Messier 87 and Mortgage Banking

Last week, scientists announced the discovery of an extraordinary, “supermassive” black hole at the center of Messier 87, a gigantic galaxy about 55 million light years away in the constellation Virgo. The image was produced by the Event Horizon Telescope, a network of 10 radio telescopes spread across the planet that functioned as if it were a single receiver tuned to high-frequency radio waves. The capture of a black hole image represents a technical triumph for scientists who once thought this was an impossible feat. In my view, this achievement reinforced that if we work together, great things can be accomplished.

In recent conversations with a Board Chairman and the President of a mortgage company, I asked each one separately “What percent of your sales staff meet the company’s annual volume goals?” This productivity percentage is a critical standard for any mortgage company because it is a predictor of profitability.

The Board Chairman said 80% of the loan officers made the company’s volume goal. The mortgage company President said the percentage was only 40% of the sales staff. This raises the question of how two executives at the same company can have such different understanding of the reality of their organization’s sales performance.

While the disparity between the executives’ perception of their firm’s sales performance can be attributed to a number of factors, the ramifications of not having an accurate view of this critical metric is a recipe for disaster. Let me explain why.

If 80% of a company’s sales force is meeting volume goals, they are achieving at acceptable levels.  In this scenario, only 20% of the originators would need to be on a performance plan and managed out if they failed to change their sales results. It also implies that hiring managers have done a fairly good job of correctly identifying sales talent and matching candidates to the company’s culture.

But if the true percentage is 40% or less, there are major problems with a company’s recruiting efforts and the skillsets of their managers. This performance level means 60% of the sales staff are underperformers and not profitable. As Stratmor’s research indicates, carrying a majority of low performers over a long period of time can lead to financial ruin for a company.

Based on my company’s nearly 20 years of research on personality traits of above-average originators, the simple reality is that only certain individuals are matched for a career in mortgage origination. If an originator is not a match for origination, no amount of investment in training or coaching will make up for a lack of sales talent. These individuals are better suited to be customer service reps than creators of loan demand.

Another important issue is that when companies hire those not matched for the sales position, they make their firm unattractive to top producers. Why would a top producer want to join a company that has a majority of poor performers? In a sales organization where only 40% of the sales group is making volume goals, the top producer has the burden of carrying too many underperformers. At the same time, operations has to devote their limited resources to handling poorly originated production. This is not an inviting proposition for top producers.

It seems to me if scientists can figure out how to see into dark space and coordinate world-wide with other scientists to get an image of M87, mortgage executives can assess the true state of their sales organizations and take action to recruit originators who can meet annual volume goals.