By Jim Panepinto
RISMEDIA, Oct. 24, 2007-In today’s ultra-challenging and fast-paced mortgage environment, which is faced with tremendous competition, constant change and great marketplace volatility, there is no better time than right now to seek out and adopt best practices that will improve performance of your mortgage business. Best practice benchmarking has been embraced by a number of leading companies in many other industries, in both good times and bad, and improvement of their business results from those efforts have been well documented.
Best practice benchmarking is designed to identify world-class performers and the specific underlying best practices utilized that enables your company to emulate similar specific structural factors to realize similar results. More specifically, it is a collaborative learning process among a group of companies that focuses on specific operating practices and comparison of metrics and results, which leads to identification of improved processes or approaches within their firms. Wherever possible, those best practices are adapted in your firm to help improve its performance.
There are numerous reasons for firms to engage in benchmarking, including:
– Helps identify performance gaps between your firm and its competition
– Provides information about external models of excellence and prevents you from starting from scratch
– Encourages transfer of real and applicable experience/knowledge
– Breaks down established paradigms and creates a readiness for change/action
– Establishes a process of continuous learning that encourages firms to innovate and be sensitive to the needs of its customers
– Most importantly, performance improvement and remaining highly competitive
Successful best-practice benchmarking requires senior management commitment and involvement with continual focus on best practices that drive best performance. Acquiring a full understanding of the benchmarking process is necessary to ensure that management is able to make better informed decisions with the results. Management must be encouraged not to merely copy what others do, but to use the benchmarks as jumping-off points for innovation within their firm and to examine how best to adapt, incorporate or expand those practices internally. Establishing an ongoing process will identify process improvements that, if properly implemented, lead to improved performance.
After senior management commitment is obtained, several fundamental steps can get a best practice benchmarking process started in your firm:
(1)Decide what to measure and what data to collect. This is critical. Choose measures that are aligned with the company’s strategic objectives and key performance metrics. Sufficient time is needed to ensure that the metrics are clearly understood and defined, but would include revenue generation, cost effectiveness, staff productivity, process efficiency, etc.
(2)Collect and compare data to determine how the firm stacks up to other real competitors (and in some cases firms outside the industry). This data allows a firm to understand its performance relative to external benchmarks (such as industry average and top performers) and to assess where it stands. “Slicing and dicing” the data is usually needed to find relevant comparisons and to ensure that you are comparing your firm with the appropriate groups.
(3)Measure and analyze performance. This phase will result in comparing the quantitative results of your firm with the qualitative information collected through other means, including surveys, site visits, focus groups, etc. These will enable you to actually see why your best practice partner is so successful and enable you to identify current practices in your firm that need to be revisited or identify other opportunities for improvement.
(4)Implement results in your firm. This phase will vary based upon the firm, but it is important to develop an implementation plan, with appropriate monitoring and reporting of progress. Sharing your successes with your partners is an important component of benchmarking best practices.
If benchmarking is used by a significant percentage of firms outside the mortgage industry (estimates are that more than 50% of firms effectively use it), why hasn’t it gained greater widespread use throughout the mortgage industry? Experts have theorized on a number of reasons, including concern about sharing “trade secrets” or highly confidential information (often raised by the large national lenders), difficulty in obtaining valid comparisons due to differences in business models, the great number of firms, difficulty in collecting data, too difficult and costly, etc.
The same challenges have been faced by many other industries that have addressed and resolved them. These industries are also reaping the benefits of their efforts. Clearly, when best practice benchmarking does not occur, and when firms do not share their data, all participants are deprived of the ability to make valid comparisons as to where they stack up in their industry, the crux of the problem for mortgage firms today-particularly ones owned by real estate companies or that have business partners.
Best practice benchmarking is a systematic way of continuously measuring your firm’s products, services and practices against your toughest competitors or those recognized as industry leaders. With the intense competition in the mortgage industry today, simply meeting or beating past performance will not be sufficient to remain competitive. It is time for the industry to embrace the principles of best practice benchmarking to learn from the best on how to improve their business processes and approach, and as a result, their financial and operational performance.
Jim Panepinto is the founder and president of Pinnacle Professional Consulting Services, LLC and provides consulting services to mortgage lending, real estate and homebuilding firms, in the areas of strategic planning, performance improvement, benchmarking and best practices.
For more information, please e-mail jpanepinto@comcast.net or call 908-803-8840.
