Colliers’ Doug Frye: ‘We’re like an iPad’

Colliers International CEO Doug Frye tells PropertyEU why the company’s decentralised business model is one that is set to last for another 50 years.

Whether it be growth in profit, revenues or staff numbers, all the figures illustrate that Colliers’ strategy is working, claims a confident Doug Frye, CEO of Colliers International. ‘Ten years ago we decided that we had to do things in a radically different way and we have since grown incredibly fast despite the economic downturn,’ Frye said in an interview with PropertyEU.

The firm has seen global revenues soar from $187 mln in 2002 to $2 bn (€1.5 bn) in 2012 through organic growth and mergers with leading players in Canada, the US and Europe in a short space of time.

‘The building up of an international brand has been an essential part of that growth. And with the exception of managing the brand, and a handful of key business lines that require a centralised process, the rest of the business is organised in a way that empowers our people at a local level, in contrast to our competitors,’ Frye said.

When it comes to structuring and building the business, the 53-year old CEO feels a strong affinity with the philosophies of US economist Daniel Pink. He argues that better results are to be obtained in creative professions - including the financial services industry - not by rewarding or punishing people with financial incentives but by giving them a large degree of autonomy. In his bestseller ‘Drive’, he argues that in developed economies where the added value must come from creativity, three things are important for professionals: autonomy (the need to shape our own lives), a specialism (being exceptional at something); and being part of something greater than themselves.

Model for the future
Frye joined Colliers as CEO in 2001 following a career with Grubb & Ellis. The firm has been controlled by listed Canadian group FirstService since 2004 when it became a 80% shareholder in Colliers Macaulay Nicolls, the biggest member company of Colliers International. That company operated as a platform from 2004 to gain a significant position in the property services sector and ultimately gain control of Colliers International, a goal it achieved in 2009.

Frye said the partnership with FirstService was essential: the company needed a strong strategic partner with capital to enable it to grow through takeovers. The driving force behind FirstService is founder and CEO Jay Hennick who set up the holding company out of Superior Pools, a management company for swimming pools established in his youth. Hennick and his team saw 10 years ago that real estate consultancy was one of the fastest growing sectors of the economy.

Frye attributes FirstService’s success to the growth realised from partnerships with entrepreneurs in individual markets. ‘The partnership model provides a strong competitive advantage for further growth. A top-down, centrally managed business has worked for some property advisers but we think our model allows for more enterprising solutions for our clients and will work for the next 50 years,’ he says.

Under this model, Colliers International is keen to share proceeds with local entrepreneurs but must hold a controlling stake in any business. ‘We don’t have to have a 100% stake in the companies with which we partner, but just enough to set up a partnership structure. That means a minimum 51% interest so that we can always intervene and provide complete accountability to our clients.’

The strategy of empowering local entrepreneurship is also a successful one at two other FirstService units: FirstService Residential has grown into the largest property manager of apartments in North America and subsidiary Property Services comprises several brands in the area of property maintenance (via franchising) and activities in the area of distressed property management.

Low overheads
Frye claims that local decisions also have to be implemented locally. ‘We want to give professionals the room to do just that and to concentrate fully on client demands. The quality of services provided in any market is determined less by a hierarchal structure or corporate documents, far more important is the way in which parties work together to achieve that goal,’ he says.

Colliers professionals strive to learn from one another by exchanging best practices and the quality of the brand is central to that. ‘Innovation comes from the field. We’re like an iPad, whereby the apps come from the local businesses within Colliers.’

Since most of the work within Colliers is done locally, the firm has a relatively small headquarters. ‘Whereas the competition spends on average 3.5% (of their income) on corporate overheads, we are way below that at approximately 1%,’ he says. That also applies to financial parent company FirstService, who are very strategic about investments. ‘There are less than 20 professionals in Toronto, of which only a handful are executives.’

Collaboration
Europe is one of the key areas of attention within that strategy as it is a part of the world where opportunities are currently to be found, notes Frye. Those ‘opportunities’ have an enormous underlying strength, he stresses. ‘The economic structure in northwest Europe in particular is incredibly strong.’ Colliers’ business model, he says, could be described as somewhat similar to the European Union. ‘We concentrate on where we have the strength in local markets and ensure that our decision-making reflects our clients’ needs locally and globally. The way we operate is probably more conducive to a region like Europe, which comprises many different languages, cultures and financial systems.

Colliers is strengthening its position in existing European markets and boosting its market share by taking stakes in local players. Recent takeovers in the UK, Germany (Colliers Schon and Lopez Schmitt in Frankfurt and Trombello Kölbel Immobilienconsulting in Dusseldorf) and the Netherlands (Urban Properties) testify to this strategy.

Frye: ‘The consolidation of all Colliers’ activities in Germany was a key part of our strategy in western Europe. We now have market leaders in Munich, Stuttgart, Berlin, Frankfurt and Dusseldorf. At the same time we have strengthened our activities in the Netherlands by taking over a respected asset and property manager.’ According to Frye, further growth in Europe will be dictated by the availability of suitable local partners who want to share in Colliers’ growth.

The firm’s position in Eastern Europe has been strong for years, In particular in Poland where it is a market leader.
Frye says there are already signs that the various local Colliers firms are helping one another as the economic headwinds persist. ‘The fundamental difference with the competition is that we strongly believe that numbers must be managed locally. Our peers are managed centrally whereas we leave that up to the local businesses. You see that this leads to local firms helping one another. Australian money is being invested in the UK while the Canadians are helping their colleagues in California. That is the collaboration that sets Colliers apart from the rest.’