WE’RE HEARING a personal sigh of relief that I survived unharmed at the MBA servicing show last week despite my personal attack in this paper on the hometown Dallas Cowboys.
I also enjoyed my speaking engagement there regarding how to involve the consumer in the change management process. But what I really enjoyed was the keynote speech by Billy Beane, which was not only entertaining but I think was very insightful for industry participants.
Beane’s speech was about his success as the GM of the Oakland A’s baseball team, made famous by the book and movie, “Moneyball.” Billy was very self-deprecating, with jokes about how Brad Pitt played him in the movie, which made me think of who might play me in a movie. After running through a depressingly short list (no pun intended) which includes Robin Williams and Michael J. Fox, I decided I would just focus on the content of the speech instead.
What Beane spoke about was the ability to use data to find the real value of personnel when managing a baseball team. Bottom line was that it’s not what the player looks like, but rather what the data looks like about the player. During his presentation, Beane showed a specific example of how he analyzed years of data for all the teams in baseball and determined that the biggest driver of success was On Base Average (OBA), and not the more glamorous statistics such as home runs and stolen bases. He then also compared the cost of each player to determine the true value of those players who have higher OBA’s than their peers.
As I watched, I thought of several examples where mortgage companies have similarly chased the glamorous statistics (number of branches, number of loan officers, total volume) and lost site of the primary objective which is to make money (my apologizes to any not-for-profit mortgage entities). At Stratmor, we rely heavily on data to help our clients figure out their best options and improve their market performance. So, here are four ways that I think mortgage bankers could play “Beaneball” and learn a lot about how data can help them.
1. Let’s start with marketing. There are amazing insights that can be gained by leveraging household data marts to help you understand more about your customers. If you are a bank, you can leverage data marts to tell you what your true cross-sell potential is for mortgages, as well as specifically when those consumers might be in the market. That is more analytical and more successful that just putting a brochure in every branch and hoping for the best.
2. A key part of part of Billy’s message was understanding the dynamic with price and output.
For a mortgage company, leveraging data can also provide significant insights into your competitive position. How often does the loan officer say that the pricing guy needs to improve pricing? A lot. It’s best to leverage analytical tools that tell you your real competitive position on a regular basis—as often as weekly—and know if you are well positioned and how your pricing is impacting your market share across a wide range of products, geographies and loan types. Robust analytics allow you to go beyond just knowing your pricing and how it impacts market share to knowing how pricing affects your profitability through coupling pricing-volume, i.e., elasticity of demand, with your revenue and expense structure.
3. Compensation surveys are another key metric. All sales people think they should be paid more, and the cost of underwriters sure has gone up. But knowing where the market is related to pay is critical for hiring opportunities. And combining that pay data with operational metrics really tells the story about whether you are getting what you paid for. This really helps executives make decisions about how much to pay and how much to expect a staff member to contribute, just as Billy Beane did with the low-budget Oakland A’s.
4. Finally, financial benchmarking is a key way to get a more complete understanding about how your organization is doing and uncovering that number that really drives your success. It may not always be the same—we do a lot of work for regional banks, and they often have a different view on the business and a different measure of success than independent mortgage bankers. But knowing what metric drives the bottom line and how much it drives the bottom line is a key part of knowing what to focus on from a management perspective.
During his talk, Beane said that finding that “correlation coefficient” (i.e., what variable impacts the outcome the most) was the key part of his success. It’s not always the easiest thing to find—to search for the signal in the noise, but for mortgage bankers, it may be one of the most important parts of building a winning team.
Garth Graham is a partner with Stratmor Group, and has over 25 years of mortgage experience, from Fortune 500 companies to startups, including management of two of the most successful mortgage e-commerce platforms. He was formerly with Chase Manhattan Mortgage and ABN Amro, where he was a senior executive during the sale of its mortgage group to Citigroup.