In Which I Speak to Steve Berkowitz, CEO of Move, Inc.

Steve Berkowitz, CEO, Move, Inc.

It’s now been a couple of days, and Errol Samuelson’s defection from Realtor.com to Zillow remains the top story in the world of real estate. I posted two questions about the move yesterday (and had one answered very quickly), and reached out to both Errol and to Move for comments.

As of this writing, I haven’t heard from Errol, but I did manage to speak with Steve Berkowitz, the CEO of Move, and Errol’s immediate boss until earlier this week. I didn’t record the conversation, so I’m going from memory and my notes here.

Bottom line: If Berkowitz knew the answer to my first question — why no notice? — then he put on an Academy Award worthy performance. I think he was still very much in shock at what happened. Furthermore, this event injects an element of animosity into a business rivalry that may have far reaching consequences for everyone involved.

Without further ado…

Steve Berkowitz is Furious, But Confident

You don’t normally get the CEO of a publicly traded company getting on the phone with a blogger. But it happened in this case, and Berkowitz was remarkably open, forthcoming, and at times, his emotions came through loud and clear.

Directly addressing the question of why there was no notice, Berkowitz told me that he was at an investor meeting all day on Wednesday (that would be the Morgan Stanley Technology Conference), and that the entire senior staff knew that he would be at that meeting and presenting. While he was at the meeting, he got a call from HR and from Errol, but because he was sitting in session, he didn’t answer immediately. Later that day, during a break, he checked his voicemail and that’s how he found out that his President was resigning, effective immediately.

Berkowitz said that he called Errol immediately and had a short conversation, with the only question he asked being, “Can I have some time?” As events transpired, we all know the answer must have been, “No.” Inman News published its story mere hours afterwards, and Errol started at Zillow on the same day. Berkowitz said that he would have been happy to have had even one day to react.

In fact, Berkowitz said that Errol’s staff, his direct reports as well as the other employees at Realtor.com, found out about his resignation in exactly the same way that everyone else in real estate did: from social media, blogs, and then Inman News. There was no farewell email, message, or any communication from Errol to the staff. (I got the distinct feeling, that even though Berkowitz is a consummate professional and a master communicator, that this really pissed him off.)

Based on our conversation, it does not appear that the two ever sat down to discuss the departure in any way. If there was an exit interview — as is common with most company’s HR policy — it was not brought up.

I asked if Errol’s employment agreement had any sort of a termination provision requiring a certain amount of notice before resignation. Since I learned that non-compete clauses are invalid in California, I wondered about the typical, “you must give two weeks notice” type of termination clauses. Berkowitz’s response was illuminating:

“I don’t know if there was a clause like that or not, but it never occurred to me, because in thirty five years of business life, I’ve never heard of anyone doing something like this. It’s a matter of basic business ethics, and I never expected that Errol would do anything like that.” (From memory/notes; I may be paraphrasing here.)

Berkowitz then relayed a story from his personal career, when he was the CEO of AskJeeves, which had been acquired by Barry Diller’s IAC/Interactive Corp. When he decided to leave AskJeeves to go to Microsoft, Berkowitz flew cross-country to meet face to face with Diller, and as he put it, “listen to him rant at me”, and resigned.

It seems to me that the contrast between the way he himself acted, and the way that Errol allegedly handled the departure remains a sharp bitter one in Berkowitz’s mind. And language like, “basic business ethics” is pretty strong coming from anybody, nevermind someone as genial and as likable as Berkowitz is.

I asked whether Berkowitz, or any of the other senior managers, who after all had worked side-by-side with Errol for years had any idea, any inkling that he might not have been happy. Berkowitz said absolutely not, and that everyone was totally shocked at the news. In fact, he told me that he and Errol were at a MLS council meeting just a week ago and he detected nothing that would suggest that Errol was frustrated or unhappy or thinking about leaving.

In terms of the rumors and speculation that Errol’s departure was part of a grand strategy for a pivot away from real estate or away from NAR, Berkowitz emphatically insisted that nothing could be further from the truth. He stressed that business was really starting to turn around and pickup in the last several months: Move had posted 13% growth year over year, their mobile app was top 15 in the iTunes store, they had massive support from NAR, that Realtor.com grew market share in the past year, etc. etc.

I asked about the departure of Scott Boecker, Chief Product Officer, which was handled very quietly just a week or two before Errol’s move, and Berkowitz emphasized that there was absolutely no connection at all between the two. There had been no change in strategy or product or business plans, and that everything was going according to plan. Tellingly, Berkowitz praised Scott Boecker to the sky, said they parted as close as friends could be, and that he wouldn’t hesitate to sit down a write a letter of recommendation for Scott. Clearly, such things are not in the realm of possibility for Errol.

In terms of impact, Berkowitz thought that Move wouldn’t miss a beat with Errol’s departure. Curt Beardsley would take over the industry relations responsibilities, and with his experience and stature in the industry, Berkowitz didn’t think anything would change for the worse. Berkowitz said they have a great product group, with people like Ernie Graham and Michele Serro, as well as top-notch technology talent. They have a great team at Tiger Leads, a new head of sales who joined the team 9 months ago and is making huge positive impact, a rock solid team at ListHub, and many of the team have enormous industry knowledge and stature.

He didn’t sound scared to me.

Berkowitz said that at this time, they were leaning towards not replacing Errol, whether from within or with a search. Berkowitz himself would take over the strategy responsibility that Errol held, and also get more heavily involved in product. (He laughingly mentioned that he missed being in the trenches with product, being a former product manager himself.)

So.

Immediate Reaction

Keep in mind that I could have been spun the whole time; I really doubt it, as I think I’m pretty good at sniffing out what sounds like bovine extrusions and what is genuine, but it’s possible. But the nature of the conversation — almost all of it on the record, with PR and Investor Relations making sure we weren’t going anywhere we couldn’t — suggests to me that we’re getting the real deal here. (One sign: the PR/IR person didn’t interrupt even once.) Berkowitz spoke with some passion, especially in those parts where he talked about basic business ethics, and the fact that Errol’s staff had to find out through the media. That won’t get forgotten anytime soon.

So my initial reaction — without having heard Errol’s side of the story, and without knowing what else might be coming down the pike from either Move or Zillow — is that this wasn’t that big of a deal institutionally or strategically. The predictions of doom for Realtor.com are a bit premature.

And I say that as one of the people whose first instinct was to wonder if Errol was pushed out because of a shift in strategy for Move. If Berkowitz is to be believed, and I have no reason not to, then nothing of the sort is happening. This was simply a case of one guy who quit a job to go work for the arch-rival. Maybe it wasn’t handled the right way (or maybe it was, as I’m only getting one side of the story), but that’s all it was.

It’s Johnny Damon going to play for the New York Yankees, or Brett Favre appearing in a Vikings uniform at Lambeau Field. Individuals have to do what they deem the right thing to do for them and for their families. Didn’t mean the Red Sox just imploded, or that the Packers became nobodies. (In fact, the Red Sox have won more World Series than the Yankees did since Damon’s defection… and Aaron Rodgers makes Green Bay fans say whatever Favre.)

I’m not saying Move and Realtor.com don’t have problems, because they do. But Errol’s departure doesn’t change those problems for the worse or for the better, from where I stand. Sure they’ll miss him, and yes, Errol’s truly talented and a brilliant guy. But… so very few people are truly irreplaceable. Time will tell if Errol is one of those people or not.

However, having said that, and with only one side of the story so far, the lingering effects will be unpleasant.

Lingering, Simmering

There is no question in my mind that Berkowitz is pissed off. Furious. Not that Errol went to work for Zillow, but at the way he handled the exit. If his version of events is true, then it really is difficult to comprehend why Errol would have done things that way. To resign over voicemail is tantamount to breaking up with your girlfriend with a Post-It note.

(Language NSFW)

And if Berkowitz is that stunned, that angry… is it possible that the rest of the people at Move wouldn’t feel the same way? In fact, wouldn’t they share Berkowitz’s feelings of betrayal and anger — again, not at the fact that he went to Zillow, but at the fact that he did so without giving them even a day to figure out how to break the news — and then some? I’d think so. And in fact, is it likely that the leadership at NAR, most of whom knew Errol for over 10 years and had worked closely with him via its presence on the Board, doesn’t share in those feelings?

I suspect that Errol Samuelson, in his new job, will find the landscape much altered. His job may turn out to be far more difficult than he had imagined, because of the lingering effects of the Exit. It isn’t because the industry hates Zillow as much as some would have you believe. But the phrase “basic business ethics” will be resonating for years in hallways and small meeting rooms where people talk openly with each other.

For what it’s worth, I’ve heard more than a few very senior, very influential people at NAR, at various state and powerful local Associations mention Errol Samuelson as the right person to take over for Dale Stinton as CEO of NAR when he retires. I don’t think those conversations will be happening anymore after this.

Furthermore, this event will die down in the next few weeks. Something else will happen and we’ll all move on. But the rivalry between Move and Zillow now carries a tinge of emotion to it that it did not before March 5, 2014.

Who knows where that might take things?

-rsh

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Rob Hahn

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

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