If You Can't Measure Performance, You Can't Manage Performance

We believe it is important to gather metrics on your business and measure the results in numbers, dollars and percentages.  In the above cartoon, sales increased by 100% but in actual numbers it’s pretty dismal, increasing from 1 to 2 sales.  However, at least the guy is measuring something.

We see, time and time again, owners of the company, managers of departments and individual loan officers all neglecting to measure the performance of their activities.  Activities might include the number of files underwritten per underwriter; gain on sale of secondary market sales; and sales and fundings in dollar and numbers for loan officers working at a branch. Without the metrics and a decent format to display them, it’s pretty hard to effectively run your business.  There are many drivers and activities that can be measured in a mortgage bank or broker company.

This week I had the opportunity to see a presentation of a retail production manager of a regional mortgage bank.  His business model was to originate loans from internet leads and affiliated business arrangements (ABA) with a large real estate company.  Many companies and individuals are originating loans through these sources, but I was impressed with the detail of metrics that supported his business vision.  This guy had a true understanding of how to make money, using metrics to drive his decisions.

His presentation showed how he was measuring everything from cost of leads per funding, lead to closed loan conversion rates, number of loans processed per month by each processor and many more activities in his business model.  The presentation reflected past and current results, but also showed how his model performed in the future.  He found a way to prove is business model efficient and used his proven assumptions to forecast results in the future.  He also compared expected results to actual financial results.

The key to metrics is doing something with them.  Exploit the things that are working and ditch or fix the things that aren’t.  As we continued to tell our clients, “If you can’t measure it, you can’t manage it”.