May 10 2023

Multifamily Unpacked Live, Season 1, Episode 4: Noah Echols + Mike Gomes — “Tomorrow’s operating model, today”

 

Funnel took Multifamily Unpacked on the road, to talk about Tomorrow’s Operating Model with multifamily leaders in the Atlanta Area. 

Learn from Mike Gomes, Chief Experience Officer at Cortland (from episode two), and Noah Echols, SVP of Marketing and Customer Experience, CARROLL as they discuss their experiences changing their operating model to include role specialization to create a better renter and onsite experience. 

They share raw, valuable lessons learned on what to avoid, things that worked well, how each of their companies approached this monumental change and what results they’re seeing. 

Keep reading to hear the whole story, listen with the player above, or go to Apple Podcasts and Spotify. 

Tyler Christiansen, Funnel Leasing  

Welcome back to Season One of Multifamily Unpacked, we’ve had an incredible time talking with industry leaders about the past, present, and future of multifamily technology. So to keep the fun going, we decided to hit the road, and our first stop was in the multifamily mecca of Atlanta. To join in the fun we invited our friend Mike Gomes who is the Chief Experience Officer at Cortland, as well as industry leader Noah Echols, SVP at CARROLL, to talk about their companies and their journeys along the path of centralization, role specialization, and customer-centricity. As we discussed their journeys, we learned all the wonderful progress they’ve made, as well as a few things to avoid. So I hope you’ll join me and I’m sure that you won’t be disappointed as we talk about Tomorrow’s Operating Model. Again, thank you everybody for being here, I’m really excited at the opportunity to have this conversation with genuinely two innovators in our space two organizations that are well on the path to a new operating model. (Obviously, please eat as food gets served and apologize to those that are having to turn their necks.) We decided to hang out with the barrel of tequila to keep things in good spirits. To get started, I want to ask my guests here to just give a quick introduction of themselves that ends with how did you find your way into the world of multifamily? How did you fall into it? How did you get stuck? But first, Mike, introduce yourself.

Mike Gomes, Cortland  

Hey, good afternoon, Mike Gomes. I’m the Chief Experience Officer with Cortland. We’ve got about 85,000 apartment homes around the country primarily in the southeast, and South in the suburbs, is really where we’ve made our stake. I have been with Cortland for five years. One of the years of course was COVID, so that kind of doesn’t count. I couldn’t believe — I just hit five years last week I was like “I can’t believe it’s been five years.” I moved to Atlanta in 2014 to help do the job I’m doing now for Mercedes Benz Stadium and work for the Falcons and help launch the Atlanta United Soccer franchise. And before that, I spent 20 years at Disney. So I know what all of you’re thinking: How the hell did this guy decide to come to multifamily after working at Disney in the NFL? But the reason I’ve been here five years is I really enjoy it. This was a business I knew nothing about, real estate I’d never worked in. I report to Steven DeFrancis, the CEO and founder of Cortland, get to work with a lot of great people and learn a lot from a lot of great industry vets that allow us to hopefully bring a great customer experience to the people that live in our apartments every day. So that’s why I’m here.

Tyler Christiansen, Funnel Leasing  

Awesome. Thank you Mike and Yeah, Mike and the Cortland team. We’re customer number one of Funnel, what is now today Funnel, it was actually Nestio back in the day, and many many of the features that you see when we gave you demonstrations, or you hear, they helped us build. But anyway, great partner throughout the years. And then Noah, tell us about yourself, your bio, and how you came into multifamily.

Noah Echols, CARROLL  

Sure, Noah Echols, SVP of Marketing and Customer Experience at CARROLL. We’re about 30,000 units primarily in the Sunbelt, and I’ve been with CARROLL, this is my sixth year. So, similar timeline, September will be six years for me, which is, wild. I got into multifamily, I was in consulting previously, and worked across industries, but we started working with Post Properties in the two years leading up to their acquisition. Because they were leading up to their acquisition, they gave me sort of a very expedited education in multifamily. They flew me all over the country, I got to visit all their properties, sort of a deep dive into the industry. I fell in love with it. When MAA acquired them. We were out of a client, but I was still invested in the industry and started looking for a place to go and ended up a CARROLL.

Tyler Christiansen, Funnel Leasing  

Excellent. Well, thank you, yeah, and then in CARROLL’s case has been a phenomenal partner for us in the short time we’ve been working together. You know, we’ve seen Cortland in their journey and a new operating model. In CARROLL’s case, you all were well on your way, as we say “hacking your way through some of the limitations that exist in our industry at large.” So, very excited to hear about how you all started and where we are today in this new operating model. One of the pieces of content that we want everyone to take is this, which we call the 20 for 20 that I’ve referenced. And the idea there that we really want to make sure everybody is aware of is, that there seems to be a growing consensus among our industry, that the operating model that we’ve had in place since Trammell Crow days. You know, going back all the way to then, is not necessarily the operating model that we think will get us to where our customers want us to be. So call that centralization, shared services, both of your organizations are well on that journey. So want to go back to the first principles, in both cases, I believe neither of your organizations had centralized teams when you joined. I’d love to understand, and both of you work closely with your respective executive team’s investment committees, what was the why? What were the objectives that were first identified that said, hey, we’re, we’re going to go down this path? While now, there are a lot of external pressures, as we were discussing, for cost control. It wasn’t necessarily that way, four or five years ago. So Noah do you want to take that one first? What are the objectives? 

Noah Echols, CARROLL  

Sure, first I’ll say “hacking our way through this,” is a good way to say it. So, I joined in 2017. I joined CARROLL in 2017, and on my first day, our COO walked up to me and handed me a spreadsheet that had 20 properties on it, and said, “We’re acquiring a 28 property portfolio in December,” and handed to me and said, “Good luck.” And for CARROLL at the time, that was tremendous growth. So we got through that, that acquisition. And what it did for Carol was it opened up a lot of doors for us to rethink our model, it expanded our footprint, it gave us more revenue to think about how we structure teams. The COO at the time, also came from consulting, he’s fairly new to the company. And we in 2018, implemented a shared services model. So we didn’t think of it at the time as centralization, we thought of it as just taking resources and you know, sort of equitably applying those resources across our portfolio. So things like marketing, which previously was regionalized, centralized that into a shared service. HR, risk, these types of teams were built corporately, rather than being handled regionally as they were prior to that. I saw some success out of that. In 2019, we started to pilot what we now think of as centralization, starting with lead management, which I know Cortland has undertaken too. Our goal there was one, to just provide better service to our customers. What we saw was that our onsite teams were asked to wear, you know, five or six different hats in terms of the responsibilities that they had. They weren’t able to provide great service in any of them, because we asked him to do too many things. One of those things was basically administrative, right? A lead would come in and make sure an email gets sent or a phone call gets made to that person. These are people that thrive in face-to-face selling, you know, environments, and we’re asking him to sit behind a computer and manage leads. So we thought this was an easy entry, take it off their plates, and free them up to focus on what they’re best at. So the end of 2019, we started to pilot that, then, of course, the pandemic hits, and what we had planned to be a 12-month, pilot and rollout across our portfolio ended up happening in a couple of months. And we had to sort of build the plane as we flew it. So we started with a centralized team of just humans managing, you know, 30,000 leads a month. I think we’ll get into some of how that evolved later. But we quickly learned that that had scalability issues, to say the least. But we’ll get into that. Well, thank I think, again, Mike, I joined slightly after in the Cortland, Team Cortland + Funnel team. But what we’re doing, obviously, to your point, you were recruited over into the organization as Chief Experience Officer. Was that something you saw right away as an opportunity, was to think about a different way to engage with the customer or what were those first principles in Cortland’s case that led to what today is a fairly unique operating model?

Mike Gomes, Cortland  

So there’s no way that I was going to be able to come up with any ideas early because I really did not know how this industry worked. When I found out about “what do you mean, you can’t make the decision and investor makes the decision?” Those things baffled me, right? Because I had never been in an environment, when you were at Disney, Disney makes the decision. Right? When, when I was at the stadium, Arthur makes the decision. To necessarily have somebody that didn’t ascribe to the same values we did, that’s pulling punches, that was a weird thing for me to just have to get my arms around. That’s one. Two, is you mentioned Post. So, when I told the team I was working with that I was leaving. I said they said what are you going to go do? And I said, “I’m gonna go work for Cortland.” And they said, “Who?” And I said, “multifamily.” And they said “What?” And I said “apartments,” and they said, “Oh, like Post.” So when I then joined and started driving around, I would come back and realize I had driven by our properties and had no idea they were our properties. Right? I didn’t understand the naming paradigm didn’t make sense to me. I know every single Hilton I’ve ever driven by, you know why? It says, Hilton. I didn’t understand. So then I was like, “Oh, do we buy and flip properties?” No. “Do we suck at what we do?” No. That was like, all right, then “Why don’t we put our name on it?” And then real started our thoughts around how to take advantage of our investment strategy. So we did not start this as an operating strategy. This started with our investment strategy, where we have a strong conviction of the markets we’re in, and we want to be dominant players in terms of scale in those markets. Right? So we’re, I believe, the largest owner of apartments in Dallas, we may be the largest owner of apartments in all of Texas. And we’re large in Phoenix, and Denver, and Orlando, and Tampa, and of course, Atlanta. So by starting to create the brand strategy, we then thought we could bring more folks into consider us. Well, then you start moving down the customer journey and say, well, when then where are they going to go? Well, if they landed on our website, it was no different than our naming paradigm. We had 23 bespoke websites, none of which integrated or talked with one another at all built on the Real Page property-centric platform. And we said, “We need to create an entirely new platform to be able to welcome people who have might have an interest in Cortland to come to us.”  Well, then if they’re interested, what are they going to do? And we realized, we might have an opportunity to cross-sell, but none of our capabilities would allow us to do that. So that’s where we started working and we put out an RFP for a CRM solution. So I said, the whole world, every customer industry, has moved to customer relationship management, at least 20 plus years ago. And we still run our business off of property management systems, built around the unit, not built around the person. My little punch line, by the way, was it sort of like we’re in the storage business for a living, we just happen to store humans. So that brought us to CRM, which then also brought us into the opportunity to, “centralize” lead management. We’d always outsourced our contact center, which was first touch contact because we operate everything we own, we said, “Why are we outsourcing that part of the touch point, as if it doesn’t matter.” So we then brought that in-house, we call it the “leasing hub,” to not just be first-touch, but to handle all lead nurturing activities using Funnel’s platform that allows us to not only satisfy that prospect but also to cross-sell them into a property. Maybe we don’t have anything that’s available for them, maybe we don’t have a two bedroom, maybe they really want covered parking and the place they inquired about doesn’t have that. Whatever the reasons may be, having our ability to do that is what started us on the journey. So the three things, Tyler, to get to the specifics of your question, we have three goals that feel like they’re not possible when you put them against one another. We’re trying to do all three, grow top-line revenue, and performance, improve our customer delivery, and reduce the number of people required to do it. I’m a both and guy, so when anybody says you can do either this or that, I think it’s an opportunity for innovation. We’re trying to do both. In my limited conversations with Noah. So is that, right? This isn’t about reducing customer service and bringing it to the bare bones. You even heard him say it, how do we improve our customer delivery, and our customer satisfaction? But when you don’t have any of the tools to do it, you’re forced to operate the way we’ve always operated, which is why I think many of us here today are on this journey.

Tyler Christiansen, Funnel Leasing  

There are so many good points there, and hopefully, anyone who spends time with me just realized how many things I borrowed, again from Mike over the years, including our own taglines. But you touched on some really important points. So first, I want to ask, you Noah. Mike spoke about Cortland’s journey in rebranding the assets to Cortland’s name. I know having visited your properties and seeing them around Tampa, you all have a brand strategy as well. But it’s a little different, a little unique, you don’t necessarily always see the CARROLL name, front and center. Right. So what do you all think about the brand and, and the role that plays in this journey toward a different model?

Noah Echols, CARROLL  

Yeah, it’s interesting, as I was listening to talk, I never thought of our master brand strategy, in the same context as centralization. But we took a very similar path. So having come from marketing consulting, had the exact same reaction when I came to CARROLL why do we not have a common brand? Why why is there no consumer brand? CARROLL, in 2017, had properties that were named, you know, whatever. We had 20 or so that were named that were actually branded as CARROLL-branded properties. And we had a few that were branded as Arium, this sort of obscure brand that was created in like 2012, primarily in Florida. And so, you know, I go to the CEO, and I say, “We need to master brand strategy, we need to pick one and just go all in on it.” He said, “we’ll do the research, find out which one’s gonna resonate the most, and let’s do it.” So I come back to him and I say, “I’m sorry, I know you’re It’s your name, but Arium performed better.” So he says, “Okay, let’s let’s go all in on Arium” So that’s what we did in 2018. 

Mike Gomes, Cortland  

You did more research than We did.

Noah Echols, CARROLL  

So we rolled out the Arium brand. It’s very similar in that it’s a master brand strategy. The one difference is if we do have a property with a short hold, part of a portfolio that we’re going to sell within a year or two, we won’t go through the process of signage and rebranding under the Arium name, we just add a “by Arium” tag. So it’ll be whatever their previous name was, by Arium. And that way, we can include them on our Ariumliving.com website and… I now know how to forecast churn from you. 

Tyler Christiansen, Funnel Leasing  

So that’s really, really interesting, and obviously, I feel strongly all of this goes, is going to continue to get more exciting in our industry of where that brand loyalty could take us. But you know, another question that I’m curious about is, you mentioned, obviously, some of the successes that we’ve seen, both of you and your journey. And a lot of the pushback that we hear today, Mike ties to something that you referenced in terms of the impossibility of getting three things, there’s no way that I could with a single, you know, goal, reduce costs, increase revenue growth, and deliver an improved customer experience. We often hear folks tell us, “I’m not interested in centralization, because we’re focusing on customer experience.” So as you all think about it, and one of the things again, that you both do share and I think that is important to note, is you’re not done in this journey, right? It is a process. It is a marathon of centralization. 

Noah Echols, CARROLL  

That’s right. I don’t think there is an end. 

Tyler Christiansen, Funnel Leasing  

To that point, the semantics, the nomenclature, Mike, I know you and I share that words matter. When you discuss this internally, how do you talk about it with your Cortland associates so that they feel bought in? Because again, there are certain words you say “centralization” or “automation” certain people think, “Hey, that’s your coming up my job.” So what do you think about the naming convention? 

Mike Gomes, Cortland  

One is internal, we gave it a code name, not like a sexy code name, but we called it we originally called it “project horizon.” But the point you guys just made is exactly right, we realized this isn’t a project, which fundamentally is a start and end date. But we did call it Horizon. Now, the reason we call it horizon was almost solely to set the expectations of our CEO. We called it Horizon 2025, so we didn’t start thinking, “This thing will be great. I love this strategy, six months, right?” You know, so we had to make sure that he understood it was going to be a journey. Internally, I think it’s important that centralization, Noah already made this point is not a Johnny Come Lately concept. Things that always used to be done onsite have started to move. Revenue Management was an example, marketing is clearly an example. Where you could say, wait a minute, and create a center of excellence around people who are skilled marketers, and I don’t have the community manager trying to decide, “I’m just going to put some ads in apartments.com and Zillow.” Same thing with revenue management, to bring somebody got a data-centric scientific match with the artistic of revenue management. Collections is another, we’re now moving down the next path, right, which is to start to continue to remove, lead nurturing was yet another. So we’ve been kind of slowly moving some things away. Today, this is almost real-time, a couple of weeks ago, we’ve been pushing Funnel for six months, maybe more than that, to extend its capability to be a true CRM. Not to serve the customer who’s only defined as a prospect, but to define the customer across the entirety of the journey and that meant managing the entirety of the customer experience through that singular platform. Whether you’re engaging via text, email, or phone, and being able to treat the customer in a more personalized way. They delivered that to us, and we deployed it less than a month ago. Today, we’ve got people on four of our sites in Atlanta, taking the main phone line and our main customer, the main inbox for the community teams, and running all that through Funnel. We’re not even calling it a pilot, it’s a technical validation. We’re not validating Funnels technology, we’re now validating the complexity of the telephony, and internet management capabilities, in addition to the change management — not to be underestimated when the humans are involved — and that’s not just the humans that we store for a living, but the humans who run our properties. Then from there, once we validate that technology, we will believe we will be in a much better position to deliver faster, more responsive, more thorough, more personalized, feedback and service to our current customers, our residents, but even our former residents. And we’re going to be testing that piloting that in Atlanta starting next month. We wouldn’t have done it if we didn’t believe we had the ability in place to currently serve our residents and we did not, see we called this internally “comms 360” to have a 360-degree view of the customer through a single platform. So that as Noah said, the poor side team member doesn’t have to know 26 different ways to communicate. Everything’s going to happen now to Funnel. So, we’re excited because we think that’s a foundational capability that will enable us to execute our vision for Centers of Excellence in a way that we think meets our scale and our eventual goals. Which may be different than yours, and different than CARROLL’s, and it doesn’t mean we’re right, it just means that ours is trying to accommodate the fact that we may be over 100,000 and might have some different scaling complexities.

Tyler Christiansen, Funnel Leasing  

Right. Yeah, I think that’s critical as our industry, no property is the same in terms of the cap structure, and the ownership structure, the teams in place, the technology. So, to your point, it’s been very clear partnering with Cortland, that each project has a purpose. And the teams and the change management understand that purpose, which has allowed you to put it in place. We certainly have seen, I think one of the reasons centralization gets a bad name sometimes is there were, as is the case with any new technology, some cases, you have folks on the bleeding edge who say, “We’re going to reduce staff, to customer be damned.” Right? Experience be damned. And so I think that to your point, if you want to have all three objectives, you do have to be more intentional about the purpose for each change. But Noah again, to your point and your model, while the outcomes and the experiences are similar to Cortland’s very different and the infrastructure and the way you’ve gone about it. So how do you internally discuss that? I know it matters because, I had to be educated on there were some names of different teams that I said, what team is that?

Noah Echols, CARROLL  

Yeah, we’ve taken a very similar approach. In terms of the naming convention, we quickly removed the name centralization from our dialog, because it had a significant impact on how specifically the operations team interpreted what we were doing. Instead, we refer to it as specialization. And the differentiate difference there is we’re taking roles that were required in the past to manage multiple different swim lanes, and breaking apart those swim lanes into distinct positions. So leasing, for example, we took lead management off. We’ve pulled out the APM role, and that’s now centralized. We’re trying to create a sales team and a resident team separate from each other. So sort of specializing each individual role. I think we’ve followed a very similar model and lead management, I think that was an easy win early on. The APM role was a little bit easier in the way that we handled it, we had a pretty heavy discussion internally about how to manage that change. There were some in the camp of, you know, rip off the band-aid, and let’s do a layoff and, you know, remove the role from the site, and we’ll see how it goes. Then I think where we landed was the more reasonable approach and in doing that turnover over time. That has worked really well. So, as of today, the APM role is no longer onsite at our properties and that’s managed, centrally. And we’ve even sort of rethought the roles and responsibilities of that position.

Tyler Christiansen, Funnel Leasing  

Awesome. Yeah, great stories. Really, I think it’s helpful to everyone in the room and anyone listening to think about, you know, to hear these stories and gain some confidence in that. What are the things that surprise you on this journey? Maybe good or bad? In this experience that to your point, Mike, “Hey, we know we want to do these three objectives.” But, you know, a unique outcome of that, a very specific example that I no surprise to me when we first turned on Funnel, here in Buckhead. You know, it was interesting, because we didn’t have the data prior to tell us how often, you know, in the use case of cross-selling, how often are organically showing up in multiple communities. And it was surprising to us to find out that turned out, in your case, it was nearly one in five renters if I recall. But any surprises as you’ve gone on this journey that we have folks thinking about just planning to make the transition?

Mike Gomes, Cortland  

I think we’ve both alluded to it. Everybody in this room is in a different mental space about it “oh my god, that scares the hell out of me” to “Yeah, do it!” You know, and so are all of our teams. Our steering committee that’s leading this effort includes our head of Talent. So think about that, this isn’t like a technology guy and an operator doing this our Head of Talent who’s thinking about every single role, the role reclassifications, the potential compensation reclassifications, and the change management program. Don’t confuse, we did this, I did this, training with change management. You train on a system. Change is a behavioral shift that is more than just “well, we trained on how to use it. What’s the issue?” So having done some of that, and gone through some of those growing pains, we have an intentional Change Management Program, going along with any of these shifts in how things have historically been done and how they may be done. But part of that isn’t just a one-way street. We are creating feedback loops, like the team that I mentioned is doing some deployment, we’ve already got it set up to a week and a half from now we’re sitting down rebind pizzas sitting down with the site team saying “What’s working? What’s not? What can be better?” Maybe the training wasn’t great. Maybe they’re confused as to what to do. Maybe there are aspects of the Funnel UX that now don’t seem to be the way that they would intuitively thought that they could be used. We take all that feedback, make sure they know they’re being listened to, and make improvements before we try to then expand that across the portfolio. But the change management is time-consuming. We could make the brand change and the website change a heck of a lot faster because they involve no people than we could anything now that’s affecting operations.

Tyler Christiansen, Funnel Leasing  

Yeah, great answer. Noah anything from your perspective of kind of unexpected consequences or surprises as you’ve gone about this?

Noah Echols, CARROLL  

I don’t know how unexpected it was, but one of the things that we saw very early on, starting with centralizing the lead management function was the positive impact that it had on our leasing teams. So we expected there to be some pushback. One they’re losing some territory and some control, and there’s, you know, creating sort of tension there between teams. You know, leasing, people are incentivized by their leases, and now we’re taking part of that responsibility off their plate. So we anticipated a lot of pushback, and there has been some tension to overcome in that process. But the positive outcome was the almost immediate increase in the conversion between tour and lease. Because these people were freed up from sitting behind a computer and were given permission to go be the people person that they are, they thrived. So I think that’s helped in the change management process and showing them that there’s a path in the specialization that’s going to play to your strengths and give you a higher ceiling to grow within that vertical, without bogging you down with all these other tasks. And I think from a change management perspective, that has resonated well, and from a business perspective we’re seeing significantly better results. That’s a great point, and in the use case you just described, I know in both cases, both your organizations leverage automation. And I think that when you both started on this journey, AI was not where it is today, clearly, right? We know that it’s made huge advances, so how have you been able to decide where in the customer journey both prospect and resident where to automate? Where to leverage artificial intelligence? Where not to? Perhaps any learnings on that side? Because I would imagine, to your point, a huge opportunity to automate the mundane that impacts associate experience, but also huge pushback that a robot is taking my job. So how have you thought about leveraging AI and where to leverage AI, versus where not to?

Mike Gomes, Cortland  

I’ll start, so we have one active AI project and another one that is kind of in development. On the active side, we actually deploy a Funnel’s Virtual Leasing Agent. We named her Cortney. So if you hear me say “her,” as I told Noah, you’d be like, “Who the hell’s he talking about her?” Well, “her” is Courtney, we even gave her a little look, so we know what she looks like.

Tyler Christiansen, Funnel Leasing  

She has a cartoon cut out of the office. 

Mike Gomes, Cortland  

That’s right. Yeah. So you know, what, what we realized is, we were growing and our leasing hub was going to continue to grow. People are hard, not just hard to work with, people are hard to hire. Right? We all know, we’re dealing with that kind of piece. We realize machines are good at transactions. Humans are good at interactions. AI is making some level of machine work better at interactions, and they handle the simple stuff. So if you’re somebody that comes into apartments.com, and says I’m interested in Cortland North Druid Hills, and I might be wanting to move in April, can you give me an idea of what your two-bedroom price start? Cortney immediately engages in handling that level of responsiveness. Once you get to the point, she can go all the way to get you to book a tour. We’re not using chat, because we just didn’t think the chat experience was great. That’s not a knock just on Funnel. We’re just not sure societally, it’s that great. So we use it as an email-based tool or text-based tool. She can respond if at any point you now ask something more complex. Oh, I have a sister who visits me who has a physical disability, do you have something around disability? You know what? She just disengages, and at that point are humans are leasing hub team can engage overall. The next one we’re excited about has been something we’ve had in underneath the hood behind the scenes, trying to understand why the heck our residents contact us. It sounds basic, but where you can track maintenance tickets, and you can track check your prospects. It’s impossible to track what your residents want, and why. They come into the office. So the AI machine learning tool we put in place, which is not a Funnel tool, has been reading every email and has so far come up with over 650 intents of why somebody is trying to contact us. What it’s also done is recognize that as you said earlier, Tyler, every property is different. Every property has its own service blueprint, based on dozens of factors. What this AI tool also does is it reads what our humans are responding with, and has started to realize its learning each community’s response to that given question, it’s going to have the ability. We have not deployed this yet, we’ve only piloted it reason we haven’t deployed it. We want it to integrate. So we want to have the ability to have this tool handle a level of responsiveness for things that are simple, right? I want to transfer to a different place. Not simple. I need to know if the fitness center is going to be open next week, because it’s been under reno, very simple, right? Or your pet policies or what have you. So we think this tool will answer as much as 40 to 50% of our common resident inquiries across communities, thereby freeing up our teams to be able to add the real value of the human touch more empathy, and more difficult level of conversations. Maybe around a transfer or around I need to break my lease, or whatever those things may be.

Tyler Christiansen, Funnel Leasing  

Right. Okay. Noah, how are you leveraging AI?

Noah Echols, CARROLL  

Yeah. So, to answer your question about how and why we got into AI, the answer to that is desperation. I told you that we, you know, rolled out the centralized lead management team in 2020, in the middle of a pandemic. Those of you who are in marketing know, that lead volume went through the roof during the pandemic. Right? It was a lot of people with a lot of questions, because there was a lot of uncertainty just in the world. So lead volume spiked, and we weren’t prepared for that. We were staffed up on the centralized team, to manage the 2019 lead volume. When it doubled in 2020, we just couldn’t handle it. It didn’t make sense from a cost perspective, to double the size of the team. So we looked at it and we said, AI has to be the solution. Let’s try to figure it out. Now, the more nuanced question of how, where, and how to apply AI, the way we tackled that is we did some research, to figure out what was going on in the minds of people and what their expectations were in terms of service and their interaction with onsite teams and centralized teams and sort of understanding what renters expected. And the insight that we took from it was two things. Once there, there is a significant difference in the mindset of a prospect, versus a resident. A prospect is busy, and they’re searching for an apartment while they’re at work, or on their phone as they’re sitting in traffic (hopefully not, but in Atlanta, probably so). And so they’re sort of doing it in their free time, and they don’t want to spend a lot of time on it. So they want it to be as easy and frictionless as possible. When we require them, to call property and talk to a human to ask them questions. And it takes 10 minutes to have that conversation. That’s a barrier, they want to access that information as quickly as possible. So similar to what they’ve done, we launched an AI tool that would handle all the basic tasks that a prospect would expect to get answered. What’s your price? What do you have available? Can I book a tour? We started there. We have since evolved it to answer more questions about pet policy and fees and sort of frequently asked questions. We have not yet launched AI on the resident side because of that insight around renters wanting more interaction with a human as a leaseholder. If something breaks in their apartment, there’s an emotional reaction, especially in today’s world where people are more sort of emotional about anything that happens. They want that individual connection. So we have not rolled out AI there. Although similar use cases we are looking at, you know, things like paying your rent, questions about your ledger, and things like that can easily be automated. The other insight that came out of that research study was it’s similar to the prospect mindset, which is the value that renters and probably all Americans place on their time. They want even the most difficult tasks, they want to be able to do it as quickly and efficiently as possible. AI obviously solves that time challenge. So it was a no-brainer for us to roll it out. We have started on the phone because call volume is so time intensive. So voice AI is active today and we are in the process of rolling out email and SMS.

Tyler Christiansen, Funnel Leasing  

Love it. Well, yeah. And I think that you both highlighted that there are opportunities. But you mentioned the word nuance. It’s not a set-it-and-forget-it. It is a piece of technology that is an active member of your team. The intersections are important. So you both referenced a couple of times, and I think it’s a good question to kind of bring home a lot of what we’ve talked about. Then if there are questions, we’re happy to mix those in. Curious with you both reference COVID as both an accelerant and obviously a change of pace that in both cases sounds like really truly accelerated your path on the centralization journey. When you look at the macroeconomic environment now, and we were discussing this over guacamole earlier, you know, what does that mean for your organization in terms of the opportunities now, right? You mentioned obviously, consumer behavior and the sentiment is actively changing. It’s different today than it was two years ago but given the stalemate and transactions in both your organizations have been two of the fastest-growing organizations in the country. Both active in the Sunbelt, over the last, you know, five-plus years now that the whole market is slowing down, how does that play a role in the continual journey? You mentioned, Noah, there is no end. So what does that mean for the next steps in your organization?

Noah Echols, CARROLL  

You know, I think it’s become a lot easier, I think Mike mentioned it. You know, prior to COVID, you had to go to investors, and you had to explain this new business model. And there’s risk involved, right, we’ve done the one to 100 model for decades, why would we change that? Well, now that you know, inflation is what it is, and costs are rising so much everyone wants to find ways to save money. So it’s much easier to have that conversation. Now, I will say the risk to that is, I personally think that companies that go into this process with the primary goal of reducing costs will fail, because they are they’re gonna cut heads. And they’re going to centralize roles without going through the process of really understanding what the renter needs, and how best to serve the renter as sort of the central part of the strategy. So I think those who start with customer experience first, will ultimately see the cost savings as an outcome, and better serve the resident along the way, which will positively impact a business. So I think it’s a different mindset, the cost savings has opened the door for us, but it’s not really the core of the strategy.

Tyler Christiansen, Funnel Leasing  

Yeah. Interesting perspective. Yeah, the willingness to be a partner on the investment side, the appetite for change from them, obviously, per the macro has changed. How do you think about it Mike?

Mike Gomes, Cortland  

So, a couple of thoughts. One is our overall strategy, remember, had started with the brand strategy, and we then started saying “Well, why do we have 42 communities in Dallas, we operate as 42 standalone businesses?” We’re not leveraging any of this. So we’d actually pitch the strategy pre-COVID and COVID slowed as, well I’m not sure how much COVID slowed us down more than a lot of other companies immediately caught up out of necessity. But because, so this is not to blame you, Tyler. But because we had decided to hitch our wagon to funnel because we firmly believe that Tyler’s vision, and his team’s vision, very much supported our longer-term vision and where we wanted to go, the product, quite frankly, just wasn’t mature enough for us to start to do a lot of these things. And we’ve taken a very deliberate approach in that regard, as we mentioned, or, as I mentioned earlier, to really want to try to make sure we were putting ourselves in the best position to serve the customer better, not at the same standard. You can’t keep serving everybody the same standard and raise your price, by definition, you’re creating more price value gaps daily. So we’re like how do we get better at providing service? So we struggled a bit in terms of wanting to go faster. The other problem that we had of which today’s macro environment is actually helping us, is we went on a massive acquisition spree early coming out of COVID. So we probably acquired 70 communities in about 15 months. And it wasn’t like we just bought a big portfolio, they were ones and twos. So on any given day, you’re now like, I gotta get leasing hub trained, I gotta get new staffing setup, I gotta get new hardware and software stack setup. The same people are then having to divorce themselves from their focus of trying to roll the new stuff out. By just keeping the day-to-day business, running and swallowing and integrating all these acquisitions. Today’s environment has given us a time runway to do nothing but focus on our operating platform foundation. We are going to grow again. CARROLL and Cortland are both sitting on some capital that none of us can put to work yet. So, our CEO keeps looking at us saying “You better be ready.” When we’re ready to go grow again, you guys collectively have put that foundation in place that is scalable, technically, and that is scalable at the human capital level. So we’ve been taking advantage of this opportunity to run, run, run as fast as we can. Because the moment that starting light goes back on, we’re gonna have people scrambling all over the place trying to deal with the acquisition volume, which is a great problem to have. But it’s hard when you’re trying to focus on executing all the change.

Tyler Christiansen, Funnel Leasing  

Yeah, well said. I think both organizations’ case did a fantastic job of putting the foundation in place, and making decisions incrementally along the way. It certainly has been fun to be a part of that journey. So not sure. Does anyone have any questions? Otherwise, I can wrap us up here, but I certainly, appreciate your time. But, any questions from the audience for these two? Yes. So just for the podcast listeners, the question was what metrics are there that help us understand you know, both from a customer experience perspective, but overall just benchmark that we’re on the right journey? So yeah, go ahead.

Noah Echols, CARROLL  

Sure, I’ll take it. First, we look at a couple of different things. So one, we wanted to see if we can convert at higher rates throughout the journey. So, was a lead converting to a tour? Was a tour converted to an application? Was an application converted to a lease? At a higher number than it was previously? So we’re teams that were responsible for each portion, or parts, of those journeys performing better and providing enough value to continue that prospect along the journey? That was indicator, number one. From a customer satisfaction standpoint, when we launched it, we were reliant on __________ and probably shouldn’t have mentioned their name on this podcast. We’ll bleep it out. We use those surveys to sort of get to have a barometer of customer satisfaction, what we quickly found is that there were challenges within that, there were very dense surveys that weren’t answered very frequently. So the response rate was very low, and so we didn’t have a lot of confidence in its ability to tell a full picture of what was happening onsite, we built our own solution in-house to survey our prospects and residents. And we’re asking a few questions to make sure that the survey is is very short. It’s basically it’s similar to if you fly Delta here in Atlanta, after you fly, you get a text message asking you how your flight was, and it’s a single question. The follow-up to that may be a little bit deeper, but we start with an initial question about their general satisfaction, with that stage of the journey. So we’re asking How was your tour? That’s a survey or they’ll get. How was their move-in? How was their, you know, throughout the journey, so we can kind of gauge where the challenges would be, and we could focus there on improving.

Mike Gomes, Cortland  

I’ll just add, so similarly, I think a lot of our business metrics will probably be similar across the board, in terms of it depends on what you’re piloting. Like, we’ve also been piloting a center of excellence around lease administration, that AI tool I told you about, teased out that as much as 40% of the back-and-forth traffic in email between a customer and the site team was all related to that window of time between, I’m no longer a prospect — because I’m because I applied —but I’m not a resident because I haven’t moved in. We refer to that internally as the applicant state, the applicant state doesn’t really exist from an industry solution standpoint. So we had to work with Funnel to help create some custom workflows to allow us to better manage, we’re trying to see do we see reduced cancellations. As a different KPI, one thing, I think that’s important for anybody that’s going to start to pilot anything, you have to know what you’re trying to measure to determine if the pilots were successful. And it’s a mixture of qual and quant. So some of the qualitative was literally not a metric. It was getting feedback from the teams that were either doing the job or impacted by having somebody else do the job to make sure that we weren’t perpetuating something going, “Well the metrics show up great. They hate it. But who cares, right?” So we were trying to balance those qualitative components with anything that was quantitative. Now, we have a lot of stuff in the industry where the benchmarks are a little fuzzy. But we tried to dial in on what best we had as a baseline to then measure, but we’ve got different metrics, depending on what we’re piloting, because there are lots of different elements of what we’re starting to roll out in this notion of kind of centers of excellence.

Noah Echols, CARROLL  

I will add one more thing, one of the metrics that we saw that was very validating for us. Looking at those CSAT scores across the journey, you know, we centralized lead management very early on. And so we were hyper-focused on the reaction to that process. Today, our prospect NPS score is higher than at any other stage in the journey, which was surprising to us, because you would think that the move-in experience would probably be the most positive. There’s excitement around a new home. But our prospect experiences is rated higher than anywhere else. It’s validating that the process that we put in place is working.

Tyler Christiansen, Funnel Leasing  

Excellent. Thank you, gentleman. Time for one more question. Yes, Kim. The question was: how do you think about comp structures when you’re separating renewals and you’re specializing the leasing function?

Noah Echols, CARROLL  

Today that go we still have leasing teams on site, the sales function has not been centralized, it is something that we’re moving towards. So they are incentivized the same way today as they were prior to that.

Mike Gomes, Cortland  

Same. The renewal piece of it, which you had referenced, as we stood up the lease administration. The lease administration, whether you’re new and moving in or whether it’s the administration of your lease as you’re renewing, we found that internally despite all of our best efforts, our site teams were very inconsistent in their ability to even deliver the renewal offers at the dates by which we were asking them to, for lots of reasons. I think that’s one of the common things we recognize, there were certainly people who were awesome at following up and doing their lead nurturing. And that’s where we ended up with a difficulty in our relationship with our site teams, because the teams that were doing a great, yes, you took this away from me, but I don’t think this team is doing it as good as we were doing it. But across the board, when you looked at it across the portfolio, our metrics all went up. But it wasn’t always the case of each individual community. If you had a rockstar CM, that held their people accountable, you saw different levels of performance. Similarly, as we took on the lease admin, we put it with renewal together. So we’ve piloted that at, I think it’s 13 communities in Atlanta, and like six in Houston, just to refine processes. Before we then came to Funnel and say, “Here’s what we now need you to build, to allow us to better automate these workflows, and better manage the workflows.” We also saw another metric we had was lease compliance. If we have all these standards of compliance, how well are we doing today? So we went and audited a bunch. And then we saw do these specialized teams actually hit our lease compliance standards at a better rate, and the case was absolutely. We actually found we were denying more people, as we should, which then had a downstream positive impact, we believe, on subsequent delinquency. So there were a lot of different metrics we would use as we were testing, but we didn’t change the site team’s comp yet. The next phase of work we’ll be doing in April will start to do that, where there will be less incentive paid for things around leasing, and more incentive pay around the delivery and success of the resident experience.

Noah Echols, CARROLL  

Yeah, to piggyback on that, I think you’ve made a good point around setting the expectations of the individual property performance. We saw the same thing. So across the board performing significantly higher individual properties, sometimes lower, sometimes higher. I think that’s important, because, you know, we went in thinking, we’re going to centralize this team, and because they’re focused on one thing across the board, everyone’s going to perform better. And we saw that you know, humans are humans, and they still need some training and support. And sometimes it’s going to dip and sometimes it’s not. What it did do though, is, maybe it’s just CARROLL, I don’t know, maybe you guys can relate? What we tended to see is that if a property was sitting at 97 or 98% occupied, the leasing team would kind of kick their feet up. Right? There are no leases, there are not a lot of leases out there to go get, which is how they’re incentivized. And so they would do less. And then the property occupancy would slowly fall down. And then they would get more engaged, and then they’d get it back up. And so it was this roller coaster of performance, right? Well, what adding this process did was it leveled the expectations on what you what the output is going to be, which made it more predictable. So now today, we can look at a property and because the performance is predictable, we can forecast exactly what a property might need to hit whatever goal they’re trying to hit. We know that we call it Lantern in our centralized lead management team, we know how Lantern performs, and we know how the onsite team converts from tour to application to lease. And so we can say it’s going to cost X number of dollars to hit your occupancy goal. And so that predictability enabled us to forecast much more accurately, how to operate a property and particularly advertising budgets.

Tyler Christiansen, Funnel Leasing  

Yeah, great question. And just to piggyback on that, one of the things obviously, every customer, every property manager has a different strategy, where we’ve seen success with different organizations where they have bifurcated the roles. It does tie to what Noah is saying, you have to provide simultaneously more inventory to sell, and so if I only had three vacant apartments, and you’re taking away my renewals, I hope I have more vacant apartments to sell. Right? And so obviously, there’s, there’s a motion there that can be perfected.

Noah Echols, CARROLL  

And from a change management standpoint, on sales, this is you know, we’re gearing up towards centralizing that role. That is the selling point, if you have a leasing consultant at a small property that sits at, you know, highly occupied at 97%, there’s not a lot of opportunity for them to make a lot of money. If that same person, though, who’s a rockstar leaser now has five properties, and now they’re over 1500 units, there’s significantly more opportunity for that individual to make a good amount of money. That’s the selling point for that one particular role.

Tyler Christiansen, Funnel Leasing  

Excellent. So thank you so much. I have one last fun question. So we were launching this podcast, though we’ve had Mike on two times. So I’m very passionate about rental technologies, I can tell you are as well. When you look ahead, so we kind of just recap the last five years for both of your organizations. When you look ahead to five years, is there a technology that you think, “Wow, that is going to be a much bigger deal in five years than it is today?” Or on the flip side is there, you know, obsolete technology like paper ILSs is that we think in a few years, it’s just going to be something that has the way of the past? So any quick thoughts on the technology changes that are coming quick.

Noah Echols, CARROLL  

I’ll raise my hand to beat up on ILSs since you brought it up. The ILS model, for those of you who aren’t familiar, started as a catalog. Right? It tends to get lumped in with digital advertising, right? It’s a website where you can buy an ad. I refer to it as a digitized ad, and the difference is they took their catalog and they put it online. And it’s the same business model. I think ILSs are dying, I think in five years that ILS will be obsolete. We’re starting to see that more and more now. To your point earlier about COVID, sort of leveling the playing field, and a lot of firms catching up in their sophistication. We saw that in advertising. Google sort of leveled that playing field, and once people unlocked that capability in-house, ILS is are taking a hit for it. So I would say ILSs on the way out, you brought it up. I didn’t so… 

Tyler Christiansen, Funnel Leasing  

Great answer.

Mike Gomes, Cortland  

So I think you may have asked me this question. Maybe in the podcast prior that I had done, which was pre-chat GPT. And I think my answer was AI. Like get ready, we’re about to see an infusion of AI in ways we’ve never seen, and that I had no idea. We can’t open the magazine, or we can’t open our email, without seeing something about chat GPT. Salesforce just announced yesterday, Microsoft’s already done a big thing, everybody, Google has now made it a red alert project for their thing. Like I don’t even think we can fathom and imagine what AI is going to do as it gets more human-like. I actually just wrote an article that’s gonna go in our annual investor report, at the end of the month, I wrote it in January, and there’s a term that’s been coined now, that’s a play on AI anxiety. And it’s kind of like, “What’s gonna happen when the machines take over?” That worry about this is gonna get really weird. So that’s going to be up to all of us to figure out how to govern that and how to manage that.

Tyler Christiansen, Funnel Leasing  

Well, thank you. Those are great candidate answers. Desert showing up. So we’ll circle back and five years on this, see how the predictions went. But thank you so much. 

Mike Gomes, Cortland  

I’ll be on podcast 15 by then. 

Tyler Christiansen, Funnel Leasing  

That’s right, thank you, gentlemen. Appreciate it.  Thanks for listening to this episode of multifamily unpacked if you enjoyed what you heard here, leave a review and rating on Apple podcasts and follow Funnel on LinkedIn.