Phil Shoemaker, the President of Originations at Home Point Financial, talks about scaling your sales group.

Highlights include:

• Thinking small vs. thinking big;
• Recruiting known performers;
• Keys to compensation design;
• and emphasize volume & MBO.

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Scaling Your Sales Group With Phil Shoemaker

Our topic for this episode is scaling your sales group. I am thrilled to have Phil Shoemaker with us, who’s going to share his thoughts on this important topic for all mortgage bankers. Phil is the President of Originations for Home Point Financial, one of the fastest-growing non-bank mortgage lenders and services. He has many years of experience with Caliber, StoneWater Mortgage, and First Magnus Financial Corporation. At Home Point, he’s responsible for all mortgage lending. Before we jump into it, let’s talk about how did you get into managing. We will go back.

I was lucky throughout my career to work for strong leaders, and in some cases, it gave me a little more responsibility than I deserved. When I was younger, I was also a little cocky and didn’t know my limits. I was constantly taking on more than maybe I should have. Needless to say, I made a lot of mistakes along the way and had the opportunity to learn from those mistakes.

The beginning of my career was heavily focused on technology, and that took me into project management, so I ended up running program management offices throughout the years. That was a good learning thing for me as well because I had the opportunity to manage things from a project functional goal perspective where you have to get things done by influencing people. That was where I started to learn how to manage things in a broader sense but it has been an interesting ride, to say the least.

When you look back over your years of managing, what was the best advice that you ever heard on this topic? Were there any books that might have influenced you?

I think back, and there are a lot of people I worked for that were great leaders. They had little sayings that stuck with me throughout the years. One is, “You would kill more flies with honey than you do with vinegar.” Another one would be, and I strongly believe this one, “You are only as good as the people that you have on your team. At the end of the day, you work for them, not the other way around.” I was lucky to learn that lesson early on. The last one would be, “Performance is managed. Performance improves. When metrics are distributed widely, performance improves at a rapid pace.” That was a good one from Joe Anderson. I worked for him for years.

You're only as good as the people you have on your team. Click To Tweet

In terms of books, I like to read more for personal enjoyment. I love geopolitical books and have been into podcasts. This is probably not the most interesting answer. I don’t think you can learn management through a book. You have to do it. You learn it by doing it. If I use myself as an example, I picked up things from the people I’ve worked for throughout the years. I’m taking pieces and parts of things that I appreciate and like. More importantly, the things you don’t like. It is about what works for one person doesn’t necessarily work for everyone. It’s about finding your own style. The one thing that’s important in managing is that you have to be authentic or genuine. If you are trying to be someone that you are not, people will see through that pretty quickly.

That’s a good point. If you had to say, “What is the secret sauce that many people miss in managing,” what would that be for you?

Probably number one is that it’s not about you. Empathy wins over ego every time. It’s trying to put yourself in other people’s shoes and see things through their perspective and not get caught up in being right in the control aspect of management. You get the best out of people when you can create an environment where they feel comfortable to be vulnerable and step out on a ledge. They don’t feel like they are being judged, and if they make a mistake, it’s catastrophically bad. You have to have high expectations of people, don’t get me wrong, from a performance standpoint. Lead with empathy and not ego or fear.

That’s well-needed in this world. When you look at the key practice that you keep coming back to over all these years, and you have been in a variety of different companies, what is that practice that you do over and over again?

It’s about focusing on building the team and the people, not creating a rigid structure that can stifle creativity or individual thought. I have been very lucky and fortunate to be part of scaling several organizations. This is not super exciting but I don’t think I do anything special other than spend a lot of time going out, trying to understand the problem I’m trying to solve, and trying to find the right person to solve that problem, such that I can empower them and don’t have to control it.

You are going to miss like if you hire the wrong person. It’s almost more important that you get them out quickly or at least get them to the right role because sometimes it isn’t about whether they are the wrong person or they need to be fired. Sometimes they are in the wrong role. Oftentimes, managers don’t spend enough time thinking about the organizational strategy and the people that they are going after to fill the different spots. That, to me, is number one.

For our audience, when you are looking at scaling the sales group and doing the strategy review, what is that you are looking at? 

Salespeople are different beasts. Good salespeople don’t like to be managed. That’s always the challenge. When you are building a highly functional and efficient sales organization, it is about going out. You can’t miss that. The salesperson is the point of the spear. You have to acknowledge that getting the right people is number one. Too many times, I see in my competitors and other organizations where people are trying to fill seats instead of going out and trying to get someone in a market or whatnot to fill a seat. In reality, that doesn’t work. You are better off paying up and getting someone that’s good at the job.

My role becomes, “How do I make that person successful?” That’s where I focus most of my time. I remember when I first got into sales management. The thing was opportunity reports. We need all of our salespeople to fill out opportunity reports, and we need to know what they are doing. I went down that rabbit hole for a little bit, where I was trying to create the structure and trying to manage activity. The reality is that it’s not scalable. You cannot scale that. You have to create a structure where you can empower people, let them be the point of the spear, and do the things that they need to do as long as they are ethical and legal in their markets to win.

A big part of the structure that oftentimes managers don’t focus on what’s required to do is compensation design. I spend a lot of my time thinking about how to motivate people through compensation because if you think about it in an environment where you are empowering people, especially salespeople, you want to keep them aligned with your company’s goals and core tenets. The best way to do that is through compensation.

Where a lot of people miss the boat or have missed the boat over the years is they don’t spend enough time trying to think through, “What are our goals as an organization? What are our core tenets? How do we build compensation or comp plans around that?” You don’t have to manage the activity. You can let people direct their own activity. You are aligned on the inside goal because compensation aligns you.

Do you look at your competition or other industries when you are designing the compensation? How do you approach it?

It’s a little bit of both. I will be honest with you. I was lucky that I worked for a group of people in the early days of Caliber, and they came from Countrywide. I will use Home Point now as an example. I will spend 20% or 30% of my time on compensation. It is a very important part of the equation. There are examples that you can point to in the industry. I try to understand because part of compensation, you got to understand what you are competing for and against.

Part of compensation is understanding what you're competing for and against. Click To Tweet

Understanding how you build something that is competitive against your peers, especially if you are trying to win that top salesperson in the market. Having an outside perspective is good, and oftentimes, the brokerage industry lacks creativity. Looking at other industries and different strategies around compensation is a good thing but it isn’t a one size fits all thing. It is something that takes a lot of time and thought. There’s no silver bullet.

When you are looking outside, are there any other industries in particular or do you look at banking or financial services? In other words, what do you think is something that is appropriate that would apply in the mortgage banking world?

In that case, it’s probably more of a function of what not to do. For example, in banking, there’s very little creativity that goes into it. It’s maybe a bit too bureaucratic. I have a hard time pointing to any one industry that I try to emulate. To get specific with you, if you look at the issue with mortgage banking, you had this close alignment with salespeople and the goals of the company pre-Dodd-Frank, where originators and salespeople were heavily aligned on the economic outcome of a company.

Since then, from a regulatory standpoint, what you’ve seen is that it has made it difficult in certain areas of mortgage banking to create that alignment, while some of it is good because there were problems in how people were compensated pre-Dodd-Frank. A lot of it was bad because, at the end of the day, profit is a big part of the health of every company.

The challenge is always how you keep compensation in line with the profit of your company but also tie it back to the core values and the softer things that you need to make sure that the salesperson is cognizant of. I used to have revenue-based plans that I would focus heavily on. I’ve backed away from that, and instead, I’ve gotten more into volume-based plans where I have structured NDOs that people understand. “Here’s how my compensation will work from a scaling standpoint,” in terms of as I do more volume. I also have these 3 or 4 things that I need to make sure I’m managing as well. For example, profit would be one of them or quality would be another one.

I’ve gone way down this rabbit hole where I used to design plans. I’m an engineer, and that’s my background. I used to overcomplicate things or over-engineer them. That’s the other thing that you got to watch. You can’t design a plan that’s so complicated because people can’t track it. It needs to be aligned and simple to understand. If you do that, salespeople are like water, and they will find their own level. They will best exit comp plan like no one’s business. At least the good ones will, and you let them go.

You’ve increased the production at Home Point by 100% in a very short time, which is fantastic. You can’t manage ten things. You have to manage a few things. It sounds like compensation was one of them, and then getting the right people. Did you change the interview process there or talk about some of the nitty-gritty types of things that you implemented?

That’s a pretty dynamic topic. Comp designs are one, and focusing on getting the right people is another one. Home Point is a startup. Since I joined, we have increased our production by well over 600%. In fact, the first year I was here, we did about $10 billion, and the following year we will do upwards of $60 billion. If you think about it, when you are going that fast, you have to be able to create an environment where you are making quick decisions. There’s a lot of risk in doing it too quickly, and scaling that fast from a quality standpoint can be catastrophic.

I didn’t have the luxury of hiring people and training people. I spent a lot of my time in terms of recruiting, and we were lucky enough to have joined our team, going after people that I knew fit the culture and had the background experience to do what I was trying to do. One key component is that we could never have done what we did by going and hiring unknown people or people that were trained to do it. You need to start with the known entity.

The second thing is that there has been a lot of emphasis, focus, and time spent on how you create controls and metrics. Part of your ability to disseminate control and empower people is that you have to have data and metrics to understand what’s happening as it happens. That’s 1). Everyone has clear expectations of what they are trying to do, but 2) You know predictively if you’ve done something wrong, and you can have a feedback loop quickly.

That’s probably the other two that have the emphasis on hiring people that were known entities that had a proven track record. I didn’t necessarily know them but they were known within the industry. Also, creating the right controls through metrics to be able to manage the scale and growth as we went in a controlled fashion.

Did you know these people or are you saying that these were people that were known for having good reputations? Is that correct?

Yes. The mortgage industry is a very small world. Most of them I didn’t know personally, and I knew indirectly or by reputation but I will say there is a concept in the mortgage. I don’t know if it’s specific to mortgages but good people are attracted to other good people. You start to build momentum and establish the right culture, and it does start at the top. I’m lucky enough. The main reason why I joined Home Point is that I’m very much aligned with our CEO, Willie Newman’s vision, culture, how he treats people, and the type of environment he wants to create.

It does start with that, to be honest with you. You have to create a culture that starts at the top, the CEO that is going to attract the right type of person. It was overly complicated, and something that I’m somehow special but the reality is I’m lucky. I learned from a lot of good people. Through that, I have decided what I want to be like and who I want to work with and for. Once you get that clarity, other people start to follow that. They will emulate those same core tenets.

You have to create a culture that starts at the top, with a CEO who will attract the right people. Click To Tweet

How did you address the issue? Even in Home Point’s case, where you came into an organization that already had people that were there and now, you are supercharging it and going at a much faster rate. How do you get the other people on the bus that are probably not even used to that or even thinking like that? Talk about that.

That was probably the hardest piece, to be honest with you. In the other companies, I have been a part of scaling. I was there from the beginning. I was part of the culture as it developed. To answer your question, when I came to Home Point, I tried to listen as much as I could. I didn’t want to judge anyone. I spent a lot of time trying to understand what was there. In some cases, there are people who are in the wrong roles. In other cases, it’s the wrong people. It took a little bit of time to sort out. As soon as you get the core group and get everyone aligned with the vision, it starts to take its own life and build momentum. It wasn’t easy.

It never is.

A simple test I do when evaluating people is, “Would I want to work for this person?” I don’t remember where I picked this one up but I do sort people into two categories. I sort them into, “This is someone that I wouldn’t want to work for.” Not necessarily from a skillset standpoint but from the cultural fit versus someone I would. Willie was the same way when I met him. There has been a lot of thought put into hiring people that we all feel comfortable that, “We would work for this person.”

When you put it in those terms, it’s neat because oftentimes, a culture becomes toxic. People are more concerned about themselves and thinking about what they need to do to get ahead. Don’t get me wrong. I don’t think that’s a bad thing. Ambition is good. People should want to grow in their careers but if that’s all that drives you, it’s a problem. That’s where that it’s core from a culture standpoint at Home Point, which I’m probably most proud of.

I want to take a little bit of credit for this but a lot of it goes to Willie. There has been a lot of thought about bringing people into the organization that is interested in building something that’s special as opposed to focusing on their own personal growth and compensation. Our actual factor is zero. Don’t get me wrong, we have heated arguments and discussions around different topics, but at the end of the day, you always know that everyone’s got your back.

We are aligned in what we are trying to do, and no one is off themselves. Honestly, that’s something that takes constant work. The last thing is that part of the issue you also have when you are growing an organization is oftentimes the people that you have early on. It’s hard to scale them to the next level. You are stretching and putting people in roles that maybe are a bit above where they are at in their own careers. It doesn’t mean they can’t get there but that’s usually the hardest part I’ve seen when a company’s inflection starts to grow and scale.

A lot of times, you end up having people in the wrong roles because they are put there out of necessity, and it’s not necessarily that they are bad or can’t do it. Experience matters. When you have to manage something that’s doing $60 billion a year versus something that’s doing $4 million or $5 million, the structure and the way you think about things are a lot different. The hardest part is if I had to point to the last couple of years that we had to navigate. We are still navigating to this day, transitioning from a company that thinks small to a company that’s thinking big without sacrificing its culture. That’s the risk that you run.

That’s a great point. If you would like to give a couple of thoughts that would be key takeaways for our listeners, what would that be?

Be yourself. I remember one of my favorite mentors that I worked for was Joe Anderson. He was that good football coach. He will yell at you and be hard on you but you always knew it came from a good place. I remember one night I was having dinner with him after he was no longer CEO, I wasn’t working for him, and I was saying, “Joe, I don’t think I can be you. I can’t get angry and pound my fist on the table.” He was like, “I don’t think that works anymore. It’s not about being me. You got to figure out what works for you.”

Being genuine, treating people with respect, and leading with empathy that’s what I want to be a part of. We’ve moved past that like the 1980s or 1990s, where you got the big boss that’s in the ivory tower that everyone’s afraid of. I don’t think that works anymore. Be you and be empathetic. Lead with empathy.

That’s a great point. I want to thank Phil for sharing his thoughts. They were terrific and right on target. Look for our next episode and please rate and review this episode. Thanks, Phil.

Important Links

• Home Point Financial

• Phil Shoemaker on LinkedIn

• Mortgage Manager Playbook on Apple Podcasts

• Mortgage Manager Playbook on Spotify

• Pat Sherlock on LinkedIn