One failing common among many small business owners (and in this universe we can include owners of mortgage brokerage shops and small mortgage banking shops) is that they do not run their business like it is a business.
All too often, they don't have a real handle on their cost structure and one of those biggest costs is employee compensation. And that is one of the things which can be the difference between staying open or closing the doors for good.
In the mortgage business, like many other sales-oriented businesses, that compensation structure is in large part commission based. Many try to track compensation using a spreadsheet, but that does not allow them to realize that the structure is out of whack and impacting the company's profit goals, said executives for CompensationMaster
CompensationMaster is a Charlotte, N.C.-based company whose system can be used to create customized compensation plans for variable pay companies.
Lee A. Griffin has been hired as vice president of business development for CompensationMaster's new financial services division. The division is looking to expand the company's market, and one of those markets is the mortgage industry.
The company's software program, which has been in use for over 25 years in other industries (including real estate), calculates how much to pay sales associates while achieving corporate revenue and profit targets.
Thus owners and managers can create innovative compensation plans and predict with a high degree of accuracy what the affect will be on company earnings.
The company's founder and president used to own a real estate company and a mortgage company, Griffin said, and the product was designed with his knowledge of the mortgage business.
But as the real estate boom took hold, CompensationMaster became more focused on that industry. Recently, the company decided there were opportunities in other business, including banks, investment brokers, asset managers and the like in the financial services arena.
With the loan officer compensation rule put out by the Federal Reserve Board, combined with the Department of Labor's Fair Labor Standards Act minimum wage requirements, pay is one of the areas that weighs heavily on a mortgage business owner's mind.
Griffin recounted a meeting with a mortgage company owner who said the CompensationMaster program would be great to use to help comply with such things as loan officers not being allowed to be paid from both the company and the consumer anymore.
Indeed, the use of this program helps to create transparency about the process, not only for the employees, but also for regulators when they examine files to show that compensation is above board.
He stressed that CompensationMaster is not designed to be a compliance tool. However, it is valuable to show to regulators when the company gets audited for compliance with the compensation laws and regulations.
The user can input any number of scenarios, which include the company's costs and target profit margin.
It can be used as a recruitment and retention tool, said Erick Miller, who is the head of service delivery for CompensationMaster, by showing prospects what they are able to make if they meet their sales targets. It is a data driven method to show the compensation structure.
He noted each company has its own unique mix of fixed and variable costs and these change over time; and when they do, the system can be adjusted accordingly.
The aim behind the creation of the software in the first place, Griffin reiterated, was “to come up with profitable and fair and transparent compensations for your folks. So that there is no exceptions to rules where somebody is being paid way more than they are bringing in.”
As a recruiting tool for companies looking to hire sales staff, he pointed out the owner can show the potential hire a comparison between what they are getting now and what they are being offered. It “eliminates smoke and mirrors,” he said.
Another part of profitability is how much the company is able to sell the loan for and originators could have different deals with different lenders on how much they are willing to pay for a loan. That can be accounted for in this system.
It allows owners to determine ahead of time with reliability what the outcome will be to the bottom line.
The program is based on a theory known as Pareto Optimality. According to the WisdomSupreme.com website, Pareto Optimality (named after an Italian economist) is a situation which exists when economic resources and output have been allocated in such a way that no one can be made better off without sacrificing the well-being of at least one person.
Griffin said CompensationMaster as a result takes in the both the math and human factors, and as a result your employees have “incentives to work harder because they can see more benefit for themselves. And, of course the harder they work in a variable pay environment, the more money you (the company owner) make.”
Furthermore, it makes it easy to show existing employees why they are worth what they are.
It utilizes a sophisticated strategy for introducing new compensation plans, which is designed to maximize buy-in, ensure retention of key personnel and accelerate productivity.
CompensationMaster resides on the company's servers and the user purchases a license and gets access to the program. But there is flexibility where for certain larger clients it could reside on their servers company executives said.
David J. Cocks, the president of CompensationMaster, declared, “When you combine transparency and choice in sales force compensation you can truly move mountains.”
Prior to joining CompensationMaster earlier this year, Griffin worked for WNS Global Services, where he led business development for the financial services vertical for North America.
Previously he was an executive with Accenture, working with clients that included investment firms like Merrill Lynch, large property and casualty insurers, money center and Tier I and II banks like Bank of America and Wells Fargo, the federal government and ConocoPhillips.
He was also managing director and chief operating officer with The Xelian Group, and held various leadership positions with NationsBank, First Union and Wachovia Bank & Trust.
“We offer an innovative and proven approach that allows companies to give people a say in how they would like to be compensated, to build greater trust and transparency into the process, align the goals of the sales force and management and become more responsive to the market.
“The outcome is that management and the sales team both walk away winners and, in turn, so do the clients and customers,” Griffin said.
