The role of the mortgage branch manager carries great responsibility — and the potential for great reward. With branches frequently operating as their own cost centers, the typical manager has plenty of latitude over daily business decisions. Given the vital nature of their position, it’s remarkable that branch managers may not have immediate access to the data they need to run their businesses effectively. This dynamic is changing, however, for managers and their originators.
The data vacuum has finally started to fill as mortgage technologies evolve to take advantage of cloud storage and open application programming interface (API) models that facilitate information sharing between systems. But a lingering symptom of the decades-long data drought is that many branch managers aren’t versed in what to do with the data now that they have it. Those who figure it out fastest — the ones that become data-driven branch managers — will enjoy a significant competitive advantage over their peers.
Laying the groundwork for data-driven management is hard work, but it will pay off by giving both branch managers and originators a precise way to measure performance. This will allow managers to coach those who are missing the mark and get the entire branch aligned behind the metrics that matter most. Here’s how to get started.
Too often, branch-performance goals center around production and little else. But managers who care about top-line revenue as well as bottom-line profitability must set goals that communicate these expectations to their teams.
Managers who care about top-line revenue as well as bottom-line profitability must set goals that communicate these expectations to their team
For instance, a branch manager might expect high loan quality, 30-day closing times and $2 million in monthly volume per loan originator. But if originator commissions are strictly based on loan volume, then the two other expectations — high loan quality and fast turn times — are not being clearly communicated.
A mismatch between the manager’s actual expectations and institutional key performance indicators can have wide-ranging consequences. Consider, for example, the originator who becomes a top producer by submitting a ton of poor-quality loan applications to be processed every month. The processor and underwriter will spend additional hours working on these loans and coordinating with borrowers, driving up operational costs and turn times. These costs will become a drag on the company’s profits and losses, but the originator won’t know it — instead, the originator will be rewarded for producing a high volume of loans.
This kind of thorny situation can be resolved by clearly communicating expectations and backing them up with goals that hold originators accountable for more than production alone. To get started, write down your top three to five goals in order of importance.
Next, consider the data that you have available across your various systems — including your loan origination system (LOS), accounting software, payroll and customer relationship management platforms — and identify a data source and success measure for each goal. Key performance indicators, for instance, could be production growth, turn times and pull-through rates as measured by the LOS. Or maybe this includes client satisfaction as measured by survey data.
Now convert these high-level indicators into specific metrics for each job role. Make sure each metric is relevant, meaning it can be influenced by employees; reliable, in that it can be measured using data employees trust; and regularly reportable and accessible, so team members know where they stand and can stay motivated. After that, assign a weight to each metric that reflects its importance as well as the employee’s ability to influence results. The assigned weights should add up to 100%.
The next step is to determine the expected value for each metric. The expected value is what you anticipate can be accomplished by a majority of individuals in a given role. They should be realistic values based on historical data. Average performance from the last full year of production is a good place to start.
Once you’ve established the expected value of a metric, you will want to determine its ranges of acceptability. These will help originators understand expectations and provide context for the reporting. An easy way to accomplish this is by establishing a bell curve with a five-point scale, where one is unsatisfactory and five is exceptional. With this model, the majority of your employee should fall in the “meets expectations” category at the top of the curve.
Note that with this model, only a small percentage of employees — maybe 5% — will be rated as exceptional for a given performance indicator. This will take some adjustment if your team is used to receiving less meaningful evaluations in which most people excel in every category. But you will have a much more precise sense of where employees stand, and employees will have a clearer understanding of what the organization defines as truly exceptional.
It may take some time to figure out the right performance indicators and associated metrics for your organization. Nonetheless, through careful establishment of the right indicators combined with the simplicity of a scorecard, you will provide a framework that will help your team stay focused on the goals that matter most to the organization.
It is critical that scorecards be reviewed on a regular basis, so employees recognize their contributions to the company’s objectives and understand when they need to adjust course. Monitoring progress over time is an excellent way to keep your team engaged and focused, and giving employees real-time visibility into how their performance stacks up against expectations will eliminate surprises and motivate self-improvement.
But to drive real changes in performance, the data-driven branch manager does more than merely distribute scorecards — he or she looks for the bigger story told by the data. Say, for instance, that you want to know why some employees perform better than others. The best way to find out is to ask them.
Meet with these individuals to figure out what they are doing that allows them to excel. It’s possible they’ve simply been in the industry for a long time and have built a strong network of contacts. Often, their secrets of success are transferable. For instance, an individual might follow a process that is particularly streamlined, or they might leverage certain technology tools or marketing techniques that others in the branch could adopt.
Bear in mind that the top performers in one measurement might not be the people with the best overall performance. For instance, you may have an employee with high volume but low quality and application-to-funding speed, or you may have someone with low volume but excellent quality and speed. Using a balanced scorecard is the best way to identify the people who are hitting the right stride.
Be sure you communicate how top performers got to the top. What are they doing differently that has led to their success?
Share the success stories of employees who exceed expectations. You might include a shout-out in the branch newsletter, or you could invite top performers to share the habits that drive their success at your next team huddle. Whatever you do, be sure you communicate how top performers got to the top. What are they doing differently that has led to their success?
Recognizing top performers in this way will have several desirable results. First, recognition lets your top performers know their efforts are valued and, in turn, they will feel more appreciated and engaged. Second, you’ll give those who are striving to improve a model to emulate. Third, you’ll help the entire team overcome the fear that performance management is a punitive effort. In truth, performance management is about celebrating those who are most successful, as well as creating development and learning opportunities that everyone can enjoy.
Imagine an originator who comes to you and says they’re not making enough money. Leveraging their scorecard allows you to identify tangible areas they can focus on to meet their objective. For example, maybe this originator has decent volume but isn’t an overall top performer because they are slow to get from application to funding, or their pull-through rate is low. Instead of saying, “Go get more volume,” or simply adding more basis points to their compensation plan, you would be able to offer constructive suggestions.
Developing the skills of your own people is usually far less expensive than recruiting new employees. The key is to create an environment that encourages retention and gives motivated employees the tools they need to continuously improve.
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Setting up this kind of performance-management framework takes some work and not everyone will be receptive to it right away. Communication and transparency will be the keys to your success. Make the program easy to understand, and make the data accessible at all times so employees know where they stand. Once the team feels they can trust the framework, they will feel empowered to improve performance on their own without a lot of handholding.