Earn It – Chapter 6: What Makes a Great Lender? [Podcast]

July 18, 2016 Iris Maslow


In the latest chapter of Earn It: Building Your Bank’s Brand One Relationship at a Time, we’re exploring top lenders – who they are, how they succeed, and how to make more of them.

Dallas Wells and Jim Young discuss some major takeaways from the latest chapter, which is released on theearnitbook.com.




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Podcast Transcript

Dallas: Welcome to another episode of the Purposeful Banker, the podcast brought to you by PrecisionLender where we discuss the big topics on the minds of today’s best bankers. I’m your host Dallas Wells and I’m joined again by Jim Young director of communications at PrecisionLender.

Jim: Hello everyone, thanks again for joining us. Dallas and I are back again to talk about the book we’ve been co-writing along with PrecisionLender CEO, Carl Ryden. It’s called, “Earn It, Building Your Bank’s Brand One Relationship At A Time.” As you know we’re releasing it in sections a month at a time, and it’s all available at theearnitbook.com, the ‘the’ is important there, theearnitbook.com. This week we’re going to discuss the latest released chapter 6, what makes a great lender?

When we wrote this chapter we basically split it up into 3 parts. First how important are great lenders to a bank. Second, what are the traits that make a great lender. Third, most importantly, how do you get more of them. Dallas let’s start with number 1. At PrecisionLender we’ve been doing a fair amount of research both for this book and for a series of reports we’re working on into the performance of lenders. Tell us a little bit about some of the things we found when it comes to top lenders and the impact of their performance.

Dallas: Yeah, first just to clarify, we use the term ‘lender’ to be really specific about what we’re talking about. Of course a lot of banks call them other things, relationship managers. In our mind a lender is someone who’s managing that relationship, so they’re also responsible for selling all the things to that relationship, deposits, feed base stuff, the whole thing, just to clarify that.

What we wanted to do was dig into these lenders and look at what’s the production distribution really look like inside of a bank. We kind of anecdotally know that most banks have a handful of lenders that are really carrying the load. We wanted to quantify that, put a real number to it and say, “How much of that load are they really carrying?” That way we can say, “Does it really matter? Is it really important?” If it is really important, if there is a big difference, what are those lenders doing that we can learn from to really lean on and improve overall performance?

The first thing we learned is that, surprise surprise, the distribution’s not equal at all. If you’ve got 20 lenders in your organization you’re not going to get 20 equal shares of production. We’ve talked about this a little bit on the podcast, we’ve written about it in several different places, but we start to see these distributions and of course they’re different by bank and by the type of business that they’re doing but they follow some form of what looks like a Zipfian distribution. That’s a little bit of a math nerd term, but basically the folks at the top produce orders of magnitude more business than the folks even at the middle of that distribution.

I think the easier way to think about it is the way our CEO Carl puts it, which is put it in terms of you have your dollar lenders, who are producing a dollar’s worth of production. If you go 25 lenders away, they’re going to be producing a quarter worth of production. You have dollar lenders, quarter lenders, nickel, all the way out to a penny lender, who’s kind of 1/100th of what that top person’s doing. If you think about that in terms of impact on the bank, obviously from sheer who’s generating income, it’s extremely top heavy. Even at the banks where it’s not a true Zipfian distribution, there is a very top heavy production.

What we use that to do is, number 1 find some behaviors that are common, and number 2 figure out where do we actually point the efforts at improving the bank? I think sometimes the logic is to say, “If we got a bunch of penny lenders, let’s fix them. Let’s turn those penny lenders into something better. If you actually back into the math of it, the real impact comes from take your dollar lender and make them $1.05 lender. The extra production versus the effort it takes to make that happen, taking 5 penny lenders and doubling all of their production, or somebody who’s already doing a dollar, making it $1.05, just the effort required.

When we talk to our clients we’re starting to pull out who are their top lenders. We call them alpha lenders as a way to designate who we’re talking about. Who are the alpha lenders at that bank, and let’s talk to those 2, 3, 4, 5 folks and say, “Let’s work on what we can do to make your production better,” because it will have this huge amplified impact on the bottom line of the bank. Versus saying, “Let’s try to get all 100 lenders in a room and make sure that everybody does everything exactly the same.” That’s, I think, the big takeaway, is it’s not equal distribution so let’s really focus our attention at the top of that list, the bottom of the list is going to be what it is.

Jim: Yeah. It was enlightening and frankly a little bit depressing sometimes to look at those distributions, to see how far out it goes very flat toward the end. There’s at a lot of banks a lot of people carrying not a lot of weight.

Dallas: Yeah, I think it goes back to the branch banking days of, “We need a lender in this market, so we have somebody in that chair,” they’re not doing anything when you actually get down to are they moving the needle or not. There are certainly some takeaways from that, of let’s measure the cost of that tail of that distribution, and do we really need a lender in every market sitting in every branch, kind of staring at the phone waiting for it to ring? If we’re going to trim some fat is that where we can do it? Then refocus those resources at the top of the curve.

Jim: Right, and we’ll stay positive here and stay on track.

Dallas: Yeah, no more job cuts.

Jim: Stay on the top part of this then. All right, we’ve established great lenders, great relationship managers, they really, really matter. The next logical question is, “What makes then great?” We’ve identified in some blog posts and as well in chapter 6 some of those traits. Can you touch on a couple of them?

Dallas: Yeah. I think the first thing is that everybody expects the top lenders to be what I would call the back slappers. When you think about what’s a great lender look like, you think about someone who’s very extroverted, they’re taking their clients to lunch, they’re playing golf with them, they’re always out of the office and they’re building relationships. What you find when you start to talk to some of these lenders is there is no personality type. They don’t all fit into that stereotype.

You have lots of different types of folks who are generating a ton of production. It’s not that. It’s not the classic sales, always be closing, coffee’s for closers, kind of lender. The difference is not sales activity. That’s stuff all important and we’ve talked about that before, you want to measure those things. You have to do that stuff to generate business. That’s business development, got to happen. The difference is the lenders that actually move the needle, is what happens when you actually come to the table to talk about a deal. All of that business development stuff, that’s not building a real relationship because frankly if I’m a customer, a borrower at a bank, and I’m someone who has big commercial borrowing needs, I can get anybody in town to take me to lunch. I can go to as many baseball games as I want to go to. I can play golf every day of the week if I want to. You’re not differentiating yourself when you do that.

The difference is when I finally come to you and say, “Okay, you’ve earned the right through all that business development now that we’re going to talk about a deal.” What happens now? That’s where the difference happens, is you’ve got the penny lenders who say, “Here’s my rate sheet, here’s what I can offer you,” and if you ask for something different, it’s deer in the headlights, “I don’t know what the heck to do with that.” The very best lenders know that the rate sheet’s not going to get the good deals. The standard, out of the box, structure is just the starting point in the conversation. It’s really about, how do we shape that deal? How do those lenders, those alpha lenders, what do they do that’s so different?

They’re very empathetic, and that’s not just towards their borrower. Remember, a lender’s got 2 sets of negotiations. One with the borrower, one to then actually get the deal done in the bank. They have to be able to handle both sides of that and those are 2 very different negotiations. They’ve got to be able to communicate on both sides of that. They have to do that with real data, this is not something where you can just be, again, the kind of loud, in charge person who forces a deal across the finish line. That’s not the way banking works anymore. Maybe it was a decade ago, not in today’s world.

There has to be some analytics to it, there has to be some reason why this deal works for both sides. Frankly you’re going to have to do some math. Those 3 big pillars are what makes a great lender. You can have that person be an introvert, they can be an extrovert, they may or may not take clients to lunch, but when a deal comes to the table they know how to put it together, they know how to make those deals work. They make it a good experience for the borrower, they make it a deal that’s palatable at the bank. They’re kind of a star on both sides, that’s why they keep getting deals across the finish line and the other ones don’t.

Jim: Yeah. It’s interesting because we talk about, you use words like communications and empathy, and I’ll admit, because I was starting when we were putting this together, I was thinking it was almost starting to get touchy-feely when describing it.

Dallas: Yeah, it does get touchy-feely.

Jim: But then the other part of it we say is basically, you do want to walk in that other person’s shoes, walk in your loan committee’s shoes, but you also at some point like you said, you’ve got to put on your analytical hat and put some of the emotion aside. What we describe is, because you and I both like to play poker, is avoiding going on tilt. One of those examples is, we’re never doing that deal again, because it went bad so therefor all future deals of this type will go bad and I’m avoiding that sort of thing.

Dallas: Yeah. When I first became a lender, I remember bringing a deal to the table. I sat down and I thought it was a great deal, the numbers all worked. My boss just said, “We don’t do hotel deals.” “Okay, like period?” “Yes, period.” I said, “What if it’s secured by mostly cash?” “Don’t care, we lost money on 2 hotel deals, never doing another one.” That’s the kind of mentality you have to avoid. You can’t just exclude an entire sector because you had go bad 15 years ago.

We’ve talked about this before too, you’ve got to overcome the lizard brain mentality, and your job as the lender is to help your borrower overcome that. “I know you want a fixed rate, maybe that’s not the right answer. That gives you some comfort, I can give you comfort in other ways.” That’s where you start to get analytical, you start to dig into … It’s not touchy-feely. You start there because it’s an emotional negotiation, but what you’ve got to actually get to is how do we solve that problem. On both sides, with the borrower and with the bank. You’ve got to actually convince with some real facts there.

Jim: All right then, so we know great lenders matter. Now we’ve got an idea of some of the things that make them great. Now the obvious $64,000 here is, how do I get more of them? That’s a question that’s being asked a lot lately. Let me read real quick an excerpt from Bank Director 2016 compensation survey report. Quote, “40% of survey respondents said that recruiting commercial lenders is a top challenge for 2016. When asked to describe their bank’s efforts to attract and retain commercial lenders, 43% say they’re aren’t enough talented commercial lenders. The same number say they’re willing to pay highly to fill these valuable roles within their organization.”

With established that A, they’re looking hard for them, they are willing to pay a lot for them, and they are not finding them. You think about, I’ve got 2 options on how am I going to add lenders. Option 1, hire them. Well, that pretty tells you, “Good luck, get in line and be ready to get into bidding wars.” Option 2 then is, the question can you make great lenders? Can you take those lenders at your bank that are maybe close to great and make them great?

Dallas: Yeah, Jim I’ll actually add on to that just a little bit, which is that even if you do happen to find a lender, or a team of lenders to hire, we’ve talked to a lot of bankers who’ve been burned by that process. You pay a giant premium, you probably also pay a recruiter fee to get that person or that team of folks in the door, and the deals don’t follow. Their customers don’t come with them because the only way you’re going to get them is to give them some reason to. You’ve got to give away something to get them to move, no matter how much they love the person you just hired. Not only is that an expensive and difficult way to go about it, the track record is not all that glowing for some folks. I think that there has to be some portion of, we’re going to build this.

A quick story to show that this is a real thing. The question is really, when you start talking about this, I think the feeling from a lot of bankers is, “A great lender is just born. They either are or they aren’t. Some got it, some don’t.” In my early days I worked with a couple of lenders, both of whom would be considered alpha lenders. Big producers, carrying giant portfolios, booking big deals, no question that they were alpha lenders, top producers, and always had lots of offers from headhunters and from other banks. Both of them eventually moved on.

One moved on to become basically the chief lender at a new bank. The other came on to become a market president at a different bank. Comparable sizes, similar size of banks but 2 very different cultures. You had these 2 top producers who’d been home runs for many consecutive years. They land at the new spots and it is night and day difference. One person, the deals show up, the business follows, the portfolio continues to grow. He gets a promotion, all is well.

The other guy goes into kind of career purgatory. He goes to the new place, it’s very restrictive, they don’t bend any to try to get the customers to follow. They’re basically like, “Hey, where’s the magic wand you’re going to wave and all the business comes with you?” “Well, you give me no flexibility. I can’t do any of the stuff I used to do.” I’m not talking about, “I’ve got to give away cheap rates,” I’m talking about, “I need to be responsive to my customers.” “You don’t allow it, you’re slow to make decisions.” He got really frustrated and petered out as a successful lender.

It wasn’t just that some people got it and some people don’t. It’s that they landed in 2 different environments. One allowed that lender to continue flourishing, the other one was hitting a brick wall. I think what we can learn from that and what we’ll start to dig into in coming chapters is, what was it about those environments? How can we, not just train the lenders the right way, I think there’s some basics we can take away from the behavior of, “Hey, do these things,” to create the really necessary important skills that are highly correlated with production.

But there’s also an environment factor. Do they have the right tools? Do you have the right policies? Do you have the right management team? Do you have the right approach to them in general? To where, if you do find or create an alpha lender, do you plug them into an environment where they succeed and they get promoted and all is well, or do they hit the brick wall? That’s what we’ll be digging into from here.

Jim: Yeah. You mentioned some of those behaviors again, that goes back to some of the reports we’re working on. But again, if you identify the behaviors but then don’t have an environment in which you can actually practice those behaviors, then really …

Dallas: Then it’s just a vanity metric. It’s nice to know but good luck actually getting it to happen.

Jim: Right. That will wrap it up for this episode. Thanks again for listening. A reminder, you can go theearnitbook.com to read each section of the book as it’s released. You can also sign up with your email to have those new sections sent straight to your inbox each month. The first 500 who sign up will receive a free copy of the final print version of the book when it’s released later this year. Those details and more will be in the show notes of the episode, which you can always find at explore.precisionlender.com/podcast. If you like what you’ve been hearing make sure to subscribe to the feed in iTunes, Soundcoud, or Stitcher. We’d love to get ratings and feedback on any of those platforms. Thanks again for tuning in, until next time this has been Jim Young and Dallas Wells. You’ve been listening to The Purposeful Banker.


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