I.    Assumptions

A few key assumptions guided our deliberations about this task. We want to lay them out explicitly at the beginning of this document to give the reader an essential perspective on our work.

A.  We have chosen to focus primarily on the closing process, since that was the general direction we were given. We did comment on other parts of the process, however, where applicable. We also realize that much of what we have said here applies in principle to every part of the loan origination process. It would have been clumsy to write “sales person/closer/underwriter” throughout this document, or to discuss how some detailed points may be reworked to apply to other areas. We tried to keep the focus simple. However, we want all parts of the process to consider the spirit of what we have said here.

B.   In addition, we tried to stay away from the alphabet soup of acronyms that can clog business writing. Instead of LCO, we simply said “closer,” since a document like this can be weighty enough without having to use a decoder ring to figure out job titles. Likewise, we chose not to write he/she or his/her to indicate both genders. The reader should consider any references to gendered pronouns in this text to be random and arbitrary.

C.  We have taken the time in this document to give reasons and a context for our recommendations. We are not simply making contentions; we are making arguments. We want our reasons to be clear.

D.  We assume that we are ready for major changes. We as a group have fallen into some bad habits. To change them, as with any bad habit, takes a healthy dose of discipline. We must climb out of the ruts we’ve landed in and cut new ones. That work will take energy and it may be uncomfortable, but our success depends on it. We assume we are willing to take on the work this document describes.

E.   Our task is all about communication. Listen how often this comes up when people discuss our situation. The underwriters have to communicate with the closers. The closers have to talk with the underwriters. The sales force does not give a clear picture to the customer. The closer has to hunt down a sales person to find a piece of information. The construction management firm was unclear about the services they provide. The closers aren’t following stated procedures. The closers don’t know what the procedures are. Over and over again, we circle back to communication.

Yet, even though we recognize the problem, we say it glibly, as if solving a communication problem is simple common sense. But if it is common sense, why do these problems keep recurring? Why is poor communication such a tough problem to solve?

The answer, in part, has to do with our perspective on communication. We, like so many corporations, have tacitly adopted some common communication myths.

1.   The first myth is that communication is simply the transfer of information, just like a computer. This is part of what Theodore Roszak in 1986 called The Cult of Information, where we assume that human beings behave just like computers as data processing machines. The fact is, we’re not machines. Our communicative behavior is much more complex. Part of that complexity is the fact that we do not respond equally to the each message, even to the same message sent at different times in a different context. If we assume, therefore, that once we have sent a message, it will obviously be correctly received, we set ourselves up for communication failures.

Communication is not about giving information. It is about exerting influence. Far from being guided by logic, it is guided by psycho-logic, to coin a phrase. The goal of communication is not simply telling, but acting, changing another person’s behavior through what we say to them.

2.   A second myth is a corollary to the first: if communication is information transfer, it doesn’t take much active effort. We have come to regard communication as passive. We simply send our messages and let them take their course, never bothering to reinforce them or check to see if they were received. When we begin to see communication as exerting influence, we can see it is hardly a passive matter. We have to actively attend to the messages we send. We have to be conscious of the unintentional messages we give out that may betray our unguarded intent. We begin to manage our communication strategically, making sure we make the most of the messages we send. We must overcome what George Orwell called “the half-conscious belief that language is a natural growth and not an instrument which we shape for our own purposes.” 

3.   A third myth comes out of the litigious world we live in. We may assume that once we have formally communicated, we have met our legal obligations to get a message across and therefore have no further obligation to communicate. If our purpose in communicating is only to meet some legal standard, this assumption would be correct. But if our purpose is to change someone’s behavior, this assumption falls far short of effective communication.

      Two and a half millennia ago, Plato described three different kinds of communicators as three different kinds of lovers. The evil lover is concerned only about himself and abuses the audience to get what he wants. The neutral lover is like our legal-minded communicator; he gives the bare facts with no care for the ultimate outcome. The best communicator, Plato argues, is like the noble lover who, overcome with a divine madness, does all he can to get his message across for the sake of the audience. Giving the facts is not enough. We have to change the way people work and think.

Key communication factors:

      When we begin to move beyond the myths, when we see not mere information, but influence, when we recognize the power not of logic, but psycho-logic, we then can see communication as a conscious craft, the discipline of shaping messages that change people. We can begin to see several key factors that make communication effective.

Use multiple channels and repetition.

1.   Since communication is more psychological than logical, we have to account for the fact that many things may interfere with the effective reception of a message. To counter this, we should send our messages over multiple channels—written, visual, auditory, kinesthetic—to improve the chance of the whole message getting through. We should also repeat important messages, not because the audience is lazy or unmotivated, but simply because they are human and may not remember.

Pay attention by taking the time to communicate.

2.   We must recognize that in itself the act of sending a message conveys a generally positive message. At the beginning of this century, researchers discovered that workers in a plant near Hawthorne, New York showed increased productivity for no other reason than the fact they were the subjects of research. This “Hawthorne Effect,” as it came to be known, teaches us that when we send a message, we are also saying that we’re paying attention, that you are important enough for me to talk to you. On the other hand, it also explains why a lack of communication can lower morale and productivity even when there is no other problem.

Manage administrative persuaders.

3.   The Hawthorne Effect also points to the fact that we communicate by far more than discreet, verbal messages. Administrative actions and nonverbal elements such as time clocks, posted policies, locked cabinets, and organizational structures all send messages. A well-defined process, clear performance standards, routine policy reviews all send strong and persuasive messages.

 Use the form of a message to persuade.

4.   The form of a message is an important factor in the message’s success. Kenneth Burke defined form as “that which creates and satisfies appetites in the audience.” Most business communication stresses information over form, but the form is often what engages the psychology of the audience best. For example, far better than random policy changes, a deliberate cycle of policy change and review creates an appetite in the closers and prepares them to receive the messages that come with policy changes.

Make messages clear to give the audience a place to hang the content.

5.   We know that a message should be clear, but to be most effective in designing our messages, we have to understand how clarity works. A clear message’s structure follows a pattern that the audience can recognize. They may not be immediately aware of it, but they sense the pattern and can use it to make sense out of the message. Specifically, the pattern acts like a rack or framework on which they can hang the ideas in their minds. In other words, a clear pattern helps the audience make connections and remember the message.

i.    For example, the general rule for the number of random elements a human being can remember is 7 +/- 2 (5 to 9). However, we break that rule routinely when we teach a list of 26 arbitrary items to young children. The list is the alphabet and we teach it by creating a musical pattern to which children can connect the letters.

      Notice, therefore, that clarity is not for the sake of logic, not to have a pretty outline, not to cover all the legal bases, but to make the message connectable and memorable in the minds of the audience.

Make messages clear by making them consistent. 

ii.    In a similar way, a message is clear if the ideas are clear--if they form a consistent whole. If a message contradicts itself, or if it contradicts other messages I’ve heard, I will probably discard it. I don’t have time to make sense of it. If, on the other hand, the ideas in the message are consistent with what I’ve already heard, I know where to connect the ideas in my head. I can more easily make a pattern and remember the message.

Make messages clear by using clear word pictures.

iii.   Clarity also applies to the specific words that a message uses. Words I don’t understand, or word-pictures that don’t make sense to me, “fall upon the facts like soft snow, blurring the outline and covering up all the details,” as George Orwell paints them. Crisp word-pictures along with relevant and real stories make messages more memorable because they give more ways to make connections.

 Manage “ethos”—the audience’s perception of the speaker’s credibility.

6.   The final key communication factor for our purposes here is the most powerful form of proof. More than logic, more than emotions, people are persuaded by the personal character, knowledge and judgment of the speaker. This potent force, called “ethos” by the Greeks, becomes a manager’s principal persuasive tool. Often, people believe a message for no other reason than their trust in the speaker. Ethos is more than the facts of your reputation; it is a proof you shape and develop in the messages you send. For the measures we recommend in this document to be credible, we must:

i.    set realistic goals

ii.    meet the deadlines we set

iii.   discuss problems honestly

iv.   be fair to opposing points of view

v.   recognize those who have helped work on the problem.

vi.   separate causes from effect, short-term from long-term effects, hard facts from wishes or dreams, and each proposal from another.

vii.  talk in terms of real-world problems rather than personalities or ideologies.

viii. provide adequate background information on controversial issues.

      These points on communication are far short of a full discussion of the communication issues involved in our situation. Yet they may be too long for this document. We have included them to reveal some of the assumptions that underlie this report. What we describe here is, in effect, the outline of a persuasive campaign to change our organization.

II.  A Productive Closing Culture

      The focus of our corporate efforts in the last few weeks has been a process. We are working to define it, control it, perfect it, and exploit it. We agree with these efforts. But there is more to the successful launch of a process than succinct analytical definition. Take the following story, for example, recorded by G. Vico in 1707:

      The case of P. Perot is in point. He built a ship the proportions of which had been carefully calculated beforehand according to the rules of analytical geometry, expecting it to be the swiftest vessel in existence. But as soon as the ship slid from the docks into the water, it sank to the bottom of the sea and remained there as motionless as a rock.

      A process is borne of a culture that gives it life and breath and purpose. Our well-defined process ship may suffer the same fate as Mr. Perot’s if we do not account for the cultural factors that keep a process afloat.

      The word “culture” is intimidating. It sounds large and unwieldy, growing up in odd places like Graceland and “The Old West,” being too much to control even in a small company.

      But a culture is simply a widely held, broadly-bound, shared perspective. The key here is perspective—a way of looking at things. As soon as a group of people looks at something the same way, they are sharing a perspective and are beginning their own culture. So even though culture sounds too big to handle, creating a perspective is manageable. By emphasizing certain things and de-emphasizing others, senior management can begin to forge a shared perspective that can keep our process running right.

      We could talk a great deal about the components of a productive closing culture, but there are three elements that we want to emphasize.

A.  The Closing Manager as Process Manager

The closing manager must guide the process as a coach.

1.   The closing manager must cultivate those competencies that will support a productive closing culture and sustain the closing process. These competencies include:

i.    Knowledge of the loan closing process in particular, and the entire loan origination process in general

ii.    Effective use of knowledge and input from others

iii.   Encouraging creative and critical thinking from the closers

iv.   Promoting effective communication among closers

v.   Ability to listen effectively

vi.   Ability to organize group thinking

vii.  Ability to supervise and coach team members.

viii. Ability to identify problems with the process, analyze and implement corrective action.

2.   A person need not have already mastered these competencies to be an effective closing manager, but should work to develop these strengths.

B.   Goal-Oriented Focus

      The key element in the perspective that all closers must share is the goal or purpose of closing a loan. No one wants the closers to become experts in the process for the sake of the process alone. The process is a means to an end. We must clearly define that end.

We need a goal for closers: “a quality loan, quickly closed.”

1.   In general, we need a succinct statement of the closer’s goal—perhaps, “a quality loan, quickly closed.” We should then use this goal to frame the process and their approach to it.

      This kind of general goal is important because, for one thing, it is memorable and can give the closers a place to connect all the other process details they must learn. Also, it teaches the closers to focus on more than the process. In other words, if a situation arises that is not accounted for in the process, but yet could adversely affect the deal, the closer should address that situation. We want the closers to use their judgment to achieve the goal of a quality loan quickly closed—that’s where their allegiance ultimately lies, not in checking off items on a list. We want them to be more than paper shufflers; we want them to use their heads. A clear goal can help teach them.

We need a brief description of a quality loan.

2.   We also need to break down the short, general goal into a list of about 10 points that describe a quality loan. Again, this list should be memorable. It may take the form, “A quality loan is one that . . . .” It is not to be a comprehensive description of every possible credit scenario—that should be in the manual; they should know where to find it if they need it. This list of the top 10 loan quality items is a teaching tool to focus the closers on quality.

We need to focus the entire loan production team on closeable loans.

3.   On another level, this goal-oriented focus is important for the entire loan production team, not only the closers. For example, if we emphasize quick, quality closeable loans for sales and credit also, we should be able to leverage their work to speed the closing process. We have not taught sales and credit to think in terms of a closeable deal. By giving them this perspective, we should be able to improve the closing process with little extra work from these pre-closing team members.

C.  Open Communication

Open communication must be a centerpiece of the closing culture.

1.   We have already said a great deal about the importance of open communication to the closing process. It is a theme running through many of the recommendations we make in this report. We emphasize it again here because it must be a centerpiece of the shared perspective we prescribe for a productive closing culture.

2.   Both management and closers must communicate with one another openly in an atmosphere of trust without hidden agendas. Each group must listen thoughtfully and respond reliably. This openness is an essential precursor to having clear and accurate communication about specific deals.