Last week, Rob Chrisman’s newsletter discussed Stratmor Group’s findings that in 2012, loan officers averaged only 3.5 closed loans per month. Chrisman noted that with such low LO production numbers, the economics just don’t work for mortgage companies.
Stratmor’s benchmark showed an average of 10 loans per LO in 2002. When you look at the last 10 years, productivity has dropped dramatically considering that mortgage firms have had declining interest rates and strong refinance markets.
To put the numbers in perspective: In 2002, the industry had 381,000 employees. Currently, there are 280,000 employees showing a decline of slightly more than 100,000 employees from a decade ago. In the industry’s go-go years, the industry had 535,400 employees. So a whopping 255,000 are no longer in mortgage banking from its peak.
It would seem reasonable to assume that the best LOs are left in the industry today and the under-performers have exited. While many in the industry make the claim, the numbers do not show the performance results.
Let’s set aside the argument that low productivity is a result of doing business in more difficult lending environment and that LOs are beaten down from too many regulations (a comment I hear frequently from executives). Frankly, the environment is the same for top producers and superior companies who are able to succeed when others are performing poorly.
Over the last 10 years, mortgage banking firms have poured a lot of money into origination, from laptops and CRM systems to lead generation modules and higher payouts. The truth is the results have not met the investment — any venture capitalist would be pulling the plug on this losing scenario.
What is going on? And more importantly, what works?
In my view, there are two answers to the sales productivity conundrum:
1. Value creation comes from how well companies manage their best people, not mediocre producers. The facts are that C players will always be C players and should be exited from the business, whether at the originator or manager levels. Further investment is wasted on C players. The issue is not training. They are mismatched to their position. For more information on creating value, see my article “Seven Keys to Building a Winning Sales Culture.” View the PDF.
2. Top managers are worth their weight in gold and they should be managing a company’s best employees. Many companies place their best managers with poor performers with the hope that they will create magic with individuals not matched for origination. While the top managers can turnaround average producers, the increase from having the top manager work with the best originators will yield greater results. Just look at how Google and Apple built their organizations — always looking for the best talent and matching them with other high performers.
The question for the week is: Are you managing to the mediocre or elite?