Overdependent on Top Producers to Hit Volume Goals?

Patricia Sherlock

In my recent conversations, mortgage executives have repeatedly lamented that their top producers are holding them hostage over resources, money and pricing. Especially troubling is that these high-performance sales professionals invariably tend to jump ship after the lender has conceded to their demands. In most cases, lenders have not even broken even before top producers leave for ever-higher commissions.

While recruiting top producers is a long-standing hiring trend in mortgage banking, it is more prevalent now than in the past and in my opinion, is becoming an increasingly risky financial strategy.

Twenty years ago, when I authored “Reaching the Top of Your Game: Best Practices of Top Mortgage Originators,” the Number One producers at the top 100 mortgage lenders stayed at their lender for a long time. This is no longer the case. Studies have shown that the average length of time for originators at a firm is two years. You can’t blame them when there always seems to be another lender that will pay outrageous guarantees to hire them.

Why have so many firms become dependent on top producers to hit their volume goals in the first place?  The answer is rooted in simple math. As Stratmor has reported for years, the top 20% of originators generate the majority of volume in the industry! The remaining 80% are average to poor performers. The 80/20 rule wins again!

Management teams know the numbers because they have personally been impacted by the performance imbalance across their sales force. As a result, hiring managers pull out all the stops to recruit above-average originators, often guaranteeing six figures upfront just to sign up. Inevitably, paying top dollar for experienced sales talent has a tremendous cost at most lenders, even if senior managers only admit it in private.

Risky Business

Whether lenders cut their margins or change their workflow to accommodate top producers, the disadvantages pile up quickly. Before firms realize it, they are being held hostage to the demands of a few elite sales professionals. Even for lenders with sizable capital, hiring top producers is an untenable strategy for long-term success. Middle-tier or smaller lenders are in an even riskier predicament.

Is there a smarter strategy? Yes. Heavy-hitter Quicken Loans (now Rocket Mortgage) is leading the way with this strategy: hire inexperienced employees, provide training and create a career path for them by segmenting the work flow to match their learning curve.

Does hiring rookies work? If Rocket Companies’ 2020 results are any indication —  $9 billion profit for 2020 — I would say “Yes!” At one time in its stratospheric trajectory, Quicken operated like every other mortgage banker and changed its approach. All lenders have the opportunity to do the same. This is where leadership needs to take a stand to achieve long-term success vs. short-term profits. Quicken chose the best long-term strategy and has built a sales machine that is the envy of the industry.

Rocket’s genius is that senior managers learned a long time ago that a sales strategy dependent on high-commission top producers is hard to scale. There are only so many top producers and competition for them is intense. Recruiting top producers may work when companies are flush but when the market changes, lenders must manage high expenses and address the performance imbalance between originators.

If you think Rocket is just lucky, let’s look at the world of sports teams for comparison. All major teams — whether the sport is baseball, football, basketball or hockey — risk losing when they make poor talent selections.

Sports teams and mortgage lenders are similar in the fact that after several years of poor hiring, it is clear that the team won’t make it into the playoffs.

As a fan of Philadelphia sports teams, I have seen this play out year after year in my hometown. Case in point: the Phillies finally won the World Series in 2008 but the 13 years since then have been a disaster. Same story with the other teams. Growing your own only works when you hire the right talent and develop those individuals. Once a lender or sports team gets that right, winning is inevitable.

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