You probably heard this advice. Recently, a client asked me to explain this advice in detail. Here it goes: Working on the business, not just in it, can change everything for you. “Working on the Business” is thinking as leader. When I speak about a leader, it means an executive that runs the business, or a major function within it. Ideally, a leader envisions the business operating without them day to day. A manager believes the business operates day to day because of them. That’s the difference in “Working on the Business”, not “In the Business”.
Here’s how “Work on the Business”:
1. You would imagine how your business should work, not how you do your work.
2. You would design the business process to serve your customers the experience you’re committed to provide.
3. You would ensure your team has the systems and processes to create an exceptional customer experience without your fingerprints on the daily ongoing work.
4. You would measure what matters against your standards.
”Working on the Business”, you would be passionate about the company or function you were creating. And you’d measure the performance of your business, your team and your processes frequently.
You may remember the book and movie, “Moneyball”. Moneyball profiled how Billy Beane, Executive Vice President of the Oakland Athletics Major League Baseball team won frequently despite having one of the smallest payrolls in baseball. I had the opportunity to speak with Beane multiple times.
A theme that came from Beane was “Measure What Matters”. Beane said, “The Oakland Athletics (the A’s) are a ‘small market’ team. We have a limited salary budget. Yet we compete with iconic, well financed teams like the Boston Red Sox and New York Yankees.”
Here’s what matters to Beane. “How much does it cost the A’s to generate a win? The cost per win is influenced by how many times a batter gets on base. Getting on base means using a batting strategy for each player that maximizes the likelihood of a hit or a walk.” And so on. These are the metrics that matter, and they inform Beane on which baseball players to recruit, and how much to pay them.
Beane “Worked on the Business” and devised a data driven strategy that produced wins for a consistently lower cost than his competition. The results have been consistently better performance at the lowest cost per win…for over 20 years.
How do you make that work in your business? It’s “Working on the Business” to develop a vision, and then measuring what matters to generate clear visibility into your team’s performance.
Context gives meaning to measurement. I spoke with a CEO who is also a pilot about how mortgage execs think about their business. “A mortgage exec’s first thought is always, ‘we originated 10 billion’”. That’s like me saying my aircraft’s speed is 400 miles per hour. Without context, it’s meaningless. If my aircraft is pointing toward the ground at 400 mph, that’s bad. If I’m cruising in 30,000 feet, 400 mph is good.”
Origination volume is not meaningful without the context of profitability, credit quality, loan characteristics, origination channel, etc. In fact, when Billy and I spoke about Measuring what Matters in mortgage lending, he suggested that I think about the five key tools in baseball and identify similar metrics in mortgage banking. Baseball’s five tools are hitting, hitting for power, running, fielding and throwing. What are the five key metrics in mortgage lending?
I asked over 300 successful mortgage executives how they Measure what Matters, and what are the five key ‘tools’ to monitor. Here’s their collective answer:
• Origination Volume
• Margin on Originations
• Pull-Through to Closings
• Speed to Closing
• Cures and Concessions
Providing visibility and transparency into these five key tools and related metrics is paramount. Consider ranking all employees (originators, operations, etc.) into quartiles, from best to worst, on each of these metrics. Examine the interaction between the metrics. That’s how Billy Beane consistently outperforms his peers. And it’s how you can do the same.
Loan Vision and Teraverde have worked together to provide an ‘out of the box’ solution to help you quickly “Work on the Business” and “Measure what Matters”. It’s called Coheus, and it provides LoanVision and Encompass data transformed into Measures that Matter. Click here to learn more. And if you like what you see, Coheus can be up and running in 48 hours.
James M Deitch
Co-Founder & CEO
James M. Deitch founded Teraverde® nine years ago, after serving as President and CEO of five federally chartered banks for over twenty-five years. Teraverde® now advises over 200 clients in mortgage banking, capital markets and financial technology, ranging from some of the largest U.S. financial institutions to independent mortgage bankers to community banks. Jim founded two national banks, including a top 50 national mortgage lender.
Jim holds a Master of Business Administration, with concentrations in Finance and Marketing, and a Bachelor of Science degree in accounting from Lehigh University. He is a Certified Mortgage Banker and, until he realized mortgage banking was a lot more interesting than public accounting, practiced as a CPA. Jim has been a director of both publicly traded and privately-owned banks and lenders through some very interesting times.
Jim’s experience in residential mortgage banking for the last three decades on a retail, wholesale and correspondent basis led to an intense desire to learn about how technology could be applied to financial institutions. His experience includes multi-channel loan origination and sales management, mortgage product design, credit policy, hedging, securitization and loan servicing, and his beginning to end experience – and his love of high performance aircraft — has fueled his “need for speed” in applying technology to mortgage banking.
He has served on the Mortgage Bankers Association Residential Board of Governors and served on CEO panelist and speaker for major financial institutions, financial industry associations, corporate clients, the Department of Defense and universities. Jim is a thought leader and has published numerous articles in the industry publications.
Jim lives in Naples, Florida.