Managing in a Tightening Market

Here we go again, another tightening of the market. The rapid deterioration of the market has caught not only homeowners and builders off guard, but the banker/broker management teams responsible for maintaining and building market share. Volume projections are down. Resale inventories nationwide are up significantly. New home sales and new home starts are projected downward and to add salt to the wound, the nation’s cost cutters are now scrutinizing every nickel spent. You now stand within this fishbowl of greater management visibility.

Some managers will rise to the occasion, recognizing that a tightening market has far reaching implications, the least of which is how a slowing market impacts their management skills. Others will say, “I have been through this before and this too shall pass,” leaving modifying management skills to others. Another potential reaction is the “I don’t think I can take any more of this” and allowing yourself to become a victim of current market conditions. The “woe is me victim” does not inspire those around him or her and therefore, cannot possibly be an effective leader. The “this too shall pass” manager hardly encourages individual initiative.

Managers who seriously analyze how market conditions impact their leadership will be the ones to win. The following steps are designed as a management self-assessment. As you review each, answer this question: “Is this an area I can brush up or do I have it nailed down?” Only you are answering these questions, so you can play all the games you want, but remember, as Zig Ziglar said: “In the subconscious, there is only witness for the defense”


1. Avoid the knee jerk reaction. Drastic layoffs are not necessarily the answer. A knee-jerk reaction that involves a reduction in staff to save overhead is an easy trap into which many managers fall. The long-term ramifications of this move must be considered. Too often this move is perceived as a short-term gain, only to ultimately become a long-term loss. It is true that a significant decrease in volume may not warrant continued staffing levels, but an across-the-board cut without serious study of the potential fallout is a mistake.

2. Be careful with comp plan changes. If you believe your compensation plan does not accurately reward the behavior you expect of your personnel, then a change is in order. Sometimes it takes a downturn to reveal “this comp plan does not encourage nor measure what it should.” However, the downside risk of making changes to your comp plan, no matter how minimal, can be significant. Be careful that your changes are not perceived as a “takeaway.” It is therefore incumbent upon managers to give serious thought to phasing in comp plan changes over time. Or announcing the change in September to become effective January 1, 2007.

Changes to your comp plan may be appropriate and warranted. Announcing a wholesale change to be effective immediately runs the risk of creating disenchantment levels that will serve only to increase turnover. Why run the risk of losing good employees because you tried to squeeze too much too fast? While introducing the new comp plan, discuss the business reasons behind the plan and help the team find the wins in the new plan.

3. Don’t pretend the skills you need in an “up market” are what you need today. When markets tighten, frustration levels rise. This reality can become a heavy burden upon all team members. It is easier to find fault when there is more time to focus on how much the market has changed. Increased market volatility is often followed by internal warfare where office politics trump working as a team. Your management skills will be severely tested in not only building the communication bridges required, but in expecting your team to travel them. The skills you applied in a “rock ‘n roll” market must therefore be amended for effective application today.

4. Determine if you are a mother hen or captain of the ship. It does not matter if you are in the “hard landing” or “soft landing” camp. What does matter is that you do not minimize the challenges your team faces. More importantly, it is imperative that you involve them in the decisions on how best to weather the storm. Managers who try to insulate their personnel from market realities are not doing themselves a favor. Employing a “mother hen” attitude to protect your “flock” from harm actually does more harm than honestly calling the game. If you minimize the issue, you undermine your personnel’s propensity to take remedial and immediate action. This is a classic management blunder.

5. Don’t think you are “above the fray.” If a manager’s sleeves were ever to be rolled up, now is the time. If all you do is stand at your white board and “pontificate from the pulpit,” you should rethink your time and energy allocation. Sure global visions and long-range thinking are required, but if you are in meetings all day, how do you really know what is going on? In times like this, it is imperative that all managers forget both ego and title and get into the trenches for an intimate look at the trials and tribulations facing their teams. The ivory tower is a splendid destination resort when markets are flush. It can be a debilitating prison when markets are not. Get over your “holier than thou” attitude and get a grip on what is happening.

6. Help your team to anticipate. What changes in product knowledge will be required to meet a changing market? When markets are hot we normally do not prepare for changes in products and guidelines. When things get tight, it is important to understand what product features may once again be in vogue and how their use will generate more business. Case-in-point: 3-2-1 Buydowns. This once popular feature has minimal value in a low rate environment. Today it will begin to gain ground. Are your personnel prepared and knowledgeable on how to position and use this feature correctly? Seller-concessions are another example. This feature is not real popular when markets are rolling. It will gain popularity as the market continues to tighten. Is your team prepared to anticipate these and other changes in product features?

7. Provide a vision for the future. Your team will actually “go to the moon” for you if they knew where the moon is. “Here is where we are.” “Here is what we are going to do. For example, we will cross train staff/departments for the next wave.” “Here is how we are going to do it.” These are all issues successful managers address. When loan volume takes a hit, so do individual confidence levels. Successful managers today realize that they must, by word and deed, present a definitive direction and vision for the company. Anything less will cause your team to question the wisdom in hitching their wagon to yours.

A successful manager is a lot like a marionette master. Pull the right strings and the show is a success. Pull the wrong strings and you are in trouble. In pre-edition testing, most managers have identified more than one of the seven issues above as worthy of greater individual attention. If you fall into that category, pick one issue and work on it until you have it covered. Then, move on to another, keeping only one on the burner at a time.

By Bill Evans