The Impact of High Standards on Recruiting and Retention

Like many people who are fans of Warren Buffett’s annual shareholder’s report, I also admire what Jeff Bezos had to say in his annual report to stockholders. This year, the Amazon founder discussed the challenge every company has in meeting customers’ ever-rising expectations. Bezos claims that “it is the nature of human beings to have a voracious appetite for a better way. Yesterday’s ‘wow’ quickly becomes today’s ordinary.” He states that the cycle of improvement is happening faster than ever before and that a company cannot rest on their laurels in this lightning-fast business climate. Why? Customers won’t let you. I think most professionals know this from their own experience but the real issue is how to stay ahead of customer expectations.

According to Bezos, the answer isn’t rooted in advanced technology such as artificial intelligence — solutions you might expect from the world’s largest online retailer. Instead, Bezos says that what really matters is setting high standards inside an organization.

When I think about all the metrics he could’ve discussed, I was stunned and pleased that he chose to address this critical topic since this is my life’s work. Bezos talks about providing an environment where people are expected to do their best and observes that high standards are not some innate quality employees are born with but something that can be taught. He cites the example that when bringing a new person into a high standards team, in his experience they will quickly learn to adapt. Likewise, if they join a group where high standards don’t exist or lower standards prevail, they will adapt to that level of performance.

So how do you instill high standards in a group? Bezos believes it involves two efforts: recognizing what good looks like (the high standard) and setting realistic expectations for how much work it will take to achieve the result.

While the benefits of having high standards may seem obvious, there are other advantages in terms of recruiting and retention. Bezos says that “building a culture of high standards is well worth the effort and not just not for building better products and services for the customer. A little less obvious is that people are drawn to high standards—it helps with recruiting and retention.”

Interestingly, each year Bezos attaches with his current stockholder letter the very first one he wrote 20 years ago.  In 1997, he notes that all decisions that they make are based on relentlessly focusing on the customer; they take the long-term view when making their decisions and they focus on their ability to attract and retain a motivated employee base, “each of whom must think like an owner.”

This made me think about mortgage banking and all the changes that are happening in our industry. Every conference stresses how technology or fewer regulations are part of the solution set. Yet Stratmor has been reporting for years that employee turnover is still high (over 40%) and how unprofitable originators are at many companies.

On the other hand, many originators say to me that they can’t really see the difference between companies when they are being recruited. Everyone says they have niche products, low pricing and great technologies. How can originators determine whether to to join a lender when the only differentiator is who is willing to pay the most money?

If originators can’t tell the difference between which company to join, how can we expect customers to figure out who is a trusted lender?

These are the best of times and the worst of times for mortgage bankers. Technology is significantly changing our landscape which is all to the good. Those that adopt it will separate themselves from their competition. But technology isn’t going to be enough when consumers are saying that they still want a trusted advisor in the mortgage process to help them. A consumer’s chances of dealing with a knowledgeable and effective originator is hit or miss because the system has let the standards be set by each originator and their manager. Some originators certainly have high standards but others do not.

I often hear mortgage banking veterans lament that the system is broken and that we need to revisit everything beginning with a strategy that expects a manager to produce, recruit and coach. These are hard questions but as Bezos says, high standards are never easy. That is what makes them attractive and fun in the first place.