The Power of Planning

“Life is what happens while you’re making other plans.”
–Various attributions

Planning is a pain. Which is precisely why many of this magazine’s readers tend not to plan beyond the current month’s originations and closings. If you are one of these, do not feel alone; it happens in much larger companies all the time, because planning causes pain. There’s just so much to do; who has time to project what is going to happen in the future?

The refinance era—it has gone on so long now, surely it can no longer be merely a “boom”—has contributed to the natural reluctance to plan. Fire a cannon in a mortgage-industry hiring hall, and you won’t hit a soul. Given the continued demand, the industry is close to full employment, indicated by the levels of activity out there. No one has the time to do much of anything besides prepare for month-end.

But they must. We must, if we are to persevere as an industry, and for precisely the same reason that we have been so busy for the last few dozen months: refinances. While they are enriching us at the moment, their absence will sound a death knell for many current industry practitioners. There is inevitability here similar to a hard drive crashing—it’s not a matter of if, it’s a matter of when. And if it’s like that hard drive, it will be at the least convenient time.

Why Plan?
Having a good plan can help you survive when the post-refinance Era comes, and to thrive in the interim. It’s a difficult time in business. Not just our business, but any business. Stock prices have fallen, resulting in lower market caps, affecting companies’ abilities to innovate and expand. The difference in large, public companies is, of course, their resources in strategic planning. Many of them have platoons of analysts preparing all manner of contingency plans involving tens of thousands of people. Among mortgage lenders and securitizers, this is less true. Most of them are thinking about industry consolidation and survival, while at the same time trying to be as competitive as possible for the loans generated by the origination community. Originators, being mostly small businesses, are trying hard to do what they do best—serve the customer. Which is a good thing, and the reason they control somewhere north of 60 percent of the retail transactions out there. But the high activity levels can leave them with reduced energy and resources to plan, or even give the concept serious thought.
So it is a great time to lay in a New Year’s resolution to plan for the future, with all its inevitability. The process doesn’t have to be overly painful. In fact, you may just find it revealing, recharging, and even inspiring—if you follow some simple steps.

Take charge. A business plan will help you take control of your future. It will help you deal with your creditors and potential financiers, it will serve to communicate your vision to your associates and support personnel, and it will help you crystalize your own thoughts about the future. At the same time, it will force you to pay attention to key issues that affect your livelihood—and your survival.

Make sure it’s workable. An unrealistic plan can do more harm than good, because it leads to disappointment and failure. 100 percent market share doesn’t work for anyone, and a billion a week in fundings only works for a handful of mega-lenders out there. Keep your plan items within the realm of possibility, but don’t be afraid to stretch a little and challenge your people to achieve. It’s a delicate balance.

Remember that it’s a “living document.” Historians will tell you that a key weakness of Japan in WWII was the inflexibility of the Imperial High Command to deviate from carefully created strategic plans. In business, companies of all sizes have to be as nimble as possible to benefit from rapidly changing market conditions. You have an advantage over large firms because of your size and ability to effect course corrections quickly. Not so easy for your large competitors, with committees, task forces, management hierarchies and budgets set in stone.

Make certain your plan allows for deviations and changes dictated by the market. It should be a “living document” that is constantly examined and amended to meet current needs and future challenges. If, for example, you are concentrating on government loans in your market area, but prices are edging up into more rarified “jumbo” air, perhaps it is time to rethink your plan. Shifting focus into different neighborhoods or migrating away from government loans may be the way to go, rather than stubbornly fighting a losing battle for a larger share of a diminishing market.

Don’t get hung up on formality. It matters less what your plan looks like than what it says. You can spend a lot of time worrying about form and format, playing with templates and making it pretty, but it may not improve the content. If you are clear about your short-, medium-, and long-term plans, they can be memorialized on a cocktail napkin and be effective. This is not the recommended final form, of course, but it is better than having a beautifully finished, leather-bound document that is of no real value.

Help is available. A variety of resources can help in the process, depending on the desired result. A Web search will reveal dozens of alternatives in software packages and advice available from all manner of experts. Most of these are aimed at creating a business plan for funding or capitalization, but there are permutations that are designed to help you plan your work at an existing enterprise.

The Process
Whether you run an origination department for a lender, are an independent mortgage broker, or are a loan officer within an origination company, your plan should reflect your personal goals and priorities. Think of a permutation of a business plan that serves as a guide when you plan your work: a career plan. Ultimately, your career plan should flavor the business planning process by leading you in the direction you most want to go. While a business plan describes the steps that will get you to a broader goal, the career plan will describe something more. In simpler terms, one plan will be tangibly oriented toward “What do I want to have/How much do I want to make?” The other plan will address deeper directional values, namely “What do I want to be/Where do I want to end up?”

Think short-, medium-, and long-term. Given the immediacy of the mortgage lending business, “short-term” means 30 to 90 days. “Medium-term” means 90 to 180 days, and long-term can mean 180 to 360 days or longer. It is important to make these differentiations, as they will drive your priorities as the year develops.

The plan as an elaborate “to-do” list. The difference is the scope and breadth of each “to-do.” Instead of language like, “Call Bob regarding Web site design prices,” the statement might be something more like:Web Site Redesign Initiative: Determine redesign look and feel by March 1. Requires prices from three sources by January 31 and decision on design provider by February 15. Provider must be able to deliver for go-live date of April 1 and stay within budget of $____.

Specific is a lot better than vague. A vague plan item works in a narrative summary section, but is useless in a list of plan line items. For example, “We’re going to do all the business we can as long as the market holds” is nice, but useless. Of course you’re going to do all the business you can as long as the market holds—but how? Current customers who have refinanced within the last three years are a good place to start, but instead of modifying the statement above to read, “We’re going to do all the business we can with existing customers,” a plan line item like this might be more productive:

Develop Business from Current Customers: Quarterly mail campaign to current database. Follow with phone follow-up and/or voicemail broadcast. Dates: Feb. 1, May 1, August 1, and November 1. Design: Seasonal themes, designed by George and Martha, with special value offer TBD. Delivery: Mailings R Us. Deliver database 10 days prior, final copy 5 days prior to drop. Follow-up: Issue leads to LOs three days following mail drop, for completion within seven days following drop.

Specific is better than vague, and should include time sensitivity and available resources, as well as any other quickly stated input you care to include. The purpose is to provide a road map, but not necessarily every turn and stop sign, at least not at this stage.

Quantify everything you can. If you know how much income you want to have, work backwards to determine how many loans you have to generate. This simple step will lead to a multitude of ideas for steps that will be required to help you arrive at those numbers.
Each of the subject areas may have many pieces, which you will uncover by giving each of them thought. Before you know it, the plan will take shape, and you may be surprised at the level of detail you are carrying around in your head but never memorialized on paper.

Consolidate and organize your specifics. Once you have thought of major initiatives you need to undertake over the course of the year and have broken them down into specific steps, check your list for duplications and items that can be linked to others. Some, for example, will have dependencies on other action steps, and can be added as bulleted items below those steps instead of being steps of their own. Consolidating your specifics this way will add crispness to the finished document, will reduce its size (thereby reducing the intimidation factor), and add to the chances for success.
After consolidating the specifics, organize them into related results areas, using your word processor’s cut-and-paste option. After organizing, the product should be a series of major results desired, followed by a bulleted list of steps needed to achieve them, all in a readable, logical form.
Congratulations: you now have a business plan. Or at least a rudimentary one, which puts you in a high percentile among your peers.

Test the plan. “Test” in this instance means a read-through for obvious fallacies, unfounded assumptions, or outright blue-sky that has no chance of coming to pass. In all likelihood, you will be its worst critic. An acid test of the plan is the question: “Does this help make me what I want to be?”
For example, assume for the moment you do not want to be dependent on refinances for the rest of your professional life. Is there a step in the plan that steers you back toward the purchase market? If so, what are the action items that will add to your success, and how do they impact your budget? Training from a pro who specializes in Realtor business like Greg Frost can be acquired, but requires a certain amount of time, expense and commitment. Be sure steps like these are included to keep your plan from being too general.

Share the plan. The people you work with are great resources. If you are comfortable doing so, bounce the plan (or portions thereof) off them and see how they respond. You will probably get some additional suggestions, and more importantly, may find you have overlooked some potentially major opportunities.

Set the plan in wet cement. No good plan is permanent. As mentioned, a good plan is a fluid and living document, requiring constant attention and tweaking to be truly effective. But that does not mean you shouldn’t commit to the plan. Think of the plan in the same light as a long-term personal relationship. They are never static and require loving attention to sustain over the long haul, two qualities inherent in most successful commitments. So even if you are not carving the plan into stone, at least set it in wet cement, allowing for course corrections and never quite becoming permanent.

To work the plan, you must read the plan. The worst thing you can do, aside from not creating the plan in the first place, is to put it in a drawer and forget about it. Instead, keep it someplace where it is regularly reviewed and used to inspire you.

Parts of it will affect and inspire your organization, so capsulize those parts and post them where everyone can see them with frequency (at the copier, in the break room, and around workspaces, for example). Another tip is to schedule a read-through of the plan at regular intervals.
The power of planning is as old as time itself, and given that we are fairly intelligent human beings in this industry, it is odd that so many of us do not have annual plans for our businesses. Given the results practitioners feel when the plan is created and followed with a successful result, it is especially surprising more people don’t follow the process religiously. With 2003 shaping up as a year full of challenges for mortgage originators (saturated markets, uncertain investors, retail-hungry mega-lenders, and RESPA, to name a few variables), a well-conceived plan is looking more like an essential than a luxury. Even if it doesn’t become a religion per se, it might be just the thing to give originators a prayer.

By James Hennessy