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   ARTICLE   |   From Scotsman Guide Residential Edition   |   August 2007

How to Achieve True Efficiency

To be truly efficient, it’s essential to develop measurable goals and build processes to reach them

Mortgage companies need innovative processes and products that not only provide quick and easy solutions but also provide genuine improvement in performance. But these new processes and products also must be cost-effective and customer-friendly. Companies with the foresight to implement these revolutionary technologies, however, are the most likely to succeed.

When the market was booming, profits were more secure, and everyone was less anxious about competition and market trends. Everyone’s pockets were getting fatter and it was easy to put off thinking about how they would remain well-fed in the future.

But in a softened market where sales volumes are down, mortgage brokers and lenders must respond to the winds of change. Otherwise, they risk being blown into a dust ball of irrelevancy and bankruptcy.

Mortgage companies must therefore develop a proactive, optimistic stance and search for revenue growth through solid business-process improvements and support-system technologies that can adapt to a shifting climate. Instead of focusing on the abstract notion of efficiency without a comprehensive, goal-driven plan, mortgage companies should work to develop internal systems to accomplish their long-term goals.

The allure of efficiency

Too often, companies respond to market changes by believing in the power of efficiency improvement but without appropriate or comprehensive strategies. Many managers will cut costs, eliminate less-profitable business areas and focus their business on what they interpret to be its core.

Some of these tactics may be effective and may improve the immediate balance sheet. But they often leave a company anemic and unprepared to take advantage of the new opportunities that a changed marketplace inevitably provides.

Manufacturers have found that efficiency for the sake of efficiency does little more than push costs from one part of the business into another. Reduced customer service can result in decreased customer retention, squeezed vendors and increased frequency and magnitude of errors — all of which result in escalated warranty costs.

Fundamentally, an exclusionary focus on efficiency is reactionary and pessimistic. Mortgage companies that simply attempt to weather the market change with a “wait and see” attitude will still be clinging to remnants of their past successes and financial gains when the dust settles. By falling under this spell of efficiency they eliminate the services that feed their referral engines and cut back their investment in partnership development. These companies must change their course before it’s too late.

Although companies may have survived market fluctuations with this strategy in the past, the current market changes are far more fundamental to the industry’s foundation. They threaten to rock mortgage companies to their core and affect the industry long-term. Rather than focusing pessimistically on efficiency, mortgage companies should embrace the market changes while retaining a positive outlook and equipping themselves with the appropriate tools for change.

The mortgage industry can learn from those in the manufacturing industry that have integrated efficiency into a comprehensive, goal-driven strategy and have developed a workflow process and system to support the accomplishment of those goals.

Developing business goals

When a company sets goals, those goals should be specific and measurable. Naturally, all CEOs want their companies to net outstanding results. But to determine the success or failure of these goals, all employees must understand their specific involvement in the process.

By defining actual metrics, you set objectives that will help you analyze your company’s strengths and weaknesses. You also can pinpoint areas that may have been overlooked, and you can conquer problems before they can grow.

Therefore, it is critical to create specific goals structured to impact the bottom line. Examples of specific, measurable goals include:

  • Increasing loan originations per loan officer by 50 percent (results in gross profit increase of $1 million per month) in the next four months; or
  • Increasing percentage of loans that result in referral business from 10 percent to 30 percent (an additional $2 million per month) in the next 12 months.

Tracking something without changing anything will show you the same results that have plagued your company for ages. For each objective, you must determine an improvement plan.

Investing in technology alone is not an improvement plan. Switching loan-origination systems (LOSs) will not get you to your goal either. Even if your LOS is below-par, if it is not the root issue keeping you from achieving your strategic goals then it is the wrong thing on which to focus. What you should look at is precisely what is holding you back from achieving your goals or what you should be doing to create an opportunity to meet them.

For instance, let’s say your goal is to increase the number of referral loans generated from your in-progress loans from 10 percent to 30 percent in the next 12 months. How will you achieve this? You may need to take action to ensure that all your originators are actively asking for referrals. You may increase the perceived value of your referral incentive. You might create a process for them to follow, train everyone and monitor things to make sure everyone uses the process.

An effective system develops a culture of trust through visibility and communication. To this end, CEOs must look beyond efficiency to achieve their companies’ growth goals. Throwing processes into the mix without first clearly addressing the business issues and challenges will not result in true efficiency. It is almost impossible to measure what you need without a specific workflow process.

Building workflow processes

There are many ways to reach your goals, but most of them will be more effective if you have a workflow system in place. A workflow system defines how you can repeatedly perform a given process. It is a sequence that your team follows every time it takes on specific tasks. The value of a good workflow system is that individuals will perform tasks in the same way and with the least wasted effort.

In the mortgage industry, some companies approach workflow development by creating a checklist or sequence that travels with a loan file. The next task cannot or should not be completed before the previous one.

For instance, when you are in the process of seeking more referrals, you should not call for a referral before sending the fruit basket. Likewise, you should not send the fruit basket before the loan is approved. As soon as the loan is approved, though, you want to ensure that the fruit basket is sent.

And as soon as the fruit basket is received, you always want to call. Otherwise you have missed the entire point, and the percentage of referral loans will not increase.

Having a support system

It is difficult and time-consuming to gather consistent quantitative information without an automated reporting or support system. As the world continues to evolve into a networked society, business operations are becoming more complex. The risk of falling behind in project-management and technological advances is ever present, and support systems that address human, operational and technological needs are vital.

Productivity tools such as project-management and reporting software are crucial and may even be the determining factors in your success or failure. Developing and maintaining a support system is not just an option; it is critical to all business relations.

Mortgage companies that are prepared to embrace market changes with a proactive strategy of innovation and growth that includes setting measurable goals, developing effective workflow processes and having a strong support system will not only weather the storm but also thrive during and after it.


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