The hidden room for improvement in the mortgage process

"Extra! Extra! Read all about it, Mortgage Bank wins customer service award!"

Sadly, that is a headline we rarely see in the mortgage industry. Banks in general and the mortgage industry in particular have a questionable record when it comes to customer service.The ever present, antagonistic relationship between volume and service plagues organizations as they try to grow. It’s like clockwork, as volume increases, service decreases. It used to be the case that you could just throw money at service issues. Well, those days are gone…at least for now.

Back in the 90s, Harvard researchers James L. Heskett and Leonard Schlesinger did some work that ended up in a book entitled The Service Profit Chain – How Leading Companies Link Profit and Growth To Loyalty, Satisfaction and Value.The initial intent of this research was to study the world’s most profitable companies and the strategies they used to be so successful. They quickly realized that none of the companies they researched had strategies around profitability. They did however uncover a chain of (what I call) “hidden drivers” that led to growth and profitability.

Here they are in simple form. The most profitable companies had a large number of loyal customers. Customer loyalty was a result of customer satisfaction which was derived primarily from the perceived value of the service they received from company employees. As it turns out, according to the research, the value that leads to customer satisfaction only comes from satisfied, loyal and productive employees.

A lot of companies miss the connection between “value” and “employee productivity.” You see, it’s not about employees being busy; it’s about employees being busy doing the right things that add “value.”

Finally, they found that employee satisfaction was driven by the internal quality (or culture) of the organization and that the internal quality/culture was ultimately driven by the internal leadership of the company. For years, I have told leaders that “people don’t quit companies, they quit their supervisors.”

Unfortunately, most financial executives believe that value is built into the products or services they sell causing them to jump from Jumbos to high-LTV to ALT-A to ARMs to Option ARMs…well, you know the story.

All attempts to build customer loyalty through loan product marketing have been dismal failures. All attempts to build employee loyalty through higher compensation have only created deeper levels of entitlement and caused companies to go out of business. This isn't likely to change as long as originators are rewarded for closing deals instead of winning a customer and settlement services partners are scored on the speed with which they run borrowers through the overly complex process.

The federal government’s attempts to legislate some level of customer service into the mortgage business has only caused headaches for lenders and title companies and are not doing much at all to help borrowers shop for a good deal. The only way to foster anything close to customer loyalty in this business is to quit focusing on products and start focusing on our people and the processes in which they carry out.

Even if financial managers make the mistake of equating employee loyalty with higher pay, the new regulations will put even greater pressure on profit margins and they will be forced to look elsewhere to find efficiencies.

Banks will be in for an uphill battle when the industry turns back toward loan origination. Where will they find the money to outbid rivals for top originators that are used to earning $400,000 annually? In the short term they might be able to raise prices but competitive pressures will quickly put a stop to that. They won’t be able to squeeze the originator any further because they’ll just leave for another company. The only thing left is to look internally to improve the culture and operations.

Right or wrong, banks are going to have to find other ways of attracting, motivating and ultimately satisfying these players. Additionally, they are going to have to drastically improve their operations and streamline their workflows. That will require them to not only see their people in new ways but to also rethink how they work. The good news is, there’s a lot of room for improvement of the mortgage process and I can assure you that when you improve the process, you improve profits.

The successful companies will employ strong leadership, smart strategies and even smarter technologies. Leaders will need to realize and embrace the fact that their direct influence on customer satisfaction is minimal at best, but their influence on employee satisfaction can make all the difference. The best leaders have figured out that the way an employee treats a customer is a direct result of how the company and more specifically, their direct supervisor treats them.

In the end, the new attitude that sees people and efficient processes as the bank's most valuable assets is likely to be the most positive change that comes out of this godforsaken mortgage meltdown. I truly hope it is welcomed as it carries the promise of success.

Rene Rodriguez is CEO of MortgageDashboard

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