My partners and I have visited many mortgage companies over the past year.
We perform our FOCIS audit for warehouse lenders looking to identify hidden risks and potential “tapebombs” that may result in unexpected losses. We also perform FOCIS-plus studies for management and boards of mortgage companies who are looking for ways to increase revenues, control cost and better manage risk. Both studies require us to interview the senior management team and other middle management to uncover business practices and leadership styles.
One of our key findings is how the leadership and behavior of the CEO influences a company’s management style and corporate culture. Whether it is good or bad leadership, the CEO’s style influences management from the senior level to the leads in the trenches take. Better performing companies had a CEO that had some common characteristics.
Let’s look at some of our findings:
Managing by Wondering Around: The CEOs that got out of their plush offices and made daily rounds in the office and visited remote branches often seem to create optimism in the rank and file. This approach was contagious as other managers wondered the halls to connect with their employees. The CEO and other managers offered encouragement and gratitude; they showed authentic interest in employees’ tasks and issues. You would think every CEO would behave this way, but we were surprised that so many President communicated only by email.
Chopping Weeds or Growing Trees: Weeds grow and die after one season; they need to be cut to allow more desirable plants to grow and don’t add any long term value in the garden. Trees grow slowly and for years, providing value when it is harvested -- wood for home building and pulp for paper.
One of the key attributes of CEOs who manage successful mortgage banks is that they spend more time on strategic initiatives and less time on the daily tactical issues. These CEOs are growing trees, not chopping weeds. We found that other managers emulated the CEOs and spent much more time thinking and planning strategically. Every one of these companies had a written strategic plan and conducted periodic meetings to review the plan and communicate the results to all employees.
Profits over Production: During the initial “tee up” meeting with the CEO, we get some color on the drivers of the company. During that first ten minutes of discussion, CEOs take on one of two paths. It is either a production or profit driven path.
If the CEO is driven only by production, there is less emphasis on growing revenues and reducing expenses. This CEO rewards management in basis points based on production. Management and employees are driven by production and not on the bottom line.
The opposite occurs when employees work for a CEO that is focused on profits. He challenges management and rank-in-file to find ways to become more productive in helping to reduce expenses and uncover new opportunities to increase revenues. Pecuniary rewards are not based on production goals, but on strategies and action items to improve profits.
CEOs set the barometric pressure of an organization. A good CEO will connect with his employees, think strategically and focus on profits. His management skills and focus influence all employees and helps set the culture of a company.
