In This Chapter

You’re going to need help with your new mortgage broker company. This can’t be a one-person office. There are too many details in this business—you need some backup. Plus, since you’re already a successful mortgage broker, the only way to significantly increase your income is to begin to earn money on other brokers’ deals.

In this chapter, we’re going to review some key elements about hiring, firing (it happens), and most of all, retaining, the right employees for your company. It’s about building a team that supports each other, communicates with each other, and understands that the success of one will only be for the benefit of all.

When you start your own mortgage broker company, you’re cautious about spending any unnecessary money. Leasing a place, hiring a lawyer and accountant to handle all the legal and financial details, buying office equipment, paying for your own benefits, you’re now responsible for everything, even the office coffee.

Hiring employees has a financial impact, but don’t underestimate the psychological effect. All of a sudden you’re responsible for someone else. If the business fails, not only are you out of work, but you now carry the burden of knowing that others are also out of a job. It’s kind of like getting married. Now you can’t just think of yourself.

But you do need help and you do want to grow. Who’s the first person to hire?

I’d vote for spending good money on the best loan processor you can find (see Chapter 3 for a description of the job and responsibilities). You need someone experienced, who, ideally, already has good relationships with the lenders, appraisers, realtors, title companies, and the like, that you’ll be dealing with on a daily basis. A loan processor isn’t a rainmaker. She’s not bringing in any clients (except perhaps her own friends and contacts). Nonetheless, an efficient loan processor frees you (and any other broker in your company) to do what you do best—make deals.

Next in line: a general office manager. Since it’s a small shop, you need an individual who can basically do it all, although you may decide to outsource some tasks, like payroll. You still need to supervise, especially in the beginning, and you need to sign every company check. But an office manager can generate the checks for signature, prepare invoices, reconcile bills, answer phones, send out mailings, call repair personnel as needed, and so on. While it would be ideal to hire someone who’s worked in a mortgage broker company before, I’d opt for an experienced office manager and assume she can learn the details of the business.

You know what characteristics are needed to be a success as a mortgage broker—you are one. So when you’re ready to hire mortgage brokers for your firm, you know what to look for in the interview. But do you try to lure away an experienced broker from another firm or do you hire a promising entry-level individual?

For me, I always opt for an eager, smart, hungry beginner. He can take a course to learn the technical side of the business (see Chapter 5). I know I’ll have to supervise an entry-level person closely, and steer business his way when he first starts. But there is an energy level, enthusiasm, and desire to succeed that is found in someone at the beginning of his career.

While an experienced broker may bring a customer base with him, he also brings baggage. He has his way of doing things, which aren’t necessarily my way. Plus if he joins my firm, leaving behind deals in progress, he’ll expect some form of compensation from me to make up for his losses. Especially when you’re first starting out, you don’t want to get that invested in someone.

The ideal candidate would be someone who’s been in the business for about a year. He’s learned the basics, started to make some connections, and may be ready to be a bigger fish in a smaller pond.

Here’s the dilemma. If the loan processor, office manager, or even an entry-level mortgage broker screws up badly, you can fire them. With regret, perhaps, but if it’s really not working out, then you give them severance and hang up the “help wanted” sign.

But it’s not quite so easy when you’re talking about a rainmaker in your firm. This is the brilliant, successful mortgage broker who is bringing in a significant amount of new business, but who’s driving you or the other employees in your office crazy. What do you do then? Is the financial gain worth the aggravation?

As with many of life’s decisions, the answer is “maybe” or “it depends.” You’ve got some choices to make if the rainmaker is poisoning your company’s environment. Certainly, you should try to talk to the individual about his behavior. If he’s obnoxious to the loan processor, office manager, and fellow brokers, you can insist on a level of civility. I wish I could tell you that a simple talk would do the trick, but it’s rarely that easy. I’ve known too many people who have essentially a split personality: charming, effective salesman to customers and bosses, and boorish, inconsiderate oaf to subordinates. You need to have the chat, but obnoxious is often their default personality.

But before you pull the plug on the rainmaker, are there any other methods of coping?

You might try to assign a separate loan processor, for just the rainmaker. That will probably create resentment among the other brokers, and does add to your costs, but may be worth it for the additional business.

But at some point the rainmaker becomes too expensive, no matter how much business he brings in. How long you tolerate the behavior will probably be a result of how much it impacts your staff on a daily basis. If you can help them see the value of having him around—because certainly he’s improving the bottom line of the company, which is good for everyone who works there—if you can soften the blow of his personal interactions, you may be able to ride it out, at least for a while. But at some point, you need to start looking for other brokers who can replace the business you’ll lose when you eventually have to replace the rainmaker. You need to build a solid team that meshes well and eliminate the ones who are undermining that effort.

Once you have a great team assembled, the goal is to keep them together. Like a car’s engine that runs more efficiently once it gets broken in, your team will gel as you work together. So what can you do to retain the best employees?

The first piece of advice is so simple, it almost sounds cheesy. It’s exactly what your mother always told you, but honestly, it’s one of the most effective ways of retaining loyalty: say thank you. Not for one second am I minimizing the need to share the profitability of the company with the folks who helped make it happen. But research has shown that nearly one in four workers are dissatisfied with their jobs. It’s not just about money. The company’s work environment—is it friendly or cutthroat? is it supportive or dismissive?—plays a huge role in an employee’s decision to remain in a job. So tell them—and yes, show them—but tell each person who works for you when he does a good job, when she makes an extra effort, when he tries something new, exciting, or innovative and it works. Like with our kids, make your praise specific.

When you created your business plan, you had to develop short- and long-term goals for your company. You had to map out how much you thought you would accomplish in the first year, and then project further down the line. You needed a plan—and the lender for your small business loan based his approval on the likelihood of you achieving those goals.

Each year I sit down individually with each of my brokers, loan processors, and office help, to talk about the forthcoming year. And here’s the second tip for retaining employees. Bring them into the discussion about the future of their company. If they feel they have a stake in the company, and not even a financial one, but that their advice is valued, it reinforces the concept that this is the place to work.

For the brokers, we set specific goals—the number of loans they hope to close, as well as the anticipated level of those loans. Volume is important, but so is the quality of the loans. How big is the deal? How many points? Yield spread? We talk about the local housing market, but we also put it in the context of the national economy. These goals should be realistic. Remember, even if the housing market in your region is tanking, someone is still going to be buying and selling some houses. So the discussion should be how you’re still going to capture your share or better of the loans being made.

For the loan processors, we talk about how they can improve their efficiency. This isn’t just about their own efforts. It’s also about what I and the brokers can do to make their jobs easier. Then we set goals for the number of loans they will be able to process each month.

For the office help, we review the procedures that make the place run. Again, we talk about how we can help them do their jobs better.

So by the end of the second week in January we all have specific goals for the forthcoming year. I make a point of setting goals for myself as company owner and as a mortgage broker.

When December rolls around, bonuses are based on achieving the goals set. If we all did our jobs, the company should be profitable and it’s only fair for everyone to share in those profits. Of course, some of the profits must be plowed back into the business to build and expand it. But each broker receives a bonus relative to how much he has exceeded his goal.

Processors receive a bonus at the end of the year for exceeding their goals, but I also give bonuses to them during the year if they process more loans than expected during any given month. They shouldn’t have to wait for a reward for extraordinary effort. (Brokers are on commission so they quickly get additional money when they make more and/or bigger deals. Loan processors are on straight salary so this is a way of rewarding their efforts.)

Office help also get bonuses at the end of the year to share in the company’s profitability. It’s an acknowledgment of their work to make the business run smoothly.

Money is always in good taste, but there are other ways to show appreciation to your staff.

Let’s get to the tip that is good administration, doesn’t cost money, and helps retain your employees. Don’t micromanage your staff. If you’ve hired good workers, let them do their jobs and don’t get in their way. There is a fine line between supervisor and buttinsky. You want to offer support and advice, but also trust. If you don’t think they are capable of doing their jobs, then you shouldn’t have hired them.

And the second tip may cost you bucks but makes sense in the long run. Hire help when you need it. If your employees are overworked, they can’t be efficient and they certainly will become dissatisfied. If your company has grown, don’t try to save money by eking it out with the staff you have. Invest in your company and expand when you are ready. Listen to what your staff is telling you about the workload.

There are some jobs that you may not have the expertise to do and some that take up too much of your valuable time to complete. So outsourcing some of the work may be a smart investment. You may want to hire an outside firm to handle security, janitorial, and grounds upkeep for your company.

You certainly want to consider hiring outside professionals to handle your payroll. While there are software programs that simplify the task, if your company is growing, an outside company ensures that you comply with all the legal filing requirements.

Meeting the payroll is much more than writing out a salary check for your employees. Payroll taxes are due either semi-weekly or monthly depending on the size of your payroll. Payroll taxes include:

Employee paychecks may also have deductions for insurance and retirement funds.

And as a firm, you need to pay unemployment taxes, workers’ compensation insurance, and your share of FICA, contributions to employee retirement funds, and so on.

An outside payroll service (or person) can fulfill the basic payroll-related responsibilities, but also deposit tax payments, prepare W-2s, and take care of insurance and retirement plans. You can’t afford to take a chance, make a mistake, or be late about filing withholding taxes. The IRS penalties are significant.

The Least You Need to Know