At Berkshire Hathaway’s annual meeting a few weeks ago, Vice Chairman Charlie Munger was asked what his thoughts are regarding the present state of business and the distrustful culture that most businesses operate under. His response might surprise you. Munger said that “instead of filling your ranks with lawyers and compliance people, hire people that you actually trust and let them do their job.” This is radical thinking in today’s world from a man who works alongside Warren Buffet in directing the fifth largest company in United States today with $163 billion in revenues and 300,000 employees.
With the daily headlines about scandal and fraud in the corporate environment, it seems almost naive to operate in a trustful way. But Munger, further stated that “we (Berkshire) operate in a seamless web of deserved trust and are careful with whom we trust. A trust-based system can be more efficient than a compliance-based system, but only if self-interested behavior among employees and executives is low.” Essentially, Munger emphasizes selecting the right people for the job.
Munger observed that “Not all industries are equal when it comes to trust. The financial industry, for example, has a long reputation for complexity and bad behavior. You’re never going to have perfect behavior, but managers should be held accountable. In other words, eating their own cooking.”
As mortgage sales organizations face tougher times this year, what Munger is saying is right on so many levels and should be the guiding principle in how corporate managers make their decisions to survive in a difficult market.
Recruiting branches (which many companies are doing right now) is a potentially disastrous practice when the only criterion is how much volume the branch has done in the refinance market and not whether the staff are trustfworthy individuals. What are the chances that a totally volume-based operation is going to hire people who will deliver to the consumer in an honest and ethical way? The answer is not likely!
Isn’t it time that mortgage companies select sales professionals who are trustworthy?