Can Strategic Planning Help Mortgage Bankers? Strategic Planning Has Not Been a Staple in the Mortgage Business. Maybe Now's the Time to Change That

Article excerpt

Let's face it: Many mortgage banking executives have a hard time finding a strategic planning process that satisfies their need for a comprehensive and dynamic plan that can help every level of the organization succeed. [??] It's just not that commonplace for lenders of various sizes to practice a disciplined approach to planning when the market has them first racing to keep up with soaring demand and then scrambling to preserve profitability when volumes plunge. [??] Does this mean strategic planning should be seen as too great a luxury for the mortgage industry, or even worse--useless? We don't think so. In fact, the present situation makes strategic planning even more essential to long-term success. [??] This article describes a recent experience working with a lender to change the company's existing mindset on strategic planning. But it also shares observations from our work with more than 80 mortgage banking companies over the past 15 years.

The current environment

The need for performance excellence and winning strategies has become urgent in today's market. Unlike the past few years, when unprecedented volume enabled mortgage lenders to recover from less-than-perfect execution, today's environment is unforgiving.

Leaders in mortgage banking whose operations are under intense pressure to improve margins and achieve return on investment (ROI) need thoughtful planning and disciplined execution. Executives must articulate a corporate vision and define a real set of business goals as part of a plan that provides direction to every level of the company.

As they attack these issues and begin their annual planning process, executives must realize their challenge is to go beyond a list of projects and resource allocations.

The idea of planning--knowing where you want to go, when you want to get there, what you are willing to spend and the risks you will accept along the way--makes good business sense. Still, many times we discover executives have a real aversion to the concept of a planning process.

Mission statements, environmental analysis and project plan discussions too often sound like the last thing on which executives choose to spend their precious time.

A bias against planning?

We were recently working with the president of a mortgage banking company who admittedly avoids "formal" planning. He began his career in mortgage banking nearly 30 years ago and recalled when "strategic planning was its own department with a group of young MBAs who told the rest of us how to do our business."

Indeed, typical strategic planners in the 1970s and 1980s would gather volumes of data on the external economic and business competition, take weeks or even months to analyze the internal strengths and weakness of their company, and then attempt to guide business managers in the "right" direction for products and services.

The business manager often was isolated from the strategic thinking and left to implement what the "wise planners" had conceived. "All we got from planning was a tall stack of papers and ideas that rarely matched the business reality. It was a waste of time," the company president said. It was not uncommon for the planning process in this scenario to take as long as nine months, ending only because the budgeting department needed 90 days to prepare the coming year's forecast and projections.

This approach--with the planners detached from the business managers--fostered an aversion to planning by many mortgage decision-makers that still exists today. Placing a company's strategic direction in the hands of few administrative employees is seen as folly. Keeping business managers separated from strategy development was guaranteed to make communications difficult, and frequently doomed even the good plans.

Perhaps the greatest failing of this outdated approach was the planning-process cycle time. Gathering facts in January to use in a plan to be adopted in September grossly ignores the speed at which mortgage markets, competitors and businesses move today. …