Robert Reffkin steered Compass through 2023. Can he navigate rough waters ahead?
The firm cut $500 million in expenses and maintained agent headcount even in a “historically” bad market.
UPDATED, December 15, 5 p.m.: Robert Reffkin was cool and collected when he took the stage for his keynote address at Compass’ annual retreat.
The crowd of 2,400 agents gathered in San Diego, seemingly a world away from the turbulence facing residential firms. The legal challenges and strained market didn’t seem to be top of mind for Reffkin either.
Dressed in his usual unbuttoned blue jacket and slacks, the chief executive emphasized the importance of personal relationships.
“When others are leaning out, I am leaning in,” he said. “I made a very specific decision to lean into one single thing: culture — our culture of connection.”
The charismatic CEO has honed this line of people-first messaging while steering his company through the highs and lows of billion-dollar fundraising, rapid expansion, a disastrous public debut and a difficult stretch of downsizing.
Reffkin, a co-founder of the brokerage, also served as an interim CFO last year in a stint that overlapped with the U.S. housing market’s dramatic downturn.
Under his watch, the Compass ship remained afloat and then some: The company hit its goal of cash-flow positivity by mid 2023, 11 years after its founding.
The metric was a reward for the brokerage and bottom-line validation for agents who were willing to defend the firm after 2022’s bleak earnings reports.
It’s not uncommon for executives and staffers to publicly cheer on their own firm — in many cases, it’s necessary. But there’s something about Reffkin as the ever-present narrator of the Compass story that makes the residential giant even more of a must-watch.
The climb to Compass
Reffkin’s rise from a scrappy entrepreneur came into focus in his press run ahead of the company’s public debut.
Raised by a single mother in Berkeley, California, Reffkin graduated from Columbia University in just two years before doing stints at the White House, McKinsey & Company and Goldman Sachs.
Reffkin launched Compass as a real estate outsider, but he’s since taken a hands-on approach so intense it seems as though he’s making up for lost time.
He’s famous within the company for calling new agents shortly after they join, and handing out his cell phone number left and right. Agents say he responds when they text him — which they do frequently — about trivialities like TV shows they enjoy.
“When others are leaning out, I am leaning in.”
He goes to open houses, shares Shabbat dinners with agents and spent 2022 crisscrossing the country, visiting 200 company offices. In return, agents are loyal to him.
They’ve had plenty of chances to flex their fidelity. After a crash-and-burn public debut in 2021, Compass in 2022 joined the ranks of residential players roiled by the housing market’s drop, plummeting stock prices and waves of layoffs.
Reffkin, with the help of acquisitions and some iron-clad clawbacks imposed on agents, has held the company together. The firm had to shed more than $500 million in expenses and maintain agent headcount in a “historically” bad market, he admitted in earnings calls.
True north
Agents have lost hundreds of millions of dollars in equity as a result of the company’s poor performance. Some say they felt financially trapped by stringent clawbacks binding them to the firm.
“I believed in the company, and I totally drank the Kool-Aid,” a former Compass agent previously told The Real Deal.
The loyalty among believers bubbles up around such flashpoints as grim financial results, which can spark fiery exchanges in TRD’s own social media comments section under reports of the company’s performance.
An Instagram post about Compass becoming cash-flow positive in the second quarter drew rival agents to comment that the company had, in fact, posted a net loss.
“Love living rent free in the haters’ heads,” Houston-based Compass realtor Alexandra Loyd commented in response. “Must be a slow news day because when that happens … let’s bring up Compass!”
Choppy waters ahead
Compass has hung on by cultivating loyalty and chopping spending, but the distance between its status as the country’s No. 1 brokerage and its bottom line was stark — and fodder for naysayers.
“What they’re doing, it doesn’t make sense,” said Brown Harris Stevens CEO Bess Freedman in 2022. “They’re not a technology company. They’re a real estate brokerage company that just spent far more than they were making.”
The coming year will test Reffkin’s leadership.
Compass has posted two consecutive cash-flow positive quarters, but it no longer projects to be cash-flow positive for the full year.
It’s also been pulled into the wave of class-action antitrust lawsuits targeting broker commission rules. Compass was named as a defendant in cases filed in Missouri, New York City and Illinois.
Churn for principal agents is down. Total churn is harder to track.
The firm began 2023 with sputtering headcount growth. Last year’s fourth-quarter results showed its average number of principal agents grew by 112 in the quarter, yet its average number of total agents rose by just 58 — meaning it lost more non-principal agents than it added.
The brokerage said average headcount grew last quarter by 543. It added 800 agents by way of brokerage acquisitions in Texas and California.
But Reffkin is kicking off 2024 with a plan to keep agents motivated, dangling a connection-focused incentive for top performers.
His keynote at the annual retreat hinted at a competition. Agents with the most exclusive agreements and in-person interactions with their clients will travel to New York City for breakfast with star agent Leonard Steinberg, lunch with executive coach Courtney Smith and dinner at Reffkin’s home.
No executive can steer the market, but Reffkin has used his recent appearances to forecast smoother sailing ahead if mortgage rates fall below 5 percent by 2025, as some analysts predict.
“If they’re even close to right, it’s going to feel like the pandemic craze all over again,” Reffkin said.
“Fasten your seatbelts. It’s going to feel like a rocket ship.”
Correction: A previous version of this story did not clarify the difference between principal agent churn, which Compass reports, and total agent churn, which requires analysis. The story has been updated to show the difference.