Lenders typically have two sets of negotiations for every deal. First they have to successfully negotiate and win a deal with their borrower, and then they have to negotiate internally to get the deal booked. This means navigating the often difficult waters of credit and loan ops, including pricing approval, credit approval, document prep, and closing.
Hi and welcome to Lender Performance, your guide to becoming a better lender. Dallas and Jess here from PrecisionLender. Thank you for joining us.
Lenders typically have two sets of negotiations for every deal. We know first they have to successfully negotiate, win that deal with borrower, but then they have to negotiate that internally and get the deal booked. This means navigating the often difficult waters of credit and loan office and pricing approval and credit approval and document press and closing. Those are a lot of things. Dallas, we want to talk today about some of the reasons for those, and some strategies to navigate them. Can you talk a little bit about why we find these pockets of difficult waters in the borrower/lender process?
Let me start with my own personal disclaimer, which is bank politics is not something that I really excelled at. Hence, not working at banks anymore, but helping them from the outside. I’m somebody who always was rocking the boat and pushing for changes to things. That makes a lot of bankers uncomfortable. I’ve worked for some really great people who were accommodating of all that, but keep that in mind as we talk about this. I tend to be a trouble maker, so to speak, as far as always looking for a better and different way. I know that in some banks that’s great, and in other banks you have to be cautious with those kind of things. That’s the disclaimer.
The reality is that banks as complex organizations with lots of moving parts, and out of necessity they’re very siloed. There’s different departments that are serving different needs to customers. Everybody kind of ends up with their own little turf. That’s the classic breeding ground for corporate politics. Every bank that I’ve ever worked at from very small ones to very big ones, they all have some pretty deep internal political waters to learn to navigate.
The interesting thing is the why, I think is, again, just the complexity and the silo effect, but the how to navigate those is really about understanding the nuances of your own bank, but I think there’s a few consistent approaches that we can talk about that will be helpful.
The first one, the really big picture thing, is to understand the priorities of all those different factions within the bank. We break them down into two big groups. It works for most folks at the bank, you can kind of put them in one bucket or the other.
On one side you’ve got what we call the front of the bank, which is the customer facing, typically people who are responsible for sales production. You’ve got commercial lenders. You’ve got mortgage lenders, consumer lenders. You’ve also got the deposit branch and retail staff. That’s the front of the bank, facing the customer, and being the interaction with the public.
On the other side you’ve got the back of the bank. The back of the bank is often the management team. It’s finance and treasury. It’s credit. It’s operations folks.
We’ll say right up front, neither of those is more important than the other. We don’t ever want to make it about that. About, you should ignore the back of the bank people or vice versa. It’s about bridging that gap between the two because there are very different priorities from the front of the bank facing the customer versus the back of the bank where, “Hey, it’s our job to manage the risk, and to make sure that all the business you guys are putting on in the front is priced appropriately, the right kinds of risk are landing on the books, and that we’re dealing with all of those issues the right way.” Both are absolutely vital, critical pieces to the survival and success of the institution, and there’s going to be some natural headbutting there between the two where those different priorities collide.
Understanding that basic dynamic, I think, is the first step. Everybody’s got their own priorities, their own things that they’re responsible for, and to navigate that you’ve got to understand where they’re coming from. Help make sure that they can check their box, and do the things that they’ve got to do in the best way possible instead of accusing them of trying to derail you because that’s rarely the case. They just have a different thing on the top of their list versus what you have.
It seems like to help with that there’s a level of understanding of what those priorities are. What suggestions do we have for lenders on how to dig into that, how to preempt some of those situations that might arise?
We’ve talked about, several times, negotiating and discussions with borrowers, and how that always starts with empathy and understanding where the borrower is coming from, and what they need in this transaction and from this relationship. If you meet those, that’s always the foundation. Meet that first before anything else, and then worry about how it fits. Those are really similar things. If you want to be able to navigate the internal politics, what that’s really meaning is if you want to be able to get the things you need from the other folks in the organization, you have to help them get what they need too.
The first step there is you have to understand what those priorities and [inaudible 00:06:03] are. When you really boil it down that means that if you want to get your loan done, you need to understand how the sausage is made. What can you do to better understand how the loan gets from where you handed it off, “Hey I got a quote. I got a turn sheet out. The borrower said yes. Now I hand it off, and it disappears into the dark tunnel, and goes to the back of the bank, and it should in theory come out as a stack of documents that can be signed by my borrower, and we’re good to go.” It can’t just be this mysterious dark tunnel, and you just wait at the other end for it to come out.
You have to, as the lender, a big part of your job description, whether it’s written that way or not is to shepherd that deal through the process. You are the advocate of the borrower. It’s your job to say, “I know how the deal needs to look. I know when it needs to be done. I have to help make sure it gets there.” You have to know all of those steps and have some understanding of those so that you can help shepherd it through, help those folks prioritize which things should be where. Again, understanding that your deal isn’t the only one that they’re working on. They’ve got a big stack of stuff. Just let them know, and be consistent about it, “This ones a big priority. I really need it done soon,” versus, “Hey, this one can wait.” Help them figure out where it goes in their stack instead of always, “Mine has to be on top.”
Understanding the steps, understanding where if falls in everybody else’s priority list, getting those priorities right so that we can best serve that customer, that’s the only way to approach this. You’re going to have to do your homework on how loans are made, how they’re made at your own bank, and all of the people involved there. You’re going to need to build some of those relationships, and help them meet some of there stuff along the way.
Okay. If the internal politics game is already in full force at the bank today, some of those strategies you’ve talked about are great for long-term and digging in and understanding, but what are some of the things that someone could do starting tomorrow? What are some tips or advice you’d give to them?
Most of these I think will be more along the lines of generally getting along with your co-workers, but … It seems basic, but we see these things all the time in trying to get loans done, in trying to get big software implementations done, these different silos within the bank that it doesn’t take much to stir up a pretty nasty battle between them.
The first thing to do is to stick to the work that needs to be done, and not the people issues. Working with people over a lot of years, and butting heads with the same folks a lot of times, it inevitably a lot of times becomes a very personal confrontation. It’s personal attacks. It’s gossipy kind of stuff. It’s thinking that they’re out to get you. They don’t get the way it’s supposed work. I hear that all the time, “The credit guys just don’t get it. The finance guys don’t understand what we’re trying to do. The lenders don’t understand why we’re asking this.” It’s become very personal.
It has to be able the work, and that goes back to how the sausage is made. We all know that for this loan to go on the books and for us to do the business that we’re here to do, these ten things need to get done. How can we work together to get them done so that everybody’s needs are met, and we move it front to back instead of, “I’ve got to have this battle with John from credit because he doesn’t like me.” Those are the kind of things that are very counter productive.
The second thing, this one comes from, and I think it’s one that will probably be more relevant, for a lot of folks it’s relevant today, but I think it’s becoming more relevant industry-wide over the next couple years with mergers and acquisitions. I’ve been through a couple of those. What happens is there’s always a shaking up of the org chart, some reorganizing of who fits where, and what spots get added, and what spots get eliminated.
What happens from that is people kind of start choosing sides and pairing up with who they think the survivors are going to be. Again, sometimes that can get really ugly. It sounds … Something that we can joke about and laugh about, but it’s also people’s livelihoods. I’ve been there, and it is high stress where you know that not everybody is going to survive the shake up, the question is, “Who’s going to be the new boss? Who gets to pick the 10 people that stay out of the 15 possible? I have to properly align myself there.”
I think you really have to avoid doing that choosing side thing because I’ve seen some of those come out really surprising where I saw a whole bunch of lenders line up behind the person that they thought was going to be leading the new real estate group of the new entity, and they kind of made some enemies in trying to line up the right way there, and then the job ended up going to somebody totally unexpected from the C&I group because they wanted to rethink the whole approach. There was a lot of people that then were like, “Oh crap. What have I done?” That’s where you can kind of outsmart yourself with the politics.
Instead, the way I think of it in my head and the way I tried to navigate that at the time was sort of like the book I love to read to my kids, “The Lorax.” The Lorax’s thing is I speak for the trees. If instead of aligning with who you think is going to be in which job, and where you think there’s the most political clout, you speak for the customers. You do your job of getting the business done, and speak up about organizational things, but do it not from the, “Hey this is unfair to this group of people within the bank,” but say, “This is going to effect how we service our customers.” Good, bad, or indifferent. Speak of it from that perspective.
Again, that’s your job as a lender. You are the advocate of the borrower. You help them get what they need, the deals will follow. If you’re concerned about your own place in the organization and which team to play on, it’s the wrong approach, and it’s the one that will eventually catch you on the wrong side of that because nobody’s going to be good enough to always guess the right winning side, so to speak. It is, get things done for your customer.
The real outcome there, I’ve seen some lenders who take that approach, “I speak for the customers,” and they’re very aggressive about it. They’ll steamroll some of the people, the “back of the bank” kind of people, really push it through credit and really hammer the finance guys about pricing, or hounding the operational folks about getting the deal documented and ready for closing, but if it’s always about my customer needs this by this date, they usually find people that are willing to help them no matter how much of a jerk they might be about it. People understand that as the motivation, “Wow, they really care about making this work for the customer. I can get on board with that,” versus the … People can see this from a mile away the, “Hey I need to make my number so I can hit my bonus kind of approach. You need to work on my deals,” versus, “The customer really needs this to close by tomorrow so their deal doesn’t fall apart,” instead of, “My loan’s always go on top because I’m a jerk to you.”
Those are very different things. You can be aggressive about it. You can be rough around the edges if you feel like that’s what’s necessary, but the important thing is what’s the motivation behind it.
The other side benefit of that, sort of a side benefit I guess, is you’ll be a producer. If that’s your mindset, if that’s your approach to lending is serving your customers with that kind of tenacity, you will be producing a lot of loans. Production always trumps politics.
When in doubt, if you don’t know how the sides are going to line up. If you don’t know … Even outside of that M&A stuff, if the politics is obnoxious to you, just ignore it. You produce and the rest of it will take care of itself. You’ll be fine within that organization if you’re putting dollars to the bottom line. I think that’s probably the big takeaway, and that’s probably a good place to wrap it up.
Focus on that customer experience. Make that good. The customers will follow, and the rest of the politics is just something that yes you’re going to have to navigate, but it’s people issues. Be nice, help them get what they need. They’ll help you get what you need, and we can all try to serve that customer in the end.
Great. As Dallas said, that will do it for this episode. Thanks for listening. We’ll be sure to provide a few resources in the show notes for this episode, and you can always find those at precisionlender.com/podcasts. As always, if you like what you’ve been hearing please subscribe to our feed in iTunes, SoundCloud or Stitcher, and we love to get ratings and feedback there. Thanks for tuning in. Until next time this is Jessica Stone.
This is Dallas Wells.
You’ve been listening to Lender Performance.