Realtor designations as an indicant of cognitive moral development and success in real estate sales

Journal of Real Estate Practice and Education, 2003 by Izzo, George, Langford, Barry E

This paper is the winner of the Real Estate Brokerage/Agency (sponsored by the National Association of Industrial and Office Properties Foundation) manuscript prize presented at the 2002 ARES Annual Meeting.

Abstract. This paper explores the influence of REALTOR(R) professional designations on the cognitive moral development and income of real estate practitioners. The study uses a variation of the human capital model and survey data from a large group of realtors. Controlling for age, education and experience, estimates show positive relationships between the possession of Realtor designations and cognitive moral development, income and job tenure. The findings are consistent with and provide additional support for previous research.

Introduction

Real estate sales success depends on the effective selection, training, and retention of good sales people. Churchill, Walker and Ford (1985: 111) suggest that "from a manager's point of view, whom one hires is important, but probably not as important as what one does with the recruits and to them after being hired." Firms that successfully manage the socialization process receive benefits such as organizational and ethical conformity and the acquisition of sales people well versed in optimal selling techniques and skills (Grant and Bush, 1996). However, despite research to the contrary, many sales managers focus on short-term performance goals, rather than teaching, motivating and encouraging salespeople to improve performance over time through professionalism and career-based learning.

Ethical behavior is an important element in displaying professionalism that garners trust from customers and builds solid relationships that lead to increased sales. Some critics, however, suggest that many sales people are not ethical due to the fluctuating parameters of ethical consensus, the salesperson's boundary spanning role within the organization, and the high functional visibility of the selling position. Other critics charge that sales positions attract persons with questionable morals, at best, or those who are unscrupulous, at worst (Hensel and Dubinsky, 1986), or that an ethical trade-off exists between salespeople's earnings and their activities creating an inverse relationship between moral development and income. Notwithstanding these critics, in today's competitive and litigious business environment, it is incumbent upon sales managers to emphasize both performance goals and socialization tactics that will help regulate compliance and assure ethical behavior.

Thus, the purpose of the present research is to expand the knowledge of characteristics affecting the income and moral development of real estate practitioners in the United States. The study adds to the literature by measuring the effects from earning a professional designation granted through the National Association of REALTORS(R) (NAR) on the income and cognitive moral development of residential real estate practitioners. Based on extant socialization theory, this study investigates connections between professional designations and cognitive moral development and evaluates the suggested ethical trade-off between salesperson income and moral development.

Literature Review

A brief summary of prior studies investigating the performance of real estate professionals follows. The earliest study of the income determinants of real estate sales professionals by Follain, Lutes and Meier (1987) found a positive relationship between earnings and effort (hours worked), that the effects of experience on income rise and then flatten out over time, and that formal education is a steady predictor of income. In a similar study of 481 Ohio realtors, Glower and Hendershott (1988) showed that (1) respondents with college educations earn more than those with less formal education; (2) respondents with post-graduate degrees did not earn more than the college educated respondents; (3) brokers in metro and non-metro locales earn more than their agents; and (4) practitioners engaged in predominantly non-residential activity have higher earnings than those in residential sales.

The impact of professional and firm-sponsored education courses on licensee earnings was evaluated by Crellin, Frew and Jud (1988). Consistent with previous studies of earnings, the authors show that hours worked, formal education, years in the profession and firm ownership are all positively related to income. In addition, professional and firm-sponsored education courses completed correlate positively with gains in income. In two related studies, Sirmans and Swicegood (1997, 2000) demonstrate that (1) experience continues to be a significant predictor of income; (2) experience tends to have less value as a predictor over time; and (3) females and those with a residential specialty earn less. In a departure from prior studies, their 2000 study found that level of formal education was not significant, while highlighting the positive effects on income from using a computer and earning a professional designation. Benjamin, Jud and Sirmans' quasi meta-analysis study (2000) evaluated the market for brokerage services by conducting a six-question survey, one of which asked the question "What factors determine broker and agent compensation?" Consistent with existing research, experience, education and hours worked were found to positively influence earnings, while the effects caused by gender, race and the impacts of new technologies were less predictable.