What does "thinking outside the box" mean?
Thinking outside the box means approaching an issue or problem from a new perspective. Recently I came across a practice that was what I would consider "thinking outside the box".
The Practice: One shop I recently visited staffs their entire operations department with 100% independent contractors
After 3 years and about 150 shops, this is the first time I have ever seen the entire operations department staffed by independent contractors. From our perspective, mortgage operations cover loan processing through loan purchase. We've seen processor outsourcing and contract underwriters, but never an entire operations staff.
When we review the productivity of a lender, we take the total number of operations staff and divide that number by the total number of closed loans. A well run company's productivity is 10-12 files per employee per month. This specific company’s productivity was north of 15 files per month.
The CEO of this shop says productivity is high because the entire operation is staffed by independent contractors. Each employee rents a desk from the Company and is paid a fee based on each loan they get to the table. The overall personnel cost per loan is approximately $650 per loan. Based on an average loan amount of 263,000, the operation's personnel cost is 25 basis points. This is very low compared to other companies we’ve reviewed.
The benefit to the company is it doesn't need to pay overtime or cover employee benefits. This approach seems to improve productivity and lower the cost of origination. Plus all the employees seem to like the independent contractor status, but the Department of Labor might take exception and consider it an employee / employer relationship.
It may make sense from a cost perspective, but is this really an independent contractor relationship?