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Corporate Culture: Why It Should Matter When Selecting a Mortgage Bank

Chris Jones
Mar 13, 2014

There are a seemingly endless list of books and articles written by organizational behaviorists who opine on the importance of culture to any successful organization. As with any behavioral science, there is often disagreement when the results are measured qualitatively rather than quantitatively. In full disclosure, I am not an organizational behaviorist. Nor am I an expert on corporate culture. But there are a few observations related to an organization’s culture that I have come to believe are important to any successful business, and particularly important to a salesperson’s choice of mortgage companies with whom he/she decides to apply their origination talents. Observation number one Every organization has a culture whether consciously created, or unconsciously allowed to be defined. Great organizations invest time and effort in defining and emphasizing that culture by aligning leadership, measurements, feedback and rewards with those activities that reinforce the cultural objective. Less effective organizations, by not investing time and effort, allow their culture to be defined for them, even if that cultural message suggests that they have no cultural focus. Observation number two An organization’s culture is largely a function of its core values. Core values let critical stakeholders such as customers, employees, vendors, investors, capital markets partners, and regulators know what the company is all about. Core values provide a filter that aid in the decision-making process at all levels of an organization. Like the larger notion of corporate culture itself, core values are either stated or unstated. If these values are not consciously defined by leadership, they will be unconsciously defined by the organization. That’s a tough way to achieve an organization’s goals and objectives! Observations number three There is no “right” answer when it comes to corporate culture. Corporate cultures are like fingerprints, no one organizational culture is exactly like another. The mortgage industry is proof enough that many very different organizations can find incredible success. And that is just the point! The only measure of a “good” culture is whether the culture aligns with the organization’s vision, business strategy, and its own measures of success. With these observations as context, every mortgage salesperson should consider what they value most in a potential employer’s culture. Let me suggest five cultural questions one should evaluate carefully when considering a new mortgage bank: Are you seeking a culture that values entrepreneurialism or institutionalism? The last five year’s regulatory changes require that all mortgage banks demonstrate a level of institutional control on matters of compliance and loan quality. Without these, a mortgage bank’s days are numbered. However, if we assume that all mortgage companies have these required institutional controls, there are still very clear cultural differences about how a company values the entrepreneurial spirit among its salesforce. I define entrepreneurialism for salespeople as the flexibility to establish one’s own growth strategy, define one’s own level of career commitment, and set one’s own goals for what he/she wants to accomplish. A salesperson or manager who has never worked in an environment which demands performance to production goals may experience a cultural disconnect with an employer that sets individual production goals and measures performance. Conversely, a salesperson who has always worked successfully with individual goals and measures of performance may find an entrepreneurial mortgage bank without these structures un-motivating. Of course, mortgage banks are not only entrepreneurial or institutional. There are many mortgage companies that offer flexibilities to appeal both the entrepreneurial and institutional salesperson, as well as the sales person that may be some combination of both. What is the organization’s strategic approach to matters of regulatory compliance? Unfortunately, on many compliance matters there is limited or unclear guidance from enforcement authorities, leaving mortgage bankers to “interpret” the expectations themselves. There are often wide differences in these interpretations. These differences are rooted in different attitudes about compliance, as well as different levels of effort made to gather needed expertise and educated opinion from reputable counsel, industry associations, and the regulatory entities themselves. A mortgage bank’s attitude as it relates to both the spirit and the letter of every point of regulatory compliance is an important component that defines a mortgage bank’s culture (and potentially its future). Is the company considered innovative and an early adopter of change, or is its culture to let others lead and define the industry’s change? There is no question but that any successful mortgage company in the last five years has had to embrace change as standard of doing business. Here again, there is a great amount of variation in strategy as it relates to how mortgage companies manage change. Some organizations are innovative, led by thought leaders who make significant investments to influence change and industry direction. While there are costs associated with innovation, measured in both dollars and brain cells, there are great advantages in the form of reputation building and competitive differentiation. By contrast, late adopters may miss out on the growth opportunities that come from innovation, but they avoid the high investment costs and distractions that come from development. Are strategy and operating decisions determined and announced, or are decisions made with participation from originators and field managers in an effort to reach consensus? Leadership in every organization must make decisions on behalf of the company. How leadership generally makes these decisions is an important variable to consider when selecting a mortgage banking partner. Generally, decisions can be made in one of three ways: One, by consensus with an effort to enroll all those impacted; two, by majority vote of those impacted; and three, by the person ultimately responsible for the decision announcing it without participation from others. When making an employer choice, one should investigate to understand the decision-making method most utilized by leadership to ensure alignment. What is the organization’s attitude as it relates to risk management? The prospective mortgage bank’s risk management views is the final cultural factor I might suggest is important in any choice an originator or sales manager makes in an employer. Again, there is a spectrum of choice as it relates to the appetite a mortgage bank may have for taking on risk. Mortgage banks that don’t take risks sacrifice growth and opportunity. Mortgage banks that take great risks may not provide a stable and sustainable business model that can survive the test of time. When choosing a potential employer, one should consider the mortgage bank’s view of debt, growth, new products, and regulatory compliance (yes, this again). Most importantly, does the bank have good mechanisms and measures for assessing and taking risks?   In summary, mortgage companies make very significant investments in finding and sourcing the needed talent to build their organizations. Originators and sales managers make difficult, life-disrupting choices to pursue other employment options that provide opportunities for career advancement and growth. When core values are not considered, and are subsequently misaligned, there’s a very high probability of frustration and failure that results in unnecessary expense among both the employer and employee. No mortgage banking organization is perfect, if for no other reason than the fact that customers, both internal and external, have different expectations of what perfection looks like. But organizations and employees can look past many shortcomings if there are mutually shared core values and cultural views. Chris Jones is senior vice president of business performance for Primary Residential Mortgage Inc. (PRMI), an independent mortgage bank headquartered in Salt Lake City, Utah. He may be reached by phone at (801) 596-8707 or e-mail [email protected]
Published
Mar 13, 2014