Motivated Service The secret to Pinnacle’s success is making its clients feel like they are a No. 1 priority. And that includes everyone – from the two doctors who own eight units in Washington, D.C., to the real estate advisor who owns 13,000 units. Clients needs are met from four regional offices located in Orlando, Dallas, Sacramento and Seattle. “The clients that have been with us for 30 years are just as important as any new client. We have clients that go back to the ’70s,” says John Goodman, Pinnacle’s chairman, who founded the company in 1980 as Goodman Management Group. “Every client deserves our full attention.”
The reason for this level of service is simple: Pinnacle’s management contracts include a 30-day cancellation notice. “A lot of people would lose sleep if they knew that their entire customer base could give them notice and leave,” explains Harrelson. But, he doesn’t worry. “If we’re doing a good job and the buildings are operating well, things are going to take care of [themselves].”
Doing a good job requires motivated employees, and one of the best motivators is money. Pinnacle places its employees in heavily commissioned environments. “Our multiportfolio managers probably out-earn their competition three to two,” says Harrelson. “They sweat the loss of a client.”
The payment structure Pinnacle ar-ranges with clients is usually a percentage of the gross revenue – somewhere between 3 percent to 5 percent; the company receives a higher percentage for tax-credit properties. “However, I think owners would be far better served if they [based the fee on] a percentage of the [net operating income] NOI, because that’s the true test. It’s income after expenses,” says Harrelson.
Regardless of how the fee is structured, “if something good is happening for [the owner], then it happens for Pinnacle too,” he says. Managers get paid proportionally to what the property has earned, usually 17 percent to 25 percent of the fee, he adds.
For example, if a manager has a building that generates $10,000 per month in management fees and 25 percent of that fee goes directly to the manager, that equals $2,500 per month or $30,000 per year. “If you screw up that account [to] where the client wants to let you go, you’ve given yourself a hit of $30,000,” says Harrelson. “Conversely, if you do a great job and they want you to do the next deal … you can do very well [financially].”
With the potential to influence their own salary, everybody wants to handle 20 buildings and make a lot of money. The key is having the right number of properties per person. This is where management takes a very active role. “It’s critical that we have the right balance in terms of the number of clients and direct reports a manager can handle,” says Harrelson.
“Each relationship requires time and we have to ensure there is enough time to cultivate an exceptional relationship,” he says. Because of the payment structure, “our people are partners in all the deals that they manage, which makes them better than other property managers,” adds Mencaccy.