Can You Retain and Motivate Salespeople in a Better Way?

“You can lead a horse to water, but you can’t make it drink” is a proverb that means you can offer someone an opportunity but can’t force them to take it. ?Motivation is a choice, a choice each person makes depending on the circumstance and how this compares to their own personal motivators.? What you can do is to influence them to choose to be motivated by creating an environment that keeps people happy and engaged at work.? There are several key drivers for engagement at work: teamwork, career development, influence decisions, clear career path, manager understands me, and a compensation plan that honors and rewards them for being successful in their role.? ????

How do you do this in a distributed retail lending company?? The answer is not so simple and some foundational factors are often overlooked by those of us in the profession.?

Consider the following:

Just when you think you’re about to achieve branch profitability for the quarter, you get hit with the news that your star mortgage loan officer is throwing in the towel and recruited away to another lender.?

You were almost there, and now you must deal with lost momentum, team morale, and lost profits –bummer!

The average tenure of a Home Equity Advisor is 2-3 years, making this scenario all too common.? Yet sales leaders don’t realize how easy it is to prevent turnover by designing an attractive compensation plan that rewards good behavior and performance.?

There is a better way to do mortgage banking, and it begins and ends, with paying people properly.? In my view mortgage advisors do exactly what they are paid to do – find and fund loan transactions.? Compensation plans are the backbone of any successful sales strategy and the key to retaining top sales talent. ?Unfortunately, in mortgage lending there are some restrictive compensation rules embedded in Dodd-Frank Wall Street Reform Act and FRB’s Loan Originator Compensation Regulations that prohibits payment based on any of the transaction’s terms or conditions, eliminates an overage or underage and prohibits varying LO compensation based on the loan’s interest rate, APR, LTV, Pre-payment penalties, or other factors serving as a proxy, such as Credit Score and debt-to-income.

Almost all mortgage lenders allow advisors to choose a pricing strategy that converts to basis points or BPs.? I have always said, we should just get t-shirts made with “I need more BPs!”

That being said, I have been successful in designing “variable compensation" plans, in addition to their pricing strategy, that focus on quarterly or annual enhancements based on performance.? The structure of these plans falls into one of these four categories:? quota-based plans; time-based plans; individual incentives; or deferred plans.?

To be effective in this new era of mortgage lending, your organization’s sales compensation plan must balance encouraging high performance, prioritizing customer satisfaction, retention, and performance metrics that drive the exact behavior you desire to reward.? If not, your business will suffer when the scales are out of balance…and today the scales are way out of balance.?

If you live in a large sales organization, here are a few ideas to help you achieve a fair balance and sleep better at night!

First and foremost, pay higher BPs if the advisor doesn’t have an expensive posse riding along with them. ?Pay them to help reduce costs and improve pricing.?Don’t hire loan officer assistant(s), marketing people, branch manager, underwriter, their brother who is their processor, etc.? The mantra needs to be “NO POSSE!”

?Second, offer quarterly, compliant, performance-based enhancements to their compensation plan.? Here’s what we did at Skyline and then at Finance of America -? with a minimum of $x million in quarterly banked production, LO is eligible for additional revenue credits as follows: quarterly 1st rate lock pull through % greater than x% (5BPs); pricing, appraisal and credit exceptions less than X% (5BPs); with a minimum of $X in quarterly banked purchase loan production, LO receives and additional 5BPs x Banked volume. The extra 15bps can be on top to their existing compensation plan or part of it - you make the call.

Third, provide the LO an option to receive quarterly revenue credit or defer that compensation over a 3-year period and receive a premium on the deferral. When Skyline became part of Finance of America, this work liked a charm as over 90% of our sales staff transitioned.?

?Fourth, offer a few annual enhancement ideas:?

·?????Consider offering longer-term incentive shadow options and vest those options over 3-4 years or upon a qualifying IPO, or sale

·????? Create a President's Club or Platinum Club and give long-term incentive options if you make it!

·????? Top producers receive greater share of the option pool

·????? Create an Annual Scorecard for Deferred Compensation (paid over 3 years; must remain with company to receive each annual payment = up to 10 basis points x annual $volume of banked loans considering a host of performance factors – pull through, annual volume, app to funding ratio, loan file quality review, 360 review with staff, etc.?

Fifth, try tiering plans based on minimum loan production (rolling quarterly average of funded loans, volume or units)and place into four categories:? Advisor, Senior Advisor, Elite Advisor and Call Center Concierge.? Tier the plans to reward folks who continue producing in all markets.?

And finally, in a perfect world (with interest rates in the 4s), part of an advisor’s compensation should be annuitized and keyed to the loan’s future performance, i.e., EPD (early payoff default), FPD (first payment default), delinquency, fraud, follow up documents, servicing transfer to the investor, and maybe most importantly, retention of the customer.? By designing the plans this way, companies would be able to align the interests of the borrower, investor, and loan officer around both the transaction and the performance of the loan. ?

So maybe you can lead a horse to water?? ?????