Addressing Mistrust

“Mistrust doubles the cost of doing business” John Whitney, Columbia Business School The cost to originate a residential mortgage has ballooned from 93 bp’s in 2003 to 231 bp’s in the third quarter of 2012. Almost all of that are new procedures and reporting of additional data required by investors and regulators. There are several ways to reduce this cost in the near future. Recently, the final issuance of guidelines will allow technology and policy and procedures, guidelines to standardize the new requirements, thus bringing down the cost somewhat. But there is still a large premium in that number for the mistrust lingers with the mortgage industry today. The rigor with which a successful total quality management or continuous improvement process style of management takes, requires using a lot of facts in a continuous and organized fashion. The tool kit includes reports, scorecards and dashboards to generate the information we need to digest in order to determine the quality and efficiency of our groups’ processes. We answer the question- are we meeting our goals or stretch goals for our process and production? The information positions us to make the many small decisions that can often have a big impact on our production or quality goals. The mortgage industry has well known quality and process metrics; speed to approval or closing, error rates and related reworking, effectiveness of turning inquiries into applications, applications into approvals and approvals into closed loans. Less pursued and often more impactful in managing these key performance indicators is the information we rarely turn to regularly because we don’t turn it into data. If we did, this information can also be used to make small decisions that can have a big impact on results. They are things like- is management’s vision for the business and future known and understood by those doing the work (alignment of the workforce), is our organization’s culture supportive of what we are asking of employees and want to deliver to customers and other stakeholders, are employees engaged and do they have what they need to make decisions in the course of normal and not so normal circumstances? The first reaction to these questions by leaders is usually -that’s why we invest in training and technology and aggressively document our expectations in policy, procedures and guidelines. All of that is good, and in the rigor of continuous improvement, one can never be let up. But the key quality and process indicators are results and don’t directly measure the questions in the previous paragraph. Those measurements have to be derived by asking the questions to the parties involved, collecting the results and measuring performance against a goal. The goal setting and asking part are very often not ever bothered with when a company is focusing on big issues around growth and process improvement. That is as big a mistake as not asking customers if they are satisfied. Best practices needs to include performing regular assessments similar to the questions posed above, as well as other questions measuring a variety of issues around the attitudes pervasive in your organization, capturing the results and tracking their movement over time in a report, scorecard or dashboard, similar to other key indicator measurement tools. These tools have the ability to reflect when an organization’s culture supports decisions in the absence of technical or policy, that are knowledgeable and consistent with all stakeholder interests. It may seem like a “nice to have” and not a “have to have”, except a careful reading of the Consumer Financial Protection Bureau Examination Manual reveals that they are going to look at a firm’s culture specific to the law. What metrics will you show them to affirm your supportive culture? Managing and leading in the world going forward requires a larger tool kit. Assessments that solicit feedback on attitudes and values will be as important to decision making as the quality and process key performance indicators used today. And as you chip away at mistrust, you will move costs down, enhancing profitability and sustainability.