5 Reasons Incentive Compensation Plans Should be Part of Your 2016 Growth Strategy

As the year of TRID comes to an end, the focus is now shifting towards driving profitability through increased productivity and operational efficiency. The foundation of success for this lies in frequently monitoring and measuring performance and having the ability to make seamless adjustments when necessary.

Incentive compensation plans (ICP) are a practical way to monitor origination performance by aligning compensation structures next to key indicators of efficiency. Here are five benefits of using ICP as part of your growth strategy and how automation and integration software makes implementing ICP’s achievable.

1. Effectively Motivates

ICPs effectively motivate origination teams by clearly outlining expectations, defining incentives, and juxtaposing them next to potential earnings and branch revenue. Doing so makes it easy to track progress; loan originators know how many units they need to close until they are bumped to the next compensation tier level, processors are aware of how their average turnaround time from application through closing compares to that of the branch’s average, and branch managers can continuously monitor plan effectiveness or identify underperforming LO’s in need of improvement. Presenting ICPs and performance data in an organized, comprehensible way provides a cost-effective means to continuously motivate and reinforce desired behaviors that drive growth.

2. Recruiting Tool

Standing out from the crowd in today’s competitive mortgage landscape requires taking a new approach to traditional compensation structures. Offering ICPs that are built around individuals skills, experience, strengths, and expertise will be the golden ticket to recruiting qualified high performing loan officers. With integration and automation, lenders can offer creative yet complex compensation plans that illustrate recognition of the loan officer’s value brought to the company by drawing a direct link from individual performance to the overall success of the branch. Whether using financial performance measures such as variable commission rates based on tiers of revenue attainment or through more non-financial means such as quarterly bonuses for loan quality, or a combination of both, ICPs make a powerful recruitment tool for acquiring high performing sales teams.

3. Invest Today, Grow Tomorrow

Integration and automation software enables ICPs to drive strategy and operational efficiency by eliminating redundant and manual administrative tasks that all too often bog down teams. The return on investment becomes evident in the day-to-day work; there’s a decrease in distractions for compensation managers because payroll reports are readily available across the enterprise; there’s no longer any shadow accounting being done by loan officers because they have complete transparency into compensation practices; and managers no longer operate reactively to situations since they have the essential mortgage performance information they need to make data-driven forward-thinking decisions.

4. Risk Management

With the countless regulations and compliance requirements faced by lenders today, implementing ICPs may seem like a daunting task. Quite the contrary actually. By utilizing automation and integration, you’re lowering risks that otherwise come with using spreadsheets or other disparate systems to manually calculate complex compensation plans and monitor productivity. You’ll ensure integrity and plan effectiveness through reduced errors of manual processes and accuracy in calculations, increase productivity with streamlined validation and approval workflow, and experience improved audits with detailed audit trails that track every transaction tied to employees at the loan level and breakdown exactly how compensation is calculated.

5. Inspires Collective Productivity

It goes without saying that loan origination is, without a doubt, a team sport, relying heavily on the efforts of multiple people in order to succeed. One of the best ways to promote teamwork is by designing ICPs that are based on collective performance and extend beyond sales departments. Using concrete performance indicators that can be measured at the enterprise, branch, and individual levels makes identifying where inefficiencies exist effortless.

Furthermore, when people know their compensation relies on the performance of others, there’s an added sense of inherent accountability to make sure loans are originated with upmost attention to detail. Doing so will keep cost-to-close low and performance high across the entire loan origination cycle.

A successful branch manager realizes the importance and power of effectively motivating origination teams. In turn, to feel motivated, one must understand exactly what is expected. The key to achieving this efficiently is by using automation and integration for ICPs. Web-based software such as LBA Ware’s CompenSafe seamlessly integrates with LOS’, automatically pulling essential loan data in real time, linking it to predefined compensation structures and delivering the big data through role-based user interfaces. As a centralized database, CompenSafe provides a single place to perform the multi-dimensional analysis, frequent forecasting, and performance management essential to increasing profitability. Make 2016 a year of growth by setting up your team with these tools for increased productivity and your branch will achieve long-term sustainable success for many more years to come.

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