The 'basics' continue to drive resident satisfaction and retention.

As most national reports continue to show, soft markets, heavy concessions and flat-at-best rents persist across most of the nation--and are expected to continue for the foreseeable future. Those in the multifamily housing industry have all heard the honor stories of sub markets where prospects are being offered as many as four months free rent.

Given the difficulties on the rental side, resident retention is receiving more and more attention as companies seek ways to "shut the back door" The key to improving performance is to reduce turnover--and the key to reducing turnover is to improve resident satisfaction. The satisfaction research conducted by SatisFacts in 2003 with tens of thousands of residents from across the majority of the country again shows the answer to improving satisfaction and the likelihood to renew comes from a focus on the "basics." These basics include prompt and professional attention to service requests, ensuring residents have positive feelings about their home and that residents feel reasonably safe. The investments that permit community staffs to improve their performance in these critical areas, SatisFacts' research shows, deliver powerful returns.

With the cost for each move-out at least $3,000 (and much more if up to four free months concessions are given), SatisFacts' research suggests that the way to increase net operating income (NOI) is to ensure that the best possible level of service is delivered. This can lead to a 1 percent, 5 percent or 10 percent reduction in turnover. What a dividend! Every move-out that is prevented means much turnover costs. Controllable turnover will decrease as more residents perceive value for the rent they pay. If expenses must be cut, do not cut back in areas that affect servicing resident requests. Instead, reduce money spent on "soft" marketing programs (i.e. social activities, gifts, etc.).

Given the immense pressures of concessions, vacancy loss and reduced rents, some firms have attempted to boost NOI by cutting back on staffing, most notably the maintenance staff. SatisFacts' findings suggest that such decisions have a significant negative affect on satisfaction and the likelihood to renew. The 2003 national SatisFacts Index reported that controllable turnover increased to 74 percent from 65 percent in 2002.

There are several possible causes for tiffs increase. Residents submitting work orders increased to 79 percent from 72 percent in 2002. This jump increases a community's exposure to how well the requests are handled--so handle them with care.

Community management does not want to turn an important customer touch point into a negative experience. Make how the service requests are handled an opportunity to show residents the value they are receiving for their rent. Another important finding was that the percent of residents with outstanding service requests increased from 20 percent in 2002 to 27 percent in 2003. With the strong correlation between the percentage of residents with outstanding requests and the percentage who respond they are "Very Likely" to renew their lease, it was not surprising that SatisFacts' findings showed a reduction in the renewal likelihood, which dropped from 56 percent "Very Likely" in 2002 to 51 percent in 2003.

This article will delve deeper into SatisFacts' findings, including an in-depth review of the factors for the reduction in the likelihood to renew, as well as some ideas on how to incorporate addressing these "basic" issues into a successful Resident Relationship Management[TM] (RRM) program. Among the key factors are that:

* The majority of turnover is controllable;

* Success begins with the staff, attitude, education and operational systems;

* Residents want and reward a focus on the basics; and

* The percent of outstanding work orders, staff responsiveness, work quality, a sense of security and perceived value drives renewals.

Service Requests and Renewals

Year after year SatisFacts' research shows that how service requests are handled is the key driver in residents' renewal decisions.

As Graph 1 shows, this powerful correlation remained the case in 2003: The higher the percentage of residents with outstanding maintenance problems, the lower the percent of residents who respond that they are "Very Likely" to renew their lease. The renewal potential drops significantly as the percent with outstanding issues increases.

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How do outstanding service issues affect satisfaction? Graph 2 shows the same type of correlation as the previous graph: Satisfaction drops from the "Superior" range into the "Red Flag" range as the percent of residents with outstanding issues grows. Management companies should focus time, effort and funds into making sure their system provides customer service as effectively and efficiently as possible.

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Graph 3 shows the same relationship reported last year: Office staff responsiveness, maintenance response time and work quality continue to have clear and strong effects on satisfaction.

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The important message here is that these issues are controllable. The return on investments in these areas is clear: There are many potential resident retention program components, but the focal point should be ways that permit improved staff efficiency. With limited budget dollars and minimal staffing, it is clear that funds should be directed to areas that will specifically address real service issues.

Some of the key areas of focus involve staff education (regarding taxing and servicing work orders), staff size (having the proper size staff to effectively handle annual or seasonal work order needs) and using the full capabilities of the community's property operating system (using the maintenance modules to help make the tracking, handling and completion of work orders more efficient).

Overall Findings

SatisFacts resident surveys cover a broad range of satisfaction areas, with residents answering questions using a 5-point rating scale (1 being Extremely Dissatisfied, and a 5 being Extremely Satisfied). Scores above 4.50 are considered "Exceptional"; 4.00 to 4.49 "Superior"; 3.50 to 3.99 "Average"; 3.00 to 3.49 are "Warning" signals; and scores below 3.00 represent a "Red Flag."

Scores dropped in 2003 from 2002, SatisFacts believes, because of the affect of reductions in staffing. These results add weight to SatisFacts' position on the need to prioritize funds to areas that improve the staff's ability to deliver service to residents.

The most important messages are illustrated in tables that follow.

* Residents rated the speed with which work orders are handled as modestly "Average," and this score dropped from 2002, which ties in with the points made earlier.

* Residents giving their actual apartment an "Average" score has significant implications. If they do not have strong feelings about their home, how do you expect them to respond when they get their annual rent increase letter? What is the affect on perceived value? Asking them to pay more for something they do not have strong feelings for will only push them to go out into the market to see what their options are.

* 79 percent of residents submitted maintenance requests last year, which increased from 2002. Since there is a strong connection between how maintenance requests are handled and renewals, properties have great potential to negatively or positively affect retention.

* Of those who submitted work orders during file past year, 27 percent of residents cited that maintenance problems remained in their apartment, representing all increase from 2002. Reducing the resources dedicated to handling service requests led to an increase in outstanding requests; given the correlation between this and the percentage citing that they are "Very Likely" to renew, this increase negatively affects retention.

* The latter point of the negative impact that increased outstanding work orders has on renewal likelihood is confirmed by the findings. When the percent with outstanding issues increased from 20 percent in 2002 to 27 percent in 2003, the percent of residents who said they were "Very Likely" to renew dropped from 56 percent in 2002 to 51 percent in 2003.

As the percent of residents with outstanding work orders increased from 2002 to 2003, the percent stating they were "Very Likely" to renew dropped by almost 10 percent.

Most Turnover is Controllable

While 51 percent of residents said they were "Very Likely" to renew, the more interesting data comes from the 49 percent who did not respond this way; these residents were asked a follow-up question of why they did not respond that they were "Very Likely" and the key finding is that 74 percent of these residents cited controllable reasons, which is a 14 percent increase from 2002.

This finding and those that follow clearly provide validation of the points made on the need to not only avoid cutbacks in funds directed to staff, staffing, education and operational systems, but to consider investing more because research confirms the return for investing funds to increase staff effectiveness and efficiency.

When reviewing the table of non-renewal issues cited, keep in mind the financial effect of every point, even the ones only citing 3 percent--3 percent of a 300 apartment home community's 150 move-outs equals five residents; at a cost of $3,000-$5,000 (if heavy concessions) per move-out, a 3 percent item has a $15,000-$25,000 effect on the bottom line. Taking a broader look, if 74 percent of turnover is controllable and it can be reduced by identifying the issues and taking action, what could the return be for investing funds in the ways addressed earlier?

Reducing the turnover rate of a 300-apartment community by just 5 percent boosts the bottom line $45,000 $75,000.

These findings show the importance of focusing on the real issues of satisfaction and retention. The priority must be on addressing the basics of Resident Relationship Management--not on traditional programs such as social activities, newsletters and the like. Highlights of the above table of the top reasons why residents say they were not "Very Likely" to renew are:

* At least six of the top 10 potential non-renewal reasons are directly related to the basics of staff performance. Items such as "social activities" were not a top-rated non renewal reason, but maintenance response time (No. 4 ranking nationwide, up from No. 9 in 2002), office responsiveness, maintenance work quality and office courtesy were given.

* Overall, 21 percent of residents cited "staff-related" reasons.

* 22 percent cited "staff controllable" reasons.

* 11 percent of residents cited financial and perceived value issues.

* 8 percent cited property improvement issues.

* 10 percent cited apartment feature, condition and appearance reasons.

Resident Confirm Need for 'Back to Basics' Approach

In the SatisFacts survey, all residents are asked, "What can be done to improve the community?" Responses are very similar to the non renewal issues, and the suggestions once again focus on "basics":

* At least five of the top 10 suggestions directly related to the basics of staff performance.

* 26 percent of suggestions were "staff-related."

* 56 percent were in areas that are "staff controllable."

* Only 3 percent related to rent.

* 23 percent were property improvement suggestions.

* 15 percent were related to apartment features, condition and appearance.

Planning for Success

SatisFacts' findings clearly confirm the strong correlation between the basics and renewals. To maximize performance, sound Resident Relationship Management plans should be crafted, implemented and regularly monitored at the community, regional and corporate levels. The foundation for these plans should be researching the issues that most greatly affect satisfaction and renewals. First and foremost, plans must address the staff-related, asset related and performance-related issues identified. And for each issue identified, the plan should include focused, cost effective, actionable options, as well as costs, an evaluation, recommendations, deadlines and responsibilities.

Clearly the majority of turnover is controllable. Residents will reward a focus on the basics. The priority for funds should be on the staff, staffing, education and operation systems that will permit the community's team to effectively and efficiently deliver prompt, professional and dependable service. Until the true key drivers of satisfaction are well under control, consider shifting dollars budgeted for "bells and whistles" (social activities, n-love in gifts, newsletters and other "soft" marketing programs) toward investments that will permit the staff to better take care of tree resident needs.

In summary, resident satisfaction is driven by "basics," such as a courteous, capable, dependable and responsive staff; proper handling of work orders; an apartment and community that residents are proud to call home; well-maintained facilities and amenities; good neighbors; a sense of safety; and visible value for the rent they pay.

What Residents Think: Satisfaction Ratings by Category

Category                 Description

Maintenance Staff        Courteous and professional
Office Staff             Courteous and professional
Maintenance Staff        Quality of work
Office Staff             Responsiveness and dependability
Exterior Curb Appeal     Grounds, landscaping, building, lots
Apartment                Appearance and condition
Building Interiors       Hallways, laundry facilities, lobbies
Maintenance Staff        How quickly requests are handled
Safety and Security      Level of satisfaction
Overall Average Score

Category                 2003 Score    Comment     2002 Score

Maintenance Staff           4.21       Superior       4.25
Office Staff                4.21       Superior       4.24
Maintenance Staff           4.03       Superior       4.09
Office Staff                4.00       Superior       4.07
Exterior Curb Appeal        3.99       Average        4.02
Apartment                   3.95       Average        3.97
Building Interiors          3.92       Average        3.93
Maintenance Staff           3.79       Average        3.96
Safety and Security         3.77       Average        3.91
Overall Average Score       3.99       Average        4.06

Category                Description

Maintenance Requests    Percent who had requests in the past year
Maintenance             Maintenance problems still exist
Renewal Likelihood      Percent citing "Very Likely" to renew
Referrals               Percent who would recommend their community

Category                2003      2002

Maintenance Requests    79.11%    72.91%
Maintenance             27.90%    20.71%
Renewal Likelihood      51.33%    56.49%
Referrals               84.18%    88.94%

Top Rated Reasons for Not Renewing

Rank    Reason and Suggested Antidote

 1      Buying Home: Consider a rent-to-buy program where
        a percentage of rent goes toward closing costs with local
        builders. This becomes a marketing advantage, plus it will
        tend to lead residents to stay longer so they can build up
        their down payment. Attempt to shift the community's
        marketing message and programs to appeal more to
        long-term renters.
 2      Relocation: Have a sound, well-promoted inter-company
        property referral program.
 3      Rent Increase: The increase is usually not the issue. It
        is the perceived value. Consider a menu of lease renewal
        incentives focused on in-unit improvements that will help
        residents "love" their home again (carpet cleaning,
        painting, closet organizers, window treatments, lighting,
        etc.). The value of incentives grows the longer residents
        have lived in a community. A dual benefit is that
        improvements also enhance the value of the asset.
 4      Maintenance Response Time: Maintenance Techs
        can waste 1-2 hours per day deciphering work orders.
        Help them by educating office staff on the key questions
        to ask on the most frequent service requests, and improve
        the information given on work orders. Enough staff?
        How about pulling money budgeted for social activities
        and gifts, and use it to at least enhance the maintenance
        staff during the heavy turnover season? Educate the
        maintenance team on any areas of weakness. Make the
        most of the service request functionality in the community
        operating system. Implement a "best practices" program
        and monitor performance metrics.
 5      Rent-to-Value: See "Rent Increase."
 6      Office Responsiveness: See "Maintenance Response
        Time." More than 50 percent of leasing staff's time is not
        spent leasing, it's providing customer service. So, educate the
        office on how to take work orders and how to maximize the
        use of the property operating system. Implement a
        "best practices" program and monitor performance metrics.
 7      Maintenance--Quality of Work: Quality can be a
        function of inadequate staff size, education needs and the
        need for work orders to be processed properly by office staff.
 8      Safety--Community: Options vary in cost, ranging from
        neighborhood watch programs, to building controlled
        access entry systems, revenue-share apartment intrusion
        alarms and fencing or gating the property.
 9      Office Courtesy: Hire right. Hire the attitude, teach
        the technique! A non-"people person" cannot be taught
        to be nice and concerned.
10      Neighbors: Enforce house rules and regulations. Don't
        be short-sighted. Make sure selection criteria has not been
        relaxed too much because residents will see the difference.
11      Office Work Quality: See "Maintenance Response
        Time" and "Office Responsiveness."
12      Moving Home
13      Apartment--Condition: if they don't love their home,
        how will they feel when they get a rent increase? See in-unit
        lease renewal incentive program under "Rent Increase."
14      Community Cleanliness: Dirt does not sell. Go for
        consistent cleanliness, not just around the office! Also focus
        on Dumpsters and pick-up schedules. Review with vendor
        or staff and push for better performance.
15      Safety--Neighborhood: See "Safety-Community."
16      Community Parking: Re-evaluate site, Dumpster
        locations, striping and lease terms (number of cars
        permitted per apartment). Consider contracting for a
        professional evaluation.
17      Apartment--Need Different Size: If you do not offer
        the size needed, use an inter company property referral
        program.
18      Location--Overall: Would an inter-company
        property referral program help?
19      Safety Gate: It is often cited that gates do not work: the
        resident perceives that they are not getting something they
        are supposed to be getting for the rent they pay. If you have
        a gate, make sure it works. If it rarely does, consider
        options.
20      Cannot Afford: Can an inter-company property referral
        program help?
21      Apartment--Space, Design: Would an inter- company
        property referral program help?
22      Found Better Deal: Why were they looking? Typically due
        to perceived value. See in-unit lease renewal incentive
        program under "Rent Increase."

Rank    2003 Frequency    2002 Rank    2002 Frequency

 1          19.1%             1            24.3%
 2          16.8%             2            17.5%
 3           6.8%             3             6.9%
 4           4.9%             9             2.7%
 5           4.9%             4             6.0%
 6           4.0%             6             3.4%
 7           3.6%            11             2.6%
 8           3.5%            10             2.7%
 9           3.5%            12             2.6%
10           3.2%             7             3.1%
11           2.9%             8             2.8%
12           2.8%             5             4.6%
13           2.3%            19             1.4%
14           2.1%            16             1.9%
15           2.0%            15             2.1%
16           1.9%            18             1.5%
17           1.8%            13             2.3%
18           1.8%            N/R            1.9%
19           1.8%            17             1.9%
20           1.5%            20             1.3%
21           1.5%            N/R            2.2%
22           1.4%            14             2.3%

Top 20 Specific Suggestions on How to Improve a Community

Rank    Category and Ideas            2003 Frequency    2002 Rank

 1      Safety--Community                  8.1%             6
 2      Community Parking                  7.5%             1
 3      Community Cleanliness              7.3%             5
 4      Safety--Gate                       7.1%             4
 5      Better Residents                   6.8%             2
 6      Maintenance Responsiveness         6.5%             8
 7      Safety--Neighborhood               5.0%             9
 8      Office Responsiveness              4.9%             7
 9      Maintenance Work Quality           4.7%            11
10      Community Landscaping              4.3%            13
11      Safety--Building                   4.0%            12
12      Office Work Quality                3.6%            10
13      Office Courtesy                    3.1%            14
14      Lower Rent                         3.0%             3
15      Safety--Fencing                    2.8%            15
16      Apartment--Condition               2.4%            N/R
17      Community--Laundry                 2.4%            N/R
18      Community--Lighting                2.1%            N/R
19      Community--Fitness Center          2.1%            18
20      Apartment--Carpeting               2.0%            17

Rank    2002 Frequency

 1           5.7%
 2           8.2%
 3           6.2%
 4           6.5%
 5           7.2%
 6           4.2%
 7           4.1%
 8           4.3%
 9           3.4%
10           2.8%
11           3.2%
12           3.4%
13           2.6%
14           7.0%
15           2.5%
16
17
18
19           2.0%
20           2.2%

Allen & Rocks, Forest City Earn Top Awards

Allen & Rocks Inc., a McLean, Va.-based owner/manager with approximately 2,500 apartment homes in its portfolio, and Forest City, a Cleveland-based owner/manager with 36,000 apartment homes, won SatisFacts' most prestigious national award for resident satisfaction in 2003.

This is the second consecutive year Allen & Rocks has won the award. It also had the highest score for a community (Elkridge, Baltimore, Md.) with more than 100 apartment homes.

Dave Thomas, Vice President and Director of Property Management, Allen & Rocks, attributed their success to attitude and focus. More specifically, he said there is a company-wide commitment to their mission. The mission is basic and simply stated, "We put our hearts into your home."

Forest City Chief Operating Officer George Cvijovic said his staff "from Day 1 shows how we truly care and appreciate our customer and realize their value to us. It is inherent in everything we do."

SatisFacts Research, LLC is a full-service customer satisfaction research company that specializes in the multifamily industry. Doug Miller, President, SatisFacts Research, has nearly 20 years experience in multifamily marketing, research and training. Chris Pulket is Director of Operations for SatisFacts. To reach SatisFacts call 866/655-1490, e-mail [e-mail] or visit www.SatisFacts.net.