Have You Settled For Average Production?

In recent conversations with managers, it often appears that their companies are doing well. True, an estimated 97% of lenders are making money. (What is the story with the 3 percent who are not?) However, upon further discussion, a number of managers admit to an average production per loan officer of 3 units or less. Many have also launched new initiatives for 2013 to address underperformers. Does this mean that last year, underperformers were not an issue? It seems to me that underperformers are always a problem and can ultimately bring about the collapse of the company if not addressed.

Wouldn’t it be easier to hire smart upfront instead of hiring anyone with a W-2 from a mortgage lender and hoping for the best? Just think of the time and energy that is wasted with the “body count” approach. According to studies conducted by the National Bureau of Economic Research, value creation comes from how well organizations manage their best people, not mediocre employees. In other words, average performers become relatively less valuable over time. More bluntly, average people make a mediocre investment!

Does this sound like the 80/20 rule? Yes, it does. The 80/20 rule holds that “average” is the enemy.

In practical terms, if 25% of producers are creating 75% of your value and 75% of employees are creating only 25% of your value, the likelihood of getting 10% improvement is more probable from your top 25% than expecting the less talented, less capable and less productive to improve dramatically to match the 10% improvement from your top-tier group.

Which group should you invest in? I know where I would put my money! More than ever before, today’s marketplace has changed the equation where average is acceptable. Regulation, investor requirements and compliance issues have created a new environment — one in which investing in mediocre employees no longer makes good economic sense. Have you made the commitment in your sales organization to refuse to settle for average production?