or the industry. Now, don’t get me wrong, get feedback, ask good questions, determine how decisions will impact the majority of members, understand why members have the opinions they do—but directors should not make leadership decisions solely based on what is most popular with the members in that the moment.
Now let’s look at the organization. While the members are an important consideration, directors must prioritize the organization. Anyone who has had any governance training knows that the fiduciary duty is to the organization.
Regardless of what members want, regardless of what is best for the individual, it can’t be contrary to what is best for the organization. This means that decisions made by directors should prioritize what is best for the organization as a whole, rather than what is best for any one individual within the organization.
There have been countless times around board tables (both inside and outside of the real estate industry) where I have heard a director make a comment about how something being voted on does not work for the way they conduct their business. Or that they support a motion because it could benefit or have negligible impact. These comments should be met with an immediate course correction to question the impact on the organization, not any one person or business.
Then there is the industry. In a recent LinkedIn post where I was sharing a REM article about technology advancements that I was interviewed for, I commented, “How do we innovate when the real estate industry is entrenched in the maintenance of legacy?”
One answer to this question, and quite frankly, the only one that matters right now, is that leadership must be empowered to make decisions that consider the future state. Gone are the days of making decisions based on protectionism, holding onto what was and the “that’s the way we’ve always done it” mentality. Unfortunately, with so many holding onto legacy, that empowerment will never truly come.
So, where does that leave us? Honestly, it leaves us exactly where we are. With leadership across this country making tough decisions that are contemplating where this industry is headed and looking to be strategic in their planning so we as an industry are best positioned for what’s to come.
Whether it’s a policy or initiative at the federal, provincial or local level, these decisions are being made by our peers, leaders who are driving this industry forward. To them I say, make the decisions not based on what the members want, continue to base it on what’s best for the organization, even if the members don’t necessarily realize it.
There will always be those who want to keep things the way they are and that’s fine. You are in a leadership position for a reason. Let’s continue to lead and do what’s best, first for our organization, and ultimately for our industry.
Trevor Koot is the CEO of the British Columbia Real Estate Association. With previous positions as the executive officer of two regional real estate boards, chair of a provincial real estate regulator, broker and Realtor, Trevor has extensive experience within the sector. Trevor lives in Vancouver with his wife, Jill, and his daughter, Abby, is attending the University of Victoria.
This is an exceptional article. The points made are without hesitation correct. Challenge is that historically the organization was placed last on the list – there was, in some cases still is, a misunderstanding of the actually priority sequence and inherent responsibilities. A prioritized and well run organization will help support membership success, which in turn helps their clients.
An important and courageous article. Thank you Trevor for your direct and clear communication on this. The comment, “……but directors should not make leadership decisions solely based on what is most popular with the members in that the moment.” The type of leadership that will guide us forward in an ever changing world needs to take the responsibility seriously. What we do matters and great leadership will keep our industry viable and vital.
Well said Trevor. Leadership must have the courage to be innovative and then hold fast to the direction they have chosen in the face of the inevitable opposition. To use a metaphor, board leaders are like the pilots in an aircraft and the members are the passengers. The pilot has the best perspective to make the right decisions and adapt to the unexpected. The passengers may not always enjoy the ride or understand what is happening but they must trust the pilots have their best interest to get them to their destination safely.
To boldly go where no one has gone before – do it best!
Right on the money Trevor,
Great article Trevor. You are spot on.
Sometimes structure impede progress.
I completely agree with you Trevor! Leadership and governance are two separate opportunities to make a difference.
I enjoyed the article and it makes some superb points that regularly need to be made. Too often, people run for leadership positions for the wrong reasons, and course corrections are all too frequently needed.
I do have one concern in that I take issue with the assertion that we are “an industry entrenched in the maintenance of legacy” and that “with so many holding on to legacy, that empowerment will never truly come.”
The first is (in addition to being a vague, sweeping assertion), I believe, just incorrect, and the second is a questionable premise that assumes the writer’s position is undoubtedly correct.
Our industry has likely seen more change in the last 30 years than almost any other, and it is only natural that that much change will meet resistance. Some of that resistance will be “this is the way we’ve always done it,” but some of it will also be “let’s look before we leap.”
Over the years I have watched the industry transform from resistance (myself included) to pushing to be at the forefront of technology and I don’t see an industry “entrenched in the maintenance of legacy” any more, I see an industry looking to lead the field.
That said, in this great leap forward, we have made many good decisions and several not so good decisions. This is normal in a time of great change and not every decision is a move toward empowerment. Let’s continue to drive forward but let’s always look before we leap.
That is my only issue with a solid article that makes a very valid and timely point. Thank you Trevor.