Simple solutions for resident satisfaction: by adopting these best practices, apartment communities can positively impact the resident experience and, ultimately, NOI.
The impact of competitive markets on net operating income (NOD, such as topline revenues, increased marketing costs. concessions and budget reductions, including staff cuts. has been the catalyst for the industry's focus on service and retention. The rationale is to keep a rent-paying resident, when the alternative means having yet another vacant unit with the resulting vacancy loss and move-out costs.
Move-out costs should not be overlooked. Research shows that the average cost for a move-out is at least $3,000, factoring in vacancy loss. concessions, marketing, advertising, leasing, turnover and staff time costs. That figure grows dramatically if a unit requires new carpeting or appliances.
The financial impact of reducing turnover is clear. When a 300-unit community reduces turnover by 10 percent, the results are dramatic: 30 fewer move-outs, with a savings of $3,000 to $6,000 each. equals $90,000 to $180,000 going straight to the bottom line. Imagine what could be done with those additional funds: increased distributions to owners, capital improvements, increased staffing and more.
Some may question the value of controlling turnover if conditions permit a community to increase rent when a resident moves out. What is the NOI gain in retaining an existing resident rather than having a new resident pay $25 more? For example, if market rents have increased $25 and move-outs cost $3,000, it will take 120 months, or 10 years, to pay back the loss that resulted from the move-out. Additionally, enhancing service delivery will increase satisfaction, which increases the likelihood for a renewal and reduces resistance to rent increases.
High Turnover Is Controllable
NAA's Survey of Income & Expenses in Rental Apartment Communities reported the average national turnover rate to be 62 percent for 2004 and 2005. This high and fiat turnover rate, coupled with SatisFacts' findings that the majority of turnover is controllable, indicates the need to address satisfaction and retention. Clearly, a greater focus on service delivery can positively impact turnover and, ultimately, NOI.
SatisFacts' survey findings show the strong impact core service delivery has on satisfaction and renewal likelihood. The research shows that the majority of turnover is controllable and that service, most notably work-order management, ultimately plays a major role in a resident's decision to renew.
While home buying and relocation account for 40 percent of why residents say they are not "very likely" to renew, the remaining 60 percent of the residents cite issues that are controllable to varying degrees. Perceived value and the infamous "rent increase" are issues raised by 12 percent of residents; perceived value is driven by service, a resident's actual apartment home and how well the property is maintained. This is supported by the average overall SatisFacts Index rating (a national benchmarking system) that residents give their actual apartment homes. Office, maintenance and custodial staff performance account for seven of the top 20 reasons cited for not being "very likely" to renew. Most of the issues relate to responsiveness, dependability and work quality. The other primary category of issues relates to safety.
Service Requests and Satisfaction
There is a powerful correlation between the percent of residents with outstanding maintenance issues and overall satisfaction. Each year, survey results make clear how important it is to focus on minimizing the percent of residents with outstanding issues. As the percent decreases, satisfaction with office and maintenance staff responsiveness, speed and work quality increases. Equally important, as core satisfaction indicators increase so, too, does renewal likelihood.
The SatisFacts Index shows that 79 percent of residents submit service requests in any given year, and the percent of these residents who report having an outstanding maintenance problem is 32.5 percent; this equates to 26 percent of all residents with an issue. The fact that there is great exposure to service delivery performance provides the rationale for many best practices.
Case Study: Reducing Turnover
Actual case studies are the best evidence of the positive NOI impact of focusing more attention on maintenance and core service delivery. Following is a case study based on a client with a 7,500-unit owned and managed class B portfolio that SatisFacts began working with in 2001.
Because of its commitment to service and quality, the company developed and implemented a diverse Resident Relationship Management [TM] program during the past several years. The program included an annual survey and a review-plan-do-review process. Satisfaction scores increased from 2001 through 2005 (see table below). As research forecasts, this improvement was accompanied by a dramatic reduction in turnover. Same-store turnover dropped from 61 percent in 2001 to 52 percent in 2005, which is well below the national average of 62 percent. This reduction equals 675 fewer move-outs in 2005 versus prior years.
At a cost of $3,000 per move out, the turnover reduction translates into a $2.025 million growth in NOI. That confirms that regardless of market conditions and portfolio type, sound steps focused on satisfying residents minimizes the exposure to costly controllable turnover.
The Staff Team Effort
The goal for improving practices is to improve service delivery, the resident experience, satisfaction and the likelihood residents will renew. Doing so will deliver enhanced returns for ownership.
Don't open a shop if you can't smile. There is no room for staff members who are not courteous and professional. Hire the attitude and teach the technique.
The entire community staff affects service quality. The quality of service delivery cannot be viewed as solely the maintenance team's responsibility. Work order management and quality service requires a team effort. The process begins when the office staff receives a service request from a resident by phone or e-mail. The entire onsite staff must focus on work orders, outstanding requests and service-delivery performance. Because the leasing and front desk staffs also are involved in service delivery, they must be aware of the importance of service requests and be trained suitably to be more supportive of the process.
Enhance maintenance staffing, especially during turnover season. Research provides strong support for the value of adding more maintenance staff, especially during the heavy lease expiration/turnover/leasing season. One tactic of SatisFacts' highest-scoring client is that it has at least one-half extra maintenance technician per community, versus the industry average of one per 100-unit community.
It is important to focus on work orders before and during prime rental season because a community's greatest exposure to work order dissatisfaction and controllable turnover occurs at the same time: when most leases expire. The resulting heavy make-ready effort often leads to work orders competing for staff's attention.
Given that great service leads to greater satisfaction, it is critical to minimize outstanding maintenance problems when a resident's lease is expiring. Possible ways to fund the staff increase include budgeting for next year; using the research provided and the community's turnover costs to justify funding; or reallocating funds from other categories that have a lower return on investment, such as soft retention programs. For approximately $6,500, a community can hire a part-time technician to work more than 430 hours--which equals 30-hour work weeks for 14 weeks--more than covering the turnover season.
Perfect move-ins--or at least "wow" recoveries. Research shows that the move-in experience affects satisfaction renewal likelihood more than service delivery issues for longer-term residents. Mistakes and oversights can happen with a move-in; the key is having a system for residents to provide feedback and for the staff to respond with a "wow" recovery. A greater focus on turnover quality and satisfaction will reap long-term rewards.
Communication and Feeback
Ensure rapid communication and feedback. The days of not having e-mail accessibility for residents are gone. Today, residents are busier than ever and their time is limited. They want 24/7 access to service. Having and promoting a community e-mail address is an important step in improving communications. Responses to communications from residents must be prompt. A failure to respond quickly creates unnecessary frustrations for residents. These create memories that are not quickly forgotten.
Follow up with every completed work order. Because of the clear impact of outstanding maintenance problems on satisfaction, more communication with residents regarding work orders is critical. Two steps should become policy: contacting residents regarding delays in completing a work order, for example, letting them know a part is out of stock; and following up with all residents via calls, e-mails or surveys on completed work orders to ensure work was done their satisfaction. The latter will permit a remarkable recovery if there are any outstanding issues.
Just because a work order is noted as being complete does not mean that it is complete in residents' eyes; checking in has immense value because of the effect problems have on satisfaction.
Promote online services. Many companies offer online functionality via their Web sites or community portals, such as rent payments, work orders and communications. Because of the retention value of offering 24/7 access to service, programs are valuable only if residents know the programs exist.
Implement resident feedback programs. The easiest way to ensure that resident expectations are being met is to ask them. Feedback programs, whether done annually or at key touch points (move-in, work order follow up, pre-renewal), help take the guesswork out of reducing turnover.
Improving Service Request Management
Plan-Do-Review. The more service delivery is monitored, the more attention onsite staff will give it. Metrics to monitor include the number and percent of outstanding work orders, average work order turnaround time, percent of return visits required, follow-up call logs, turnover percent and resident survey results.
Monitor work quality, key steps and goals. Outstanding work orders and unresolved issues should be below 15 percent, preferably less than 7.5 percent. Work orders by all office staff members should be consistently thorough. Company goals should include fast turnaround times, high-quality workmanship, a low percent of return visits and quicker responses to communications so a resident does not need to follow up. Do not leave a resident's home dirty. Follow up regarding delays in completing work orders and, once completed, follow up to ensure satisfaction.
Host weekly onsite staff reviews. All onsite staff should be included. The agenda should cover a constructive random audit and review of work order quality. Review the number, percent and type of outstanding work orders to assist with planning. Review other metrics mentioned earlier for service delivery.
Thorough service requests deliver big returns. Successfully satisfying a resident depends on prompt and proper handling of requests, and that requires that maintenance staff receive clear and timely direction from the office. More time, care and attention is required from the office, leasing and front desk staff when taking service requests. Thorough work orders, which clearly define the issues, will save the maintenance staff time and permit them to complete more requests per day. Compare the turnaround time implications for a work order that states only "toilet broken," forcing technicians to play detective to try to figure out the problem, versus one which states, "master bedroom toilet handle broken off; all other bathrooms OK." As the number of outstanding work orders decrease, research shows the positive impact this has on resident experience and satisfaction.
Superior service requires the ability to communicate. A key to providing high-quality service is being able to communicate. However, a fairly common industry issue is the lack of complete and current contact information in the property management system. Too often, when onsite staff members enter a new resident into the property management system, they either insert out-of-date contact information or no information at all. Staff must collect and enter a resident's new home, work and cell phone numbers and e-mail address. Management should audit new resident files in the system to confirm information is complete. Follow up when needed. Each time residents contact the office, staff should confirm or update their information in the system.
Tools of the Trade
New technologies reduce administrative burdens. Most new technologies are intended to directly or indirectly enhance customer service. This occurs as technologies reduce staff administrative burdens and provide the ability to better manage property performance and the service process, ultimately freeing more time to focus on residents. Examples include Web-based property management systems; resident portals with online services, 24/7 communications and work-order functionality; maintenance call centers to handle overflow service request calls, after-hours calls or full-time call support; and online or automated rent payment programs.
Get the most out of the property management system. Regardless of what system a company uses, each system offers many functions that support service delivery, such as contact information and work order management. The key is to use the system's full capabilities to reduce or eliminate manual tasks. Fully use the work order system for submitting orders, scheduling and monitoring. Ensure office and maintenance staff are fully educated on the system, including move-ins, contact information and work order functionality. The system must be used consistently by all staff members.
New-hire orientation programs and programs for current employees should include valuable education about the work order process.
Community office and front desk staff. Significant resources are dedicated to leasing-related training. However, given the role and importance of the office staff in the delivery of service and the work order process, time and resources should be directed to training. This should focus on the impact these areas have on community performance, leasing staff's role in the process and the need to help the maintenance team work more efficiently, including the need to consistently use the property management system's work order module, as well as improving work order requests. The latter is easily accomplished by having maintenance staff provide a list of important questions to ask for the most common work orders the community receives. This step alone will permit for more work orders to be completed each day.
Maintenance staff. There is a sound return for investing in "how-to" continuing education for the maintenance team and training on the property management system's work order module.
Resident education. Anything management can do to lessen the burden of work orders on the service team is valuable. One way to reduce workloads is to provide residents with helpful hints on what to do for minor problems before calling maintenance, including simple do-it-yourself instructions. This information can be communicated via move-in folder inserts and community portals and by giving instructions to the office to provide when residents call in such service requests.
Programs and Ideas
Implement pre-lease renewal warm calls. Given the impact of maintenance issues, it is important to make warm calls to residents several months before their leases expire to determine how satisfied they are and to identify any issues. Once issues are identified, follow-up must occur. This will increase the probability that when residents receive the renewal letters, they will renew. It also will reduce resistance to a rent increase, as perceived value will have increased.
In-unit lease renewal incentives help residents love their apartments again. The SatisFacts Index shows that residents rate their apartments as "average." Why? Perceived value drops as apartments show wear and tear. When that shows--and then residents receive the rent increase letter stating that they must now pay more for something they feel is only "average"--it is understandable why residents begin investigating other options. Rather than absorbing the high cost associated with a move-out or offering renewal incentives, such as concessions, invest in an in-unit upgrade program. This delivers value to both residents and owners (reinvesting in the asset versus giving concessions). The menu can include various items including carpet cleaning, painting, closet organizers, window treatments and lighting. Incentives offered increase the longer a resident has lived there.
Be realistic about home buying. Home buying is the No. 1 reason residents move. The apartment industry tries to "convince" residents not to chase "the American dream" of homeownership--a dream supported by the IRS, Congress, the powerful home building industry and ads by financial institutions pitching low mortgage rates. Consider rent-to-buy pro grams in which a percentage of rent is applied toward closing costs. This creates a front-door marketing advantage and helps close the back door by creating an incentive for residents to rent longer. The latter does not stop turnover, but does delay it, which provides a financial gain.
Accommodate today's mobile population. Today's renters are extremely mobile. While most companies have transfer policies, because "relocation" is the No. 2 move-out reason, try creating and aggressively promoting a user-friendly online inter-company community referral program.
Social activities, newsletters and move-in gifts should be only the icing on the cake. Of all reasons residents cite for not being "very likely" to renew, less than one-tenth of 1 percent cited social activities Additionally, research shows that only 11 percent of residents read community newsletters. And what is the point of a move-in gift if the residents' new home has not been thoroughly prepared? Until a management company consistently achieves high-quality service delivery, a community should not let soft retention programs become distractions to delivering what residents want most.
Bricks and Mortar
Consider curb appeal. Dirt does not sell. Curb appeal includes more than just the areas around the leasing and management office. Residents often cite frustrations that while the front of the community loom great, where they live does not look as good. The issue easiest to control is cleanliness, of course, because the community staff is responsible for this. If outsourced, make sure the service provider knows the company's and residents' expectations and monitor the provider's performance. Management can address additional issues often raised by residents by increasing the frequency of building cleanings by adding more Dumpsters.
Ensure clean laundry rooms, fitness centers and pools. Cleanliness, adequacy, condition and accessibility are the operable words for amenities. If a contractor performs the laundry service, an onsite tour of the rooms and equipment and an action plan are valuable.
Focus on safety and security. SatisFacts' research shows that safety and security are major issues. Regarding building safety, one of the most common issues is that residents leave doors of controlled-access entry buildings propped open, which is a controllable management issue. Another option is to research an access system. Often, market conditions cause communities to lower selection criteria, which can impact the type of residents being approved. Those guidelines should be reviewed.
Regarding community safety, one of the most significant issues is that the gates at gated communities rarely work. This frustrates residents. The challenge becomes either to find a product solution or actually to consider removing the gates, as the value to residents can be viewed as being more negative than positive. Adding courtesy patrols is a worthwhile option. However, consider that if the community starts the patrol, it is difficult to stop it. Stopping it will negatively impact resident satisfaction. Likewise, if the community has a staffed gatehouse, the primary issue is the staff's performance--make sure the gatehouse is manned and that the guards are awake and in control of who enters. Neighborhood watch programs also can be of great value.
Lastly, if there are serious crime issues at the property, request increased patrols by the local police. Extreme situations warrant attempts to have a police sub-station at the community. Safety and security concerns are a fact-of-life, and apartment owners should have a sound plan in place.
Doug Miller, President of SatisFacts Research, a full service customer satisfaction research company that specializes in the apartment industry, has more than 20 years' experience in apartment marketing, research and training and has worked with more than 1,000 communities nationwide. To reach SatisFacts. call 866/655-1490 Ext 123. e-mail email@example.com or visit www.satisfacts.net.
Client Portfolio Cast Study--Turnover Reduction and NOI Growth 2001 2002 2003 2004 2005 SatisFacts: Overall Score 3.98 4.16 4.13 4.12 4.19 (Five-point scale) SatisFacts: Not "Very Likely" to Renew 52% 41% 47% 52% 48% Client Annual Portfolio Turnover 61% 57% 55% 56% 52% Company Owned Units 7,500 2005 NAA Income & Expense Survey Reported Turnover 62% Client 2005 Portfolio Variance vs. National Average -10% Client 2005 Portfolio NOI Performance vs. NAA * $2,250,000 2001 vs. 2005 Turnover Reduction 675 2005 NOI Growth vs. 2001 $2,025,000 * Source $3,000 cost per move-out
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|Date:||Jun 1, 2006|
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