To fuel growth and market advantage, you need the right people. In fact, attracting and retaining originator talent is one of the keys to competing in the mortgage industry today.
A recent STRATMOR Group study found 30% annual turnover among residential mortgage originators. That means for every 10 people you hire, at least four will be gone within a year, taking their training, knowledge and rolodex with them.
At a macro level, skills shortages will continue to worsen as the Boomers retire at a rate of 10,000 per day, while Millennials take their place. These young originators lack both experience and a loyal network of referral partners.
Retaining top originator talent is crucial to competing today.
Branch, regional, and organization leaders must implement an effective talent strategy to attract, engage, and retain star performers, while cultivating younger team members to succeed. Doing so is especially vital in the current market for a few important reasons:
—With fluctuating loan volume, efficiency is crucial to creating profitability. STRATMOR has found that the top 20% of loan officers are responsible for 57% of total loan volume. Holding on to this elite originator talent is instrumental to winning in today’s competitive lending landscape.
—More than ever, borrowers crave experienced professionals to guide them. Right now, millennials make up the largest share of home buyers—a trend not likely to change any time soon. Overwhelmingly, these borrowers want a convenient digital process augmented by human expertise. Tenured loan officers are essential to that experience.
So, how can lenders bring in and keep skilled professionals? The simple answer is a talent strategy. We know talent strategies work because we’re doing it ourselves. The challenges of talent are all too familiar to technology companies like ours—scarce resources drive up costs and turnover. And that’s not to mention the challenge of promoting a diverse and inclusive culture in an industry that famously lacks in gender and racial diversity.
While Silicon Valley may not have all the answers, some of their talent strategies have helped to accelerate our growth. Here’s what the mortgage industry to learn from the technology industry—one long experienced in fighting the war for talent.
1. Create belonging.
There is no shortage of articles and books promoting the value of creating a culture that attracts employees. Today’s employees want more than a paycheck. They want to “belong.” In technology companies, “belonging” begins at the interview and weaves its way into the day-to-day life of an employee.
Gusto (formerly ZenPayroll), a San Francisco-based payroll company currently valued at $4 billion, deeply instills its core values. New hires are evaluated on their alignment to the company’s six values. During onboarding, the leaders dig into the values. These themes are also weaved into every all-hands meeting. Before making decisions, everyone strives to ask, “Is this aligned with what we believe?”
Company traditions also play an important role to create “belonging.” I remember visiting Gusto’s offices and being asked to remove my shoes—thankfully, I was wearing socks with no holes!—a holdover from the company’s origins starting in someone’s home.
When Gusto was a smaller company, the team used to take week-long “workations” once or twice a year, when the whole company would spend time living together in a house. As they grew much larger, this tradition evolved into the “Gustaway,” a series of one-day off-sites where 25 to 30 people from different teams in the company come together. The detachment from the day-to-day refocuses the relationships on the team and reminds employees that they’re part of a corporate family.
If these notions seem far-fetched for the mortgage industry, consider industry-leading Movement Mortgage, which processed over $13 billion in loan volume in 2019. Their leaders point at their emphasis on culture and values as their source of organizational strength.
2. Sell the vision.
Let’s say you run a branch or region of a mortgage company. In and of itself, that may not inspire many prospective employees. What enduring companies have learned is that vision compels engagement and drives action. Technology companies have adopted this principle wholeheartedly.
Take Box, the NYSE-traded cloud storage company used by 70% of Fortune 500 companies. This organization is not just about secure file-sharing. According to their website, their work is “transforming the way people and organizations work so they can achieve their greatest ambitions.”
Of course, cloud storage itself is a commodity. Yet Box’s vision has propelled it to be used by millions people at more than 95,000 businesses, with a market cap over $2 billion and $696 million in revenue for fiscal year 2020 (up 14% year-over-year). The company even employs a Chief Storyteller, whose job is to promote the very ambitions Box is helping its users achieve.
This is not just word play. As a leader, you must believe and inspire your people that your work is about more than mortgage transactions. Your people are part of a story and a journey towards a big ambition. Maybe that story is about revitalizing your local community, changing lives through homes, or creating and managing real estate wealth for your clients. Bottom line: It’s not just about mortgages.
3. Share in the upside.
Every employee at a technology company knows that their compensation is based on three components: salary, bonus, and equity. Of the three, equity by far dominates conversations as a tool to attract, engage, and retain employees.
With equity, you remind your employees of two things: first, that they are part of creating the vision for the future and two, that it will take time to reap those rewards—but they may be more significant than salary.
“You have to remember that when people are joining your company, they’re making a bet on its future and the value they will add to its future,” commented Molly Graham, who helped build the compensation plan in Facebook’s early days. “Sometimes you need to remind them they are making a bet, and that it’s the kind of bet you have to make if you want to join.”
If structured correctly, equity plans stipulate that employees start pocketing shares or options after their first full year. The initial allocation will vest over their first three to four years at the company. That means they’re seeing the value of their ownership increase, and they’re incentivized to stick around to earn out even more. Star performers are bonused not just in cash but with more equity, this on a similar three to four year vesting schedule to drive retention.
In 2016, Axia Home Loans took an aggressive stance to be 100% owned by its employees through an Employee Stock Ownership Plan (ESOP).
“Studies show that employee-owned companies experience increased employee satisfaction, retention and productivity gains,” Gellert Dornay, Axia’s President and CEO, said. “An ESOP rewards employees who contribute to the company’s success by allowing them to share in the company’s future increase in value.”
If your employees don’t own a stake in your company’s success, you might have to ask yourself why exactly they should stick around for the long haul and invest in their time accordingly.
4. Go beyond the cube.
Mention the phrase “tech company culture” at a dinner party, and most will ask about the free food, lavish benefits like massages and haircuts, funky office designs, and flexible work schedules. But even as these perks have become cliché in Silicon Valley, the underlying logic is important: How do we create a company culture that differentiates us enough to make that employment decision an easy yes?
FullContact, a contact API company with 200-plus employees, has been a consistent presence on Outside Magazine’s “Best Places to Work.” Based in Denver, the company has adopted the outdoors, encouraging its employees to work hard and play hard. During ski season, employees can take a “powder day” as long as they make up those hours within two weeks. Employees choose their machines, Mac or PC, and get a free commuter or parking pass.
After a year, employees can work from anywhere in the world for one month, a perk that many pair with the company’s “paid, paid vacation,” an annual $7,500 pretax stipend to take a one-week trip of their choosing. All this might seem a little too good to be true, but FullContact realizes these benefits are an important tool to win the war for talent.
When adding benefits, a great first step: Consider your employees, how they work, what they value, and what you could uniquely offer them. Increasingly in the mortgage industry, technology plays an important role in attracting and retaining talent. Enabling your team to work productively and be happier at work means giving them the tools, technology and otherwise, to stand out.
Winning the originator talent war one battle at a time
Technology companies that have fought long and hard for employees know that an effective originator talent strategy is the number one thing to ensure they come out on top. Creating belonging, selling the vision, sharing the upside and going beyond the cube is an enormous challenge.
Everyone reading this is starting from a different position with a different set of resources to allocate. You don’t need to do it all or implement these ideas lavishly. The key is to start now. The competition for talent is a war, and like any war, it’s an opportunity to seize—or to squander.