In mortgage origination, declining interest rates can result in overwhelming volume, as the industry experienced in 2020. While companies and producers alike racked up record profitability last year, a robust refinance market can distract lenders from focusing on critical long-term success strategies. When business is humming along, it is easy to become complacent and assume that maintaining the status quo will be enough to meet future challenges. Unfortunately, that mindset has been the death knell for many retail giants. Need proof? Just ask Sears, Blockbuster, and Kodak.
As 2021 gets underway, right now is an excellent time for lenders to consider what it will take to remain relevant in the coming years. In my opinion, there are three core issues lenders should be examining:
- Hiring Structure. When starting a business, everyone has to wear multiple hats. Being spread too thin doesn’t matter, since so much needs to be accomplished. Hiring employees who can fill different roles makes sense and works in most instances. But, if a company wants to achieve greater economies of scale, it requires more specialization, new processes, and expertise. This is where firms can fail especially if sales executives refuse to adopt a hiring structure or don’t know how to put one in place. Managers hire friends and friends of friends and before they know it, they do not have the talent to move the company forward. This is the main reason why scaling never happens for these firms.
Hiring decisions based on whether the manager “likes” the sales candidate or whether a prospect’s W-2 looks good are key indicators that a lender lacks structure. High tolerance for poor performance is a tell-tale sign. An employee turnover rate higher than 30% is another. No business can succeed if managers are constantly replacing the current sales staff.
- Retaining Employees and Customers. Every lender says that they are employee- and customer-focused. But, are they really? If there is high employee turnover or low customer retention, the numbers speak for themselves. Having a strong engagement strategy to keep good employees and customers requires commitment and thoughtfulness. Making people feel special is not easy, especially during difficult times like the current global pandemic.
Meaningful engagement does not happen overnight and involves time and an investment. For employees, an attractive compensation and/or benefits program is not enough. Employees are looking for more from the companies that hire them. Customers feel the same regarding the firms they choose to do business with.
Today’s employees want retraining, upskilling, and more of a definitive career path — something that often does not materialize. Customers want personal advice on how to manage financial issues in good times and bad. When they have a question, they want an answer from a knowledgeable person who has their best interests at heart. This is a challenge for companies with a transactional approach and hit-or-miss customer service. Employees and customers deserve better treatment. Going forward, this will be mandatory for lenders who want to stay in business.
- The Importance of Good Managers. In my view, good managers who are transparent and supportive are worth their weight in gold. Too often, lenders think of managers as in-house recruiters and nothing more. This is evident when managers are fired for not recruiting enough originators versus not developing the sales staff. In such a volatile business world, quality managers who are empathetic and supportive of employees is invaluable. Good managers are essential for achieving long-term success.
While no one knows exactly what the future holds, lenders that focus on these three issues will be ahead of the curve.