When Knight Frank announced its new commercial board in February there was one thing that stood out – it was made up of eight white, middle-aged men.
At a time when the property industry is working hard to enhance its diversity it seemed a step in the wrong direction and a missed opportunity. The explanation, in short, was that at present they were the best people employed by the company for the positions and the business was duty-bound to appoint them.
Knight Frank’s gender pay gap published today shows a mean pay gap of 30.2%, and a bonus gap of 70.3%. Female salaried members of the partnership made up only 11.1% of the upper quartile, and 39.3% of the upper quartile in terms of pay in the overall workforce were women.
This week, Stephen Clifton took over as head of the commercial business from the retiring John Snow and he has a plan to dramatically change the profile of the company’s senior staff and the image of the distinguished firm as something of an old boys’ club.
On his watch Knight Frank is to re-examine the whole business from top to bottom in order to boost diversity.
Changing demography
At entry level, the company is to step up its efforts to promote itself at a broader spectrum of careers fairs and start searching for more staff which have not undertaken traditional real estate courses, including recruiting straight out of schools.
This will apply to internships and its graduate scheme and star performers from the broader intakes will be put on personal and leadership development programs to boost their rise through the business.
Maternity and shared parental leave has been enhanced to offer six months’ full pay and ultra-flexible return-to-work terms are being offered to ensure that more women rise to senior positions.
In a bid to change the demography of those at the helm as quickly as possible, Clifton is setting up four development boards, or “ideas hoppers” as he calls them, that will determine the direction of the business. They are intended to serve as a pathway so an “ambitiously diverse” variety of staff can have influence and gain the appropriate experience to join the main commercial board.
One of these will be dedicated to overseeing the culture, wellbeing and the diversity of Knight Frank. It will also be responsible for graduate intake which will be overseen by Merelina Monk, a 30-year-old partner in the student housing division who was made the company’s youngest partner four years’ ago.
Four critical area boards are also being set up, including one focusing on social impact that will oversee a handful of major projects that the company can dedicate itself to, each over a three- to five-year period, in order to have a broader positive effect on communities within the geographies it operates.
“[The make-up of the main board] does not reflect who we are as a business – we are a really diverse group of people,” says Clifton who himself went to a state school and grew up on “an estate in Wolverhampton of the type that Knight Frank wouldn’t typically be associated with”.
“I am really keen to make it clear that everyone here can succeed on merit and change our image. Over a relatively short space of time [the new board structure will] allow a platform for recognition and opportunity, to work on the key strategic areas, influence the running of our business and report directly to the board with recommendations and actions.”
The four development boards will initially be led by members of the current commercial board and will cover people (head of London offices, William Beardmore-Gray), clients (head of UK capital markets, Richard Claxton), finance (head of UK cities and head of portfolio investment, Alastair Graham-Campbell) and service lines (partner, Julian Stocks).
Each of these board will have eight to 10 people and most of the members will be rotated every 18 months in order to provide opportunities to a broader range of staff. Those that have successful tenures are likely to be transferred to other boards for those high performers to gain a broader range of experience of the business before being considered for election to the main commercial board.
The four critical area boards will cover social impact, brand engagement, cities and growth. Graham-Campbell will also lead the cities board that oversees the company’s 10 UK offices outside of London, although heads for the other three critical area boards are yet to be appointed.
Anthony Duggan, the company’s head of capital markets research, has also been appointed as chief strategy officer, and is tasked with ensuring that each of the boards are working together.
The boards will be fully staffed and operational by June.
“Marzipan layer”
Separately, a tech board led by Tim Robinson that spans the commercial and residential business is being established. This will include non-executives from proptech and fintech.
“In the past you would qualify and get on to the commercial board if you ran a whole subdivision of our business. What I wanted to get away from a bit is the dominance of very specific people that got to the top of their own subdivision and look more broadly to those who can bring the most to our strategic thinking over the next five years,” Clifton says.
Diversity is clearly at the top of Clifton’s agenda in ensuring that Knight Frank is future-proofed and successful but it is not the only challenge the business faces. It is arguably in the much maligned “marzipan layer” in smaller than giants CBRE, JLL and Cushman & Wakefield that can provide comprehensive global coverage across every service line but is much larger than niche firms.
Clifton says that the business has the financial resources to recruit top quality staff, as illustrated by its recruitment of the 50-strong commercial team of Deloitte Real Estate in 2016 and Charlie Barke joining as head of shopping centre and high street investment from Cushman & Wakefield in the same year.
The partnership does have a pension scheme deficit of £16.8m, but this is “considered modest” by Clifton in the context of around £225m of net assets.
“We are not a revenue machine. It’s a personal industry and this is a business owned by people who work here and that’s what makes us really unique. If we have best in class people leading our teams then we will have best in class teams.
“I think clients, unless they are international and just want blanket coverage absolutely everywhere, I think they still want a personal and best in class service,” he says adding that it would steer away for competing against low margin work dominated by the largest firms such as facilities management.
Strengths and growth
In terms of strengths, Clifton highlights the traditional areas of offices and logistics but stresses that the retail business has gone from below par to among the most active in the UK under Barke. It is also growing its specialist teams and its student division advised on the two largest deals of 2017 while its valuation business, led by Rupert Johnson, values 40% of the IPD index.
“We also have relationships going back 40 or 50 years with ultra high net worth clients around the planet who have been phenomenally important to our residential business for years and are becoming increasingly important on the commercial side,” he says.
Knight Frank has traditionally not paid money to buy businesses, although Clifton says there is the cash to do so selectively for smaller targets and that no investment has ever been turned down due to lack of finances from within the partnership. But could the business ultimately become a target itself?
“It’s highly unlikely because unlike a bunch of shareholders who don’t have a passion about the business it would have to be a majority decision by the people who own the business. It gets discussed as it should on a reasonably regular basis no there’s no interest in doing it. It would just make us like everybody else,” he says.
Turning the company that has arguably the most notable reputation in the UK for being an old school property services firm into one that is diverse and representative will be no easy task. The proof will only come through tangible results over the next year or two, but in Clifton Knight Frank has at its helm a man that has set a clear pathway for change.
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