Why Conventional Wisdom on Experienced LOs is Wrong

Conventional wisdom in mortgage banking contends that it is a smart bet to hire experienced originators because they will be able to ramp up quickly; are already trained; and have a book of business. Hiring inexperienced salespeople who need to be trained is viewed as a more risky investment. While this strategy may hold true in the case of elite producers, the same cannot be said of average producers (those who generate $8 to $12 million in annual sales). The risk percentage in hiring experienced originators is greater than you think.

After 16 years of analyzing the sales performance of thousands of mortgage originators, I can tell you that sales experience does not translate into origination success. In fact, it is very rare for an average producer at one firm to become an exceptional producer at another lender. What happens more often than not is the average or mediocre producer is more likely to originate at previous levels or worse since their support levels have changed by switching to a new company. For hiring managers this is not only disappointing, but kicks off a self-defeating cycle of hiring more “warm bodies” to compensate for lackluster previous hires.

There are many reasons why average performers don’t get better at their next lender. To start with, having sales talent does not necessarily mean that a candidate will commit to succeeding at different points in their life. Talented under-achievers are everywhere.

According to Greenberg, Weinstein and Sweeney in How to Hire and Develop Your Next Top Performer, the authors estimate that 55% of the people in sales should be doing something else. They also note that roughly 25% with sales talent who have what it takes to sell, should be selling something else. The authors conclude that the practice of hiring experienced sales candidates will produce an unsatisfactory result 80% of the time!

What solution is there when 75% of a company’s sales talent will be terminated or self-select to move on to another lender once their guarantee expires? The answer is hiring the inexperienced and growing your own.

Most managers know this but fail to recognize just how bad their odds are when hiring experienced but mediocre originators. So, what does it take to launch a successful rookie program? The first two steps might surprise you.

First, a company needs to review their sale processes—look at what works in today’s marketplace and what doesn’t—then determine what the best practices are. Once they have those answers, then they should invest in training all originators on best practices.

Second, to support these best practices, front-line managers must be given the tools to manage their originator’s implementation of the sales process.

These two steps are a must because they permit inexperienced individuals to succeed quickly. Rookies are a proverbial “blank slate” and if they possess the inherent personality characteristics and behaviors for sales success, they will respond promptly to effective training. When training rookies, there is no reliving what worked 20 years ago; discussion of why TRID should be repealed; or the complaint that my previous lender had a better ops support staff. These issues evaporate and allow managers to really focus on coaching originators to peak performance.

Analyzing your sales process and determining your best practices is the clue that allows companies to bring on potential stars who will originate in the right way. If you are not comfortable conducting this analysis, have a third-party perform this function.<br><br>

There are many benefits to hiring rookies but the hidden one is that it allows a company to a cast a wide net when recruiting. It releases companies from being trapped into continually hiring under-performers and dramatically expands the pool of potential candidates who will excel.

Isn’t it time to recognize experience is over-valued in origination?