While watching the annual Macy’s Day Parade, a yearly tradition for many families including mine, I thought about a recent New York Times article that noted Macy’s real estate ($16 billion) is worth more than the company’s market value ($6 billion). It is no secret that Macy’s has been battered by e-commerce competition. Its sales have fallen for 11 consecutive quarters and its stock price has plunged about 41 percent this year alone. Macy’s situation is a classic example of a company that failed to see the future and most importantly did not align its business model to address what customers are looking for today. Mortgage lenders are facing the same issues. Fickle customers, generational change, an aging sales force, too many unproductive originators and costly brick-and-mortar commitments all translate into a negative financial performance for lenders. While it is obvious that retail has been “Amazoned,” how financial firms are addressing the new marketplace is unique to each lender.
In recent conversations with sales leaders, I know that managers are feeling uneasy about their positions at their current lenders. Many are wondering whether their lender will make the changes necessary to win in the new world of mortgage lending. As one manager related to me “no manager at our company is safe in their position. Everyone is on edge all the time which is not a great place to be.” While current production in mortgage banking is challenging and next year looks to be the same, it is clear that many mortgage companies will face the same fate of Macy’s.
In my last few posts, I discussed the MBA’s financial data on the economics of an unproductive sales force and low profitability. The numbers speak for themselves. While the current lending environment leads to opportunities for some firms, for others it is a disaster waiting to happen unless management teams right the ship quickly. This means some hard decisions need to be made in 2018.
What are the signs that your lender is in trouble? Here are my ten indicators that should raise concerns for employees:
- When the company only talks about cutting expenses and not building a better mousetrap.
- If there are leaner and meaner competitors in your marketplace.
- If everything is discussed in relation to protecting legacy processes instead of discussing new and better approaches.
- There is no investment in employee development to improve selling sells.
- When new ideas are not wanted or listened to.
- If the company culture is that you have to watch what you say.
- Closed doors and no sharing of the company’s situation and plans to turnaround because there are none except wishful thinking.
- If long-term employees who were good are fired or quit.
- If McKinsey or Bain are now at your lender.
- If turnover is over 50% and nothing has been done to address it. A constant treadmill of lower quality originators being recruited and hired is damaging to operations.
Now here are 10 signs or questions that you should consider when interviewing at a new lender:
- Does the management team have a vision on how to compete in today’s marketplace? If they say they have Encompass, that is not a good sign because nearly everyone has Encompass. What ideas do they have to be faster and better in loan origination? How will they deliver a unique message to the consumer or broker? What investments are they making to update their business model? Technology is important but sales and management development investment is just as essential.
- What is the company’s capital situation? Mortgage banking in a capital-intensive business — the more the better. Of course, it is not the only thing that matters but companies with capital can outlast those that do not have a lot. It’s a simple economic fact that money problems equal no investment to change performance.
- What is their employee value proposition? If it is the more basis points the better, the company is just renting originators.
- If the management team is composed of only 30-year veterans with less than five years left in the business, this group will rarely make the hard decisions because they have a retirement viewpoint and want to protect the status quo. Protecting the status quo includes not firing who they have hired even if the individuals are not performing.
- What is the quality of their first-line managers? When were managers last trained in improving their skill sets? If managers only receive training at the yearly sales rally, that is not a good sign. Good training is consistent, frequent and requires a commitment from senior executives.
- Does the company hold originators accountable and will they terminate underperformers? If not, their system is clogged with people that will hamper the operations process. If you are a top producer, this means trouble.
- If you are talking to a bank, how important is the mortgage sector to the bank? I know this sounds a little strange but the reality is many banks have backed away from the mortgage business because it is perceived as too risky and difficult.
- If the firm has reorganized in the last 18 months that is a sure sign that the group is having trouble. If it is a revolving door at the executive level and they are overpaying to attract sales talent, the company will not last long.
- What is their sales culture? Do they have a vision for today? How do they engage their sales force? If they cannot describe their current sales culture because they have none, this is not a good sign.
- If employee morale is down the drain and getting worse, this does not bode well for sales candidates. Check out the company’s employee reviews at Glassdoor.