When is “conviction” an important component of leadership? I guess you could ask the question this way: “When is it not?” The later is more rhetorical in nature. In times of uncertainty, who wants to follow some ‘wishy-washy’ indecisive “leader?” That is an oxymoron if there ever was one … an “indecisive leader.” This is especially true when uncertainty gives way to anxiety, fear and some level of panic. Times of crisis demand strong decisive leadership.
I am writing this article the very week that the new Fed rule regulating loan originator (LO) compensation is scheduled to go into effect. I cannot think of a single issue that has stirred up more frustration, anger and anxiety than the Fed’s changes to loan originator compensation. Federal Reserve officials, who are supposed to provide leadership and guidance, have done nothing to help sort out this vaguely written convoluted “ball of tape” new rule. Their handling of this matter has been absolutely abysmal.
Loan originators have been understandably concerned whether or not they can make the same level of income as they have in times past. Business owners and executives have had concerns that if they do not come up with the right compensation plan, they may lose their whole loan origination staff and watch their businesses fail. As a result of poor leadership from the Federal Reserve, there have been elevated levels of anxiety on both ends of the spectrum.
As I pointed out in the January issue of National Mortgage Professional Magazine, our industry is in a serious leadership crisis. In February, I wrote about the importance of leadership as it relates to successfully launching the new loan originator compensation plans. In that same February article, I predicted that the success or failure of any future LO compensation plan will have more to do with “leadership” (rolling out the plan) than the LO compensation plan itself. And as we have watched various companies roll out their respective compensation plans to their LOs, we have seen this to be an accurate prediction.
For example, one rather large company made the decision to invite not only their own loan officers to the meeting where they rolled out their compensation plan, but they opened up the meeting and invited every originator in that city to come and listen to their compensation plan. Think about it, what a bold and confident statement this made in that market. Whether or not their plan was in fact the better plan, the way they rolled it out (it was done with conviction and confidence) was very well-received by all and established them as leaders in their particular market. Not only that, but they presented their plan in such a convincing way that not only were their own LOs sold on the plan, but a fair number of LOs outside of the company began to wonder if they shouldn’t consider making a move to this company. This is a good example how strong leadership led to a successful outcome and that it was more about leadership than the plan itself. Their gutsy way of rolling out their plan in full view of everyone in that market demonstrated their character and conviction. It further established themselves as leaders in that market. Mixed in to all this was an element of creativity that you have to admire.
Now let me contrast the above story to what I see many are doing in the industry as it pertains to developing and rolling out their own compensation plan. Many, if not most, executives have been more concerned about trying to figure out what their competitors are doing rather than studying the regulation for themselves (vague as it may be) and arriving at a plan that will work for their loan originator all the while staying true to their own company’s goals and objectives. Can you see the difference? One is trying to establish a consensus, versus arriving at a conclusion and boldly leading with conviction.
I am sure you have seen how many executives manage by consensus building believing it is the best approach. Management schools and books have taught the importance of listening to everyone’s point of view and “mirroring” their thoughts. But trying to “get everyone on the same page” and “marching to the same drum” isn’t going to cut it when the Fed’s provided no leadership or guidance. While there is a time and place for vetting things out and trying to gain a consensus, there also comes a time when a decision has to be made and that decision has to be executed with conviction and confidence. Too many are operating in fear of “losing their LOs,” so they are slow to act with conviction and are always trying to build a consensus. Strong people recognize strong leadership and will gravitate to strong leadership, especially in times of uncertainty. Those executives who portray strong character and strong convictions will draw the stronger LOs to their company. Those who “lead” by following a consensus will realize their fear by losing their better LOs.
True leaders are not afraid of conflict! Leadership, almost by definition, involves conflict. An avoidance of conflict inherently implies a lack of leadership, or at a minimum, poor leadership. One way to detect weak leadership is recognizing when someone is trying to still arrive at a consensus when it is time to take action.
As a way to dramatically depict the differences between leadership by conviction versus consensus, I am going to use a classic old movie, “The Poseidon Adventure.” This movie in and of itself is a leader. It was the first of a series of disaster movies. In it, Gene Hackman and Ernest Borgnine portray the importance of dealing with conflict while sticking to your convictions. There were some great lines in it. Another great example of a strong leader leading with conviction were the fables and legends of the Scottish folk hero/leader William Wallace as portrayed in the movie Braveheart.
History provides us with other well-known lessons in leadership by those that were led by strong personal convictions … the best of which might be George Washington. For example, did Washington try to build consensus amongst his troops, or did he command with the conviction? Of course, it was his convictions that led the way to victory, not a consensus amongst his troops.
I am writing all of this to help you to recognize a “harsh” reality of our world today. Leaders today, more than ever, must have conviction; and managers must adopt those convictions as their own. While the strength of a conviction for any idea is vetted through some level of conflict (arguments, analysis and testing), once a decision has been reached, managers of that which has been decided must command others with the same conviction as if it were their own. The bigger/larger your organization is (i.e. the greater the layers of management), the greater that challenge senior “C-level” executive leadership has in communicating and transferring down through the rest of the organization the convictions of the top executives. The level of effectiveness in communicating/transferring convictions from the top of an organization to the “rank and file” of an organization is a way to measure leadership levels in an organization. It is essential that deficiencies be addressed and changes be made in order for an organization to survive in the days ahead. I do a whole seminar on this topic.
True leaders have core convictions that guide them in times of uncertainty … and nothing could be more uncertain than the state of the mortgage industry after the LO compensation rule takes effect after April 1st. Again, I repeat my prediction that the success or failure of any LO compensation plan rolled out by a company will have more to do with leadership ability and skills than the comp plan itself.
It is for this reason that I made the decision to write a series on leadership. I outlined the seven characteristics or the “7-Cs of Leadership” which serve as the framework for this series of articles. The “7-Cs of Leadership” are character, conviction, confidence, charisma, clarity, communication and compassion. Last month, I wrote about the importance of character, and if you didn't read that article, I would encourage you to go online, download and read it. The bottom line about character is that with character, you're on a solid foundation, and without character, you're ultimately doomed to failure. This month, I wrote about leading with “conviction” and next month, I will be writing about leading with “confidence.” While the two are closely related, they are distinctly different. As always, I welcome your feedback, comments and ideas for future articles.
David Lykken is president of mortgage strategies and managing partner with Mortgage Banking Solutions. He has more than 35 years of industry experience and has garnered a national reputation, and has become a frequent guest on FOX Business News with Neil Cavuto, Stuart Varney, Liz Claman and Dave Asman with additional guest appearances on the CBS Evening News, Bloomberg TV and radio. He may be reached by phone at (512) 977-9900, ext. 101 or e-mail [email protected]