Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Michael and Harvey Kalles
Michael and Harvey Kalles

Report on Small Business magazine

The new king of the castles Add to ...

The spread of brokerages that offer access to MLS listings and a few other basic services for a flat fee may be the vanguard of an industry metamorphosis. Mitch Joel, president of Montreal digital marketing company Twist Image, points to the growing popularity of fee-based websites abroad that list properties and supply the required legal documents, the surge in housing listings on eBay, and the "augmented reality" feature on the new iPhone that Europeans are quickly adopting for house browsing: Just point the phone at a home you drive by to find out if it's for sale, who represents it, and do a video tour of the inside. "His industry is changing, whether he wants to acknowledge it or not," says Joel.

Nevertheless, the shift toward consumers handling more of the purchase or sale workload will likely erode agents' ability to demand 5 per cent of the purchase price, the standard commission that hasn't changed much over the years. "Brokers are petrified that someone will challenge that 5 per cent fee," says McKellar. "How many other parts of the business world can say, our fees never change? It's like some sort of secret society."

Though Michael waves off concerns about technology's impact, it's hard to believe this brainy MBA who led the company's outreach to a global market and onto the Web doesn't have some worries. But his dad has the business values of a different generation - he disparages credit, hardly uses a computer and seems to view the franchise system as an uncivilized abomination - and he's still the CEO.

The transition from dad to son has been gradual and fluid. Asked when he became president, Michael can't remember the year, though he does remember the day when he took over signing the cheques. "Dad never said, 'I'm going to step back from this now,' " he says. "I just took on different jobs."

And even in this exceptionally close family where the parents and kids all live in the same neighbourhood, dine together every Friday, and share most holidays and vacations, father and son have a special bond. "In the 15 years I've worked hand in hand with my dad, we've literally had not a single cross word," says Michael.

But Michael intensely feels the pressure to grow what his dad built. He knows the statistics that show 75 per cent of family businesses fail after the first-generation handover; of the remaining quarter, 90 per cent fail in the third generation. From the Eatons to the Aspers, there is no shortage of high-profile examples of children squandering their parents' legacies. "It certainly weighs heavy on me," he says. He's less concerned about using it to make his own name. "Every day that I work in this business, I put my own stamp on it," he says.

Yet while Harvey's name is on the door, it's Elise's name that carries the most weight. "The mother is a very important driving force," says McKellar, who knows the family. "She is the firm." When she retires, it may not be easy for the brokerage to retain her clients. "She is the kingpin of that organization, and the relationships are based on her. How do you transfer those? You can't transfer them to Michael," because he doesn't work in sales.

Elise is bringing more of the firm's agents in on her deals and forging links for them with her contacts. She's also encouraging Corinne to work more closely with her, but her daughter isn't keen. "I don't want anything to come in the way of our relationship," says Corinne. As for Michael, he tersely dismisses the idea of his mom's retirement. "She's more energetic than she's ever been," he insists, as if even admitting advancing years were disloyal. Yet succession and estate planning, as any adviser will tell you, are at core about confronting unpleasant realities so you can prepare for their impact. The business his father dominated will change dramatically during Michael's reign. His mom will eventually not be part of it. And familial superstition and courteous deference to parental sensitivities will not solve those challenges.

Single page
 

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories