Tad Smith hosted his first Sotheby’s earnings call as CEO. And though he has only been at the company for 41 days, he’s issuing an update on his strategic plans which signal a flatter organization and some potential bold moves on the real estate front:

The first priority – implementing a compelling growth strategy for Sotheby’s – has numerous elements.

• I very much like the markets in which Sotheby’s does business. According to one recent report I read, there were over 170,000 people around the world with a net worth of more than $30MM in 2014, with a total wealth estimated of nearly $21 trillion. The same report predicted that the global population of ultra-high net worth individuals would grow 34% through 2024.
• Serving these discerning customers around the world begins with our brand, so our strategy must first define an architecture for our company’s brand as well as set and maintain standards of elegance and superb quality across all we do.
• The growth strategy will also address market share gaps within various specialist categories in ways that are appropriate for creating shareholder value.
• The strategy will broaden and deepen client relationships through fact-based research, better internal client retention, better matching of buyers to consignments globally, improving our consignment hedging strategies, and ensuring that all of our marketing and events are consistent with our improved brand standards.
• Our strategy must unleash the talent within the organization to enhance our sales force effectiveness and productivity, align our incentives internally, clarify accountabilities and responsibilities, make our sales approaches more transparent, and streamline and bring innovation to our deal making processes.
• Our growth strategy should further find ways to build on our historical successes in private treaty sales through internal improvements and external alliances. Last year, we did $625 million in private sales, which seems a small amount in a $35 billion estimated market.
• The middle market of auctioned fine art continues to be a large area from which we generate substantial revenue and profits, but where we believe the opportunity to grow remains very significant for us.
• Sotheby’s financial services is another area where we can expand and grow profitably through improved focus and attention.
• Our global growth strategy must seek opportunities to improve our position in attractive geographic markets and determine the right mixture of talent, capital and partnerships for success.
• Our S2 gallery business has shown early successes as a lead generation vehicle, and we must follow that up with a clear picture of how to expand the business with an eye on value creation and strategic positioning.
• With respect to strategic adjacencies, our growth strategy must address how to achieve minimum efficient scale and sustainable competitive position in the right part of the value chain for areas such as jewelry, wine, cars, coins, memorabilia, collectibles, and appraisals. We will be reviewing these areas beginning over the summer.

The second priority will be to embrace technology more effectively both internally and through client-facing products.

• Over the past year we have been cultivating relationships with many prospective partners in the technology space. One of these — eBay — has already yielded an important partnership for us. Others will undoubtedly follow and fill out the range of our technology solutions for clients, as well as strategic positions on which our shareholders can bank.
• Part of this effort involves auditing our internal systems and filling in gaps to enhance our market knowledge, client understanding, and product information.
• New talent with depth of experience in technology will help us drive our digital future.
• Finally, our current digital products will yield themselves to more experimentation in business models, innovation in the customer experience, and enhanced usability, while relentlessly adhering to brand excellence.

The third priority is a necessary condition for success and that is to build the organization and processes that can sustain progress on the priorities themselves.

• Sotheby’s as an organization requires very talented people with excellent values, a focus on client service, and clear goals and incentives aligned with the shareholders.
• Adding to our excellent talent base — especially in areas where we have gaps — is a top priority for me.
• Improving our people processes, performance reviews, and accountabilities will also yield performance results.
• Our organization can be simplified and flattened to bring top management very close to the needs and experiences of our clients at the same time we broaden the organization’s scope and talent to fill in soft patches in areas of opportunity around the world.

A compelling corporate growth strategy that embraces innovation and has the talent, organization and procedures to win must have capital allocated well in order to succeed. And so rigor in capital allocation is my fourth priority.

• Real estate is one example. Our real estate decisions in New York and in London depend crucially on our growth strategy. Our facilities must reflect our enhanced brand standards and the type of client experience we insist upon conveying. They must be elegant and welcoming, and exude superb quality in every aspect of the client experience.
• Further, our facilities must be designed for our 21st century workforce. And, naturally, our real estate must be financed in a way that is prudent for our shareholders. Properly conceived, our real estate should be a cornerstone of our strategy just as it was when our esteemed former chairman Alfred Taubman set in motion the real estate position we have to this day. Real estate decisions — separate and apart from mortgage decisions — very much remain on the table and will be part of our strategic thinking.
• Other aspects of our balance sheet such as the $700 million in loan assets from Sotheby’s Financial Services require that your management team constantly seek higher net interest margin and fees while managing risks to grow this small but promising business. Our target 15% return on equity for our shareholders depends on innovation in funding these loans, and our management team is committed to this.
• From time to time, Sotheby’s also makes principal investments in art, jewelry and the like. Some of these are very short term such as when we make guarantees to support the consignments of our agency business. Others are opportunities when we make investments alone or with partners that we believe, over time, will produce risk adjusted capital appreciation that exceeds our company’s weighted average cost of capital. Perhaps there is an opportunity to expand these activities with partners, but your management is committed to pursuing them in such a way as to create enduring shareholder value.
• Of course, there are also guarantees that we have made on consignments that do not perform in auctions the way we would have hoped, with the result being that our company finds the lots on our balance sheet. We will inevitably make mistakes from time to time. Nevertheless we are committed to making every effort to hedge these risks through partners to ensure that our shareholders’ money is well deployed to generate a return.
• We will not roll dice in the auction room with shareholders’ money. At the same time, guarantees on high profile trophy lots can be important marketing investments and potentially generate positive momentum and product scope within certain art categories. Strategy, opportunity, judgment, and sensible risk management will guide our use of these guarantees.
• Separately, having cash pile up on the balance sheet is hard to justify unless needed for strategic investments, working capital, emergency liquidity reserves, or capital investments on things such as technology upgrades. The same is true of unused debt capacity which, in light of our high cost of equity, should also be viewed as expensive to leave untapped.
• In February, our board placed our capital return program on hold pending the arrival of the CEO and, now that I am here, the board is comfortable letting investors know that the company may repurchase shares at any time under the remaining $125 million share repurchase authorization. However – and this is crucial – management and the board are early in reviewing the company’s many growth options and this review will play out over a number of months. Any share repurchases under this existing authorization will be secondary to the requirements of our company’s longer term growth needs and take into account market conditions.