Model behaviour

The business model of an organisation should be reflective of the recruitment and staff retention strategy it has adopted and of course...visa versa. Judith Tydd reports on why this fit is so important

Hiring the right staff for a position left vacant or one that's been newly created underpins the long-term profitability of any successful business.

Even more pertinent is crafting the approach to hiring around the individual business model - whether it be a broker, lender, aggregator, mortgage manager or originator.

According to Ray Hair, CEO of PLAN Australia, tying the recruitment strategy to the business model is critical, as each business is pitching to a different investor or customer.

As an aggregator, PLAN has moulded its recruitment strategy around the experience of prospective brokers, with most needing to demonstrate at least two years experience.

In sourcing potential candidates, PLAN targets its campaigns through direct marketing initiatives and through internal channels, notably business development managers (BDMs).

"Word of mouth is our biggest source of referral for people who have been in the business," he says.

Direct marketing is initially used to create awareness of a position and drive curiosity, and the BDM then acts as a filter through the interview process and beyond.

The process, says Hair, can take up to 12 months depending on the number of interested parties.

Hair needs to see they're motivated enough to run their own business, and says the 80/20 rule determines their success and income levels: if they're proactively seeking new clients and business opportunities, they'll do well.

The PLAN interview and accreditation process (see checklist) is used to identify candidates with the right experience and expertise.

Operating as a full-service aggregator, Hair says if a prospective broker doesn't want the benefits provided, there's no sense in signing up.

"If they've got the motivation to be self employed then those are the people we're taking to," he says.

Candidates who have previously worked as a mortgage or finance broker are looked upon favourably, and will be reference checked.

While it's a small part pf the business, there is also a broker development program where new industry recruits are subject to an aptitude test.

According to Hair, PLAN's approach to recruitment has evolved over time to become a much more formalised, structured process, and the increasing competitive nature of the industry means the business is perpetually seeking new operators.

"There's no such thing as a vacancy. You've got to sell your service proposition...we're always in recruitment mode," he says.

The direct cost of recruiting for the aggregator model, he says, shouldn't be measured in dollar terms, and instead refers to it as an opportunity cost.

"It's all about retaining. The more profitable they are, the more profitable we are," he says.

According to Glen McGrath, general manager of Employ, the recruitment strategy should not only complement the business model, but also the skill sets around that model.

From the end user's perspective, recruiters need to ensure the skill sets brought into the business best suit the model, such as an aggregator's need to attract quick- thinking brokers with an understanding of what self-employment entails.

An aggregator needs to deal with the brokers that are part of their plan, he says.

McGrath says the mortgage management approach to staffing tends to be more reactionary - a factor of the type of business they're engaged in.

"Managers are usually small and quite flat out day-to-day and they're surprised by the fact someone leaves so it's not poor management it's the nature of their business," he says.

He believes the mortgage management model traditionally attract career minded professionals who've worked in other areas of financial services, while broking brings in the ex-bankers.

The cost of recruitment for both of these models can be substantial, particularly as many are small businesses watching every dollar spent.

Given such outlay, McGrath says work of mouth is a good way of recruiting and finding a solution quickly but isn't necessarily the best.

By establishing a relationship with a specialist mortgage recruiter who understands the process can pay off handsomely, and also help the small business understand the value of quality staff.

"We look at the roles and the culture of an organization...just because it's small doesn't mean it doesn't have a strong culture," he says.

Employ has acted as a recruitment supplier to some of the major banks, who McGrath says that a very professional approach that's fundamentally driven by the structural hierarchy in place.

He believes smaller organisations, whilst not as complex in structure, still have the capacity to offer the same degree of professionalism.

The more senior the role, such as one where there's accountability over income or credit or risk, the more rigorous the recruitment process.

The benchmark for entering a bank or larger institution is typically an entry test, a series of panel interviews and some degree of psychometric testing.

Intuition on account of the interviewer is something relied on less and less, and the more tangible the testing, the sounder the process.

The current trading environment is underpinning employment prospects in the mortgage space; the tight market is forcing the hand with a lot of players who would typically use an agency.

According to McGrath, the number of business models operating in mortgages may contract temporarily, however, there's no questions it'll grown again once the turmoil subsides.

"It'll test the players that don't have a sound model from an infrastructure point of view. There's a place for everyone," he says.

Expert voice: Floyd Nangreave, Cherry Solutions

As managing director of one of the industry's specialist recruiting firms, Floyd Nangreave has been privy to many a questionable hiring decision.

According to Nangreave, the rule of thumb for recruitment appears to be, the smaller the business, the looser the process.

His justification lies in larger organisations having an institutionalised mentality, with layers of corporate structure incorporating human resources, acquisitions and retention strategies and loyalty programs - all fundamental to successful recruitment drives.

By and large, the bigger fish also have the capital to inject into hiring a quality salesforce.

"In a smaller business such as a broker or mortgage manager...their processes tend to be quite loose and informal and fairly sloppy," he says.

He stops short of suggesting these business models are less professional in their approach to recruitment, but concedes the level of due diligence undertaken tends to be less than that of larger businesses.

"It's a by-product of capital and understanding the process and most importantly a by-product of time - these brokers and mortgage managers are time poor because there day is focused around transactional activity as opposed to corporate - they're working in the business and not on the business," he says.

Despite this, the advantage the smaller brokers and mortgage mortgages have is the ability to react quickly to staffing changes. Bigger lenders are often slow to react and make decisions - by the time multiple stakeholders have been advised, quite often the candidate is no longer available.

This, says Nangreave, hinders the likelihood for some of these lenders to recruit the most desirable prospects as the process is deemed too slow. Some candidates have even turned down a role because of the protracted nature of the process.

"Most candidates reflect upon the way they are treated in the recruitment process as they are likely to be treated as employees," he says.

Most of the larger mortgage organisations, such as the banks or larger aggregator groups, have preferred recruitment supplier agreements.

In general terms, the more technical the role the greater the degree of due diligence applied, such is the case in an IT or analytical credit role, but according to Nangreave, the same process of due diligence should be consistent across all roles.

Recruitment agencies are increasingly a popular method in hiring staff, but at the broker level, for example, this is often cost prohibitive.

"The cost of acquisition can be the cost of the entire years marketing budget or a month's rent but it's only a true cost when the selection process fails. The cost sometimes be becomes the issue when the decisions to hire is wrong. The right decision is money well spent," he says.

In a tight employment market, those hiring are aware of who the high performers and once identified, a recruitment strategy should be executed, says Nangreave.

The mortgage industry is tight-knit and word of mouth hiring is common.

By informally adopting an internal process through existing staff, management are easily able to validate prior history and the staff member isn't likely to nominate someone less than qualified for the position.

Surprisingly, however, the number of recommendations that fail to be employment checked is staggering, says Nangreave.