It is said revenue is vanity while profit is sanity. There must be a lot of mirrors and people losing their minds in JLL’s UK HQ then.
Since Guy Grainger took control of the group’s EMEA region two years ago, and Chris Ireland stepped up to take over the UK business, the global group has been hit by the under-performance of both these regions, with the upshot that while revenues have risen significantly, profits have plummeted.
With EMEA and the UK taking so much of the flak for dragging down global earnings, you would have thought Grainger and Ireland would have been keen to defend their strategy. However, beyond a written statement from Ireland, there has been nada. So why exactly does JLL’s UK operation appear to be the weak link in an otherwise steady global operation?
To see where the seeds of this current mess were sown, we need to revisit 2015. Back then, the high-margin capital markets business accounted for 34% of all EMEA revenue, and the UK team accounted for a large chunk of that. Last year, capital markets accounted for just 24% of the region’s revenue.
To make the firm less reliant on the oscillating fortunes of capital markets, JLL, like other real estate agency firms, has pursued growth in steadier, but lower-margin, sectors such as facilities management. Hence the expensive $330m Integral acquisition in 2016. But Integral has not given JLL the boost we were told it would give, and the integration of the business has taken a lot longer than anyone expected.
Find out more: JLL falls behind CBRE in EMEA
That’s not the end of the story. At JLL’s Warwick Street HQ, morale is low, so low that barely a week seems to go by without the next high-profile resignation being announced.
One of the main reasons is that JLL has changed the way it rewards staff. Not so long ago, if a star investment agent sealed a big sale, he or she would have been paid a percentage fee. That’s been scrapped because JLL now believes the brand, not the individual, wins clients. Now agents are paid out of profits, which, in reality, means they are paid significantly less than they were. After all, as the saying I kicked this piece off with concludes: cash is reality.
So how can JLL turn things around? A change at the top would help. Chris Ireland is, without doubt, good at charming clients. However, insiders claim he’s not at all keen on counting beans, and the modern agency world is all about cost management. Ireland is also said by many in the firm to be losing his enthusiasm for the role.
As for a replacement for Ireland, the hot favourite is Alistair Meadows, head of the UK capital markets team. Meadows is well liked in Warwick Street, and would, perhaps, help improve staff morale. But, again, he’s not a cost manager, and that’s the type of person JLL UK needs. As one leading agency figure told me this week: “The job of an agency boss isn’t to be liked. It’s to make money.”
As for Grainger, he’s made no secret of his desire to seek public office – and as we know, numbers are not exactly the strong suit of politicians either.