Why an Autonomous Originator Model Doesn’t Work

All is not well in the world of mortgage origination. Managers and executives know this. Even top originators will voice their concerns about the position over cocktails at conferences. It seems that the Emerald City may be fading.

Some mortgage consultants will say that the ops side of mortgage companies is getting so much better than the sales side with ongoing technological changes and upgrades. It is another story in the sales departments who seem to be stuck conducting business the same way senior executives did as originators 25 years ago. The problem is that these methods have run their course and don’t work in today’s marketplace environment.

When you look at production per originator over the last 10 years, the sales performance numbers have not really improved that much. While it is true that mortgage banking isn’t the only industry where low productivity is commonplace, it isn’t much solace that the automobile and real estate industries are facing the same issue.

So what is really going on here? When conducting sales audits, I often see originators spending time on customer service activities and not selling activities like prospecting for new customers. The bigger question is: Why hasn’t management addressed this situation? Why is their only solution to recruit more sales people in an effort to achieve volume goals? In many cases, the increasing cost to originate means that even with more “feet on the street,” that revenues may never rise to the level needed to justify these additional expenses.

In a great book by Justin Roff-Marsh, The Machine: A Radical Approach to the Design of the Sales Function, he argues that “sales consistently underperforms, because it can’t be scaled economically, it is in regular conflict with other departments and its key assets (top performers) are a contingent liability.” This is not a pretty picture. Roff-Marsh also believes that change is needed in the very structure of the sales organization. He makes an even more important point that “that managers commonly tell their sales people to manage their own territories, accounts and their own sales opportunities as if they were their own.” I am sure you have heard this pitch before! I know I have. Unfortunately, what happens next shouldn’t be surprising—the sales people do just that and view themselves as autonomous agents who are temporarily aligned with their current lender until the next lender recruits them.

In this scenario, originators are essentially running their own business and being funded by the lender with limited risk. This is a sweet deal for the originator and is why many sales people are able to do well when the lender may not. When managers attempt to rein in autonomous sales people with simple measures such as performance standards or requiring them to input into Salesforce.com, resistance is often the case. As Roff- Marsh observes, ” the connection between dysfunction and salespeople’s autonomy is easy to spot.”

The answer is the division of labor. He makes the point that today, sales is the responsibility of a centrally coordinated team. In other words, the sales function is an inside endeavor, supported, in some cases, with discrete field activities performed by an outside sales person.

With every passing day, it is clear to me that mortgage origination will be delivered in a dramatically different way within five years from now. The old field model doesn’t work anymore and companies that implement a true inside sales approach with field originators who actually sell 100% of the time and are not mobile customer service reps will be the winners.

Are you ready for the new model of origination? Call me to discuss how to implement a successful inside sales organization.