CMP 8.11 Business Strategy

BUSINESS STRATEGY FIRST EDITION

MORTGAGEBROKERNEWS.CA

EXCLUSIVE INTERVIEW

BRANSON

ON BUSINESS How to turn your business into an empire the Virgin way

PLANNING FOR BUSINESS SUCCESS

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MARKETING, SALES MANAGING CASHFLOW

MANAGEMENT AND LEADERSHIP STRATEGIES

SMART BUSINESS DESIGNS FOR OUR TIMES

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CONTENTS

10

BRANDON ON BUSINESS

Brokers, take a page from the book of Virgin mastermind Sir Richard Branson on how to stamp your business with ultra strong branding

4 | Business planning How to ensure strong foundations for sustained success within your brokerage 7 | Cash flow Your guide to staying on top of cash flow and avoiding mounting debts 14 | Diversification Brokers are finding real success in better connecting with clients through the Canadian First Financial model, but why?

18

18 | Competitive Advantage Cash flow management is a vital element of any business, and one that’s vital for mortgage brokers to stay out of the red

22

Leadership How to recognise the importance of emotions while guiding decision-making

Twitter.com/ CMPmagazine

26 | Transitioning How to create satisfied customers who will help drive your business forward

Like Us on Facebook Canadian Mortgage Professional

30 | Sustainability and engagement A business has got to respect the stakeholders who are essential to its long-term prosperity

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CONTENTS / EDITOR’S LETTER

IT’S YOUR MOVE COPY & FEATURES EDITOR Vernon Clement Jones STAFF WRITER Justin da Rosa CONTRIBUTORS Kevin Eddy, Michael Quinn, Neal Ashkanasy, Adam Fraser, Jeremy Galbreath, Fiona Mackenzie

ART & PRODUCTION GRAPHIC DESIGNER Alicia Chin

SALES & MARKETING ASSOCIATE PUBLISHER Trevor Biggs GENERAL MANAGER - SALES John Mackenzie MARKETING AND COMMUNICATIONS Claudine Ting PROJECT COORDINATOR Jessica Duce

CORPORATE PRESIDENT & CEO Tim Duce OFFICE/TRAFFIC MANAGER Marni Parker EVENTS AND CONFERENCE MANAGER Chris Davis

Editorial enquiries vernon.jones@kmimedia.ca Advertising enquiries trevor.biggs@kmimedia.ca Subscriptions tel: 416 644 8740 • fax: 416 203 8940 subscriptions@kmimedia.ca KMI Publishing 312 Adelaide Street West, Suite 800 Toronto, Ontario M5V 1R2 mortgagebrokernews.ca Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as CMP magazine can accept no responsibility for loss.

Yeap, it’s a mug’s game for brokers ill-prepared to navigate a chessboard where mortgage lenders are changing the rules left, right and centre and client approvals, it seems, are decided by a roll of the dice.

But that new, post B20 landscape is here to stay and industry professionals are finding ways to win. Ensuring that success is no less a focus for CMP, and this special Business Strategy issue arms brokers with more of the tools they’ll need to stay in the game and grow their businesses even in uncertain times.

Helping steer us in the right direction is Sir Richard Branson, in an exclusive interview, starting on page 10. He outlines his blueprint for the successful branding of a business, mapping out what brokers need to do to distance themselves from the competition.

But there’s no getting around it: Consumers — A borrowers, in particular — are increasingly spoiled for choice and all brokers are having to up their game in order to grow or even maintain their revenue streams.

Canadian First Financial offers some cogent advice on how to diversify that stream and reinforce your usefulness to clients (p. 14).

Just as crucial for brokers is taking charge of business development.

EDI Enterprise Performance Group examines the ins and outs of strategic planning in order to solve that puzzle (p. 18).

Cheers, Vernon Clement Jones

CONNECT

Contact the editor:

vernon.jones@kmimedia.ca

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STATS / DATE PLANNER

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BRITISH COLUMBIA

ALBERTA

31,000 19,100 9,200 18,300 18,400 15,900 additional households

units expected to start

new single-family homes

single-family units

new housing starts

multiple-family starts

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BUSINESS STRATEGY / STRATEGY AND PLANNING

BUSINESS PLANNING:

BUILDING THE FOUNDATIONS FOR SUCCESS

Investing in business planning can ensure strong foundations for sustained success within your brokerage, explains Fiona Mackenzie In the current market, small and medium enterprises (SMEs) in mortgage brokering are having to become increasingly competitive and provide a unique offering in order to retain existing clients and attract new ones. Most mortgage brokering companies are small: 49% are single operators and 30% have two to three people, while 21% have four or more people.

So SMEs in the mortgage space must use their limited resources efficiently, and this applies to how they do business planning as well. We all know that regular planning is essential, but how can we achieve this efficiently?

Generally, the responsibility for change lies squarely with the business owners as they are fundamental to the business, and some might even argue they “are the business.” Their vision and what they implement to reach these goals have a profound effect on the shape and health of the business.

You can think of it in terms of your own health and fitness. Your body and health today generally reflect the choices you have made in the past, and the choices you make today will affect your health in the future. The same idea applies to the health of a business.

It can seem daunting that the onus for success falls on one or more individuals, but it can also be an

exciting opportunity to create the change you want.

WHAT DOES THIS MEAN ON A PRACTICAL LEVEL? Keep it simple. Ensure your planning is focused on what will make the real difference at every stage of the business life cycle.

In the very early stages of business, the focus should be on attracting clients and generating revenue – and on raising awareness within a niche market.

Delivering on promises and ensuring a great client experience are key drivers of success at this stage.

Even though it can feel like a luxury at this point, having your own trusted adviser or coach can help you stay focused and grounded.

Once the business is established, it is time to prepare for the growth phase. But before rushing to recruit staff and upgrade premises, it is vital to check on the basics. When ready to expand, it’s important to examine the numbers. An international Macquarie report on brokering shows that an increase in rent expenditure is offset by reduction in other costs as companies grow. It’s worth taking this into consideration.

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PUTTING YOU IN THE DRIVER’S SEAT Essentially, in one hour of working through a streamlined process, a broker can get to a point where she has identified what she wants to achieve, has unpacked her options, and decided what positive action she needs to take to achieve the end goal.

What does that process look like?

REFLECT: Ask yourself what you find fulfilling and what you find frustrating in your business currently.

What one change to your business would ensure you enjoyed it significantly more, every day?

BRAINSTORM: What are all the things you could do differently in order to get the outcome you seek?

Give yourself permission to jot down a whole raft of ideas, thoughts, half-plans, one-day/someday thoughts, etc.

CHOICE: Identify the one initiative that will make the most difference to your business. Be ruthless and just choose one initiative because you will have a greater chance of achieving it. For example, it might be to add insurance to your offering or recruit a new support person.

BROKERAGE SIZES IN FOCUS

21%

FOUR OR MORE PEOPLE

30

%

49%

SINGLE OPERATORS

TWO TO THREE PEOPLE

Source: Macquarie 2012 Mortgage Brokering Benchmarking Report

REVIEW: Now ask yourself what internal barrier you might be putting up that is getting in the way of doing the one initiative and achieving the one difference in your business. The sorts of barriers that often come up are knowledge gaps - for example, not knowing the steps involved in adding a new service, or skills gaps such as not being competent at delegating complex deals. This is where the rubber hits the road, and if the barrier can be identified and worked through, it can have profound implications.

DECISION: Think about what one simple action will get you started – to overcome your one barrier and start implementing your one initiative. Make sure this action is both simple and SMART (Specific, Measurable, Achievable, Relevance and Timebound). This will lay a good foundation for ongoing business planning and implementation.

Once you have worked through these steps, the secret to ongoing success is to do the one action, see what occurs, then review and plan the next action. Put that new action in motion and continually repeat. If this is done, then very quickly real learnings occur, momentum is achieved, and results start to flow.

DO YOU HAVE A SUCCESSION PLAN IN PLACE?

YES 37% Gino Tieri

NO% 63 Source: Macquarie

Macquarie Practice Consulting’s “Power of One” workshops

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BUSINESS STRATEGY / STRATEGY AND PLANNING

EXPENSES BY CATEGORY

+

Fiona Mackenzie is head of Macquarie Practice Consulting.

She has an extensive background in financial services in senior marketing, product development and business consulting roles.

Individual

Staffing

39% 40% 42%

Client communication/marketing

12%

15%

11%

Premises and technology

13%

20%

26%

Administration

36% 25% 21%

What can also get forgotten at this stage is ensuring the business is crystal clear on its ideal target client and value proposition. The reason this is so important is that it serves as a compass for all important decisions, such as whom to partner with for referrals, what skill set to recruit for, what marketing to undertake, and what the website should contain.

As the client base grows, it becomes a more important source of revenue – through referrals and retention – and so ongoing client engagement comes to the forefront. A potential opportunity some brokers are currently exploring is working with accountants who offer self-managed super fund services and whose clients may be seeking limited recourse borrowing arrangement loans.

NNING A L P N SIO SUCCESLIST ur CHECK ing in yo

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2-3 staff

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As a firm matures, the focus may shift to expansion or the owners may start to consider their exit plans.

If expansion is on the cards, the options can include geographical expansion or offering complementary products and services. Again, reflecting on your ideal client and value proposition is vital for setting the right course for the future. It is important to be clear on how you are currently positioned in the minds of your clients and referral relationships, and how readily they will accept the expanded offering from your business.

Succession planning is also relevant to factor in, in terms of what timeframes you might be working towards, what are you seeking in your successor, whether you still want to be involved in the business, and what sort of value you would put on your company. Identify and assess your exit options, which may include running down or selling your book to another staff member/broker/type of business (such as accountant/financial planner). Equally, it’s worth taking into account what they may want from the purchase.

While surveys suggest only 37% of brokers had a succession plan in place, of this group, the main proposed options were to continue to own book while paying another broker to manage the book (21% of succession plans), and sell to another mortgage broker (21% of succession plans).

As the mortgage industry continues to face the challenges of softer property markets, lower investor confidence and tighter margins, it is vital that brokers have a business planning approach that works for them. In our experience, keeping it simple and action-orientated works best for most smaller, time-poor firms.

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CHAPTER ONE / STRATEGY AND PLANNING

HOW TO KEEP THE

FLOWING Cash flow management is a vital element of any business, and one that is vital for mortgage brokers to get right if they’re to avoid mounting debts.

Michael Quinn explains how to get it right

A cash flow management plan is vital to understanding your business operations. Simply put, managing cash flow means delaying outlays of cash for as long as possible and speeding up payments to reduce the lag between outgoings and income. Cash flow can cause headaches for brokers and all types of small businesses when it dries up and debts begin to mount.

Through careful management planning, you or your small business can help make certain there are sufficient funds to pay wages, taxes and expenses as they fall due. Compare your cash flow forecasts with

actual reports and make sure you plan for the unexpected. A contingency plan will ensure you are able to respond to unexpected changes in the marketplace and put your business in a stronger position.

It may seem obvious, but a better-managed cash flow budget starts with keeping accurate records.

Accurate, up-to-date records will enable you to create a cash flow forecast that truly represents the financial position of your business. As a result, the reports you produce and analyse will allow business owners to identify any future problems and initiate NOVEMBER 2013 | 7

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BUSINESS STRATEGY / STRATEGY AND PLANNING

TIME TO SEEK HELP? Cash flow seems to be a common issue for many mortgage brokers, as income and commissions can fluctuate significantly from one period to the next. If your business has the following problems, then it may be time to seek the advice of a professional and take action to manage your cash flow situation: A heavy reliance on borrowed monies An inability to pay creditors A decline in profit margins

rescue procedures as well as plan for major expenditures, such as GST or creditor bills. Your cash flow forecast should include all fixed costs (rent and salaries), variable costs (supplies and marketing) and projected revenue. Depending on the nature of your small business, this may vary from a monthly to a quarterly or half-yearly forecast. More frequent cash flow reviews are important for mortgage brokers as income can vary from month to month.

GETTING BACK ON TRACK If you’re seeing plenty of sales on your profit and loss statement but no actual cash in your bank account, you will most likely have little to no cash flow. This is known as the timing difference, basically the difference between the date your client accepted the costs of your services and the date you actually collected the proceeds for providing your services.

Timing difference will exist if you offer credit terms to your clients. To help take control of your cash flow, you need to take control of your accounts receivables.

Selling your services on credit is an inevitable factor of running a business, so you need strong accounting systems to track and finalise your accounts.

Collecting accounts receivables as quickly as possible is a critical aspect of cash management.

CASH FLOW FORECASTING WHAT TO INCLUDE: ● All fixed costs (rent and salaries) ● All variable costs (supplies and marketing) ● Projected revenue

When sending out your invoices, be sure to follow the steps in the invoice checklist below.

Many industries request a certain percentage of monies or deposit from their clients before undertaking any work. If you will be working with a client over a period of time, it may be worthwhile exploring this option.

If you do find yourself needing finance to get back on track, there are a number of options available, depending on the nature of your business. Short-term finance, which includes overdrafts, business credit cards and import finance, is used to maintain cash flow by purchasing assets that will turn over quickly.

This type of borrowing would be self-liquidating, meaning that as soon as the cash is received from the debtor the loan will be repaid in full. However, before applying for short-term finance, speak to a professional who can analyse your cash flow statement and explore other options available.

Finally, be proactive about cash flow: make a plan and stick to it. You can’t control the external environment, but with good financial management you can keep your cash flow under control. Seeking the advice of a professional accountant, lawyer or financial planner will give you an outside opinion of how your business is doing financially.

Professionals can help you analyse various options available and turn your negative cash flow around.

T ECKLIS H C E C I INVO s clearly nt term

payme Outline 60 days, etc.) s, (30 day the llowing voices fo in t u o ice Send our serv sale of y mer e custo nt for th s, such ie n e v n n co Make it . Offer all optio heque, etc. c ou l, y a y P a y p a to posit, P e d t c e as dir s if their ur client lling o y d in rem p ca Call and is overdue. Kee ill w t n u e o y m pay hen asking w ent , ly k e e w ym their pa receive

Michael Quinn is an experienced chartered accountant and lawyer, and co-founder and director of the Quinn Group. He has spent years advising industry leaders and business owners about their financial situations and decisions, assisting them in maximising their potential and their opportunities.

Visit quinns.com.au for more information.

JARGON EXPLAINER:

THE TIMING DIFFERENCE The difference between the date your client accepted the costs of your services and the date you actually collected the proceeds for providing your services.

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ANALYSIS: CASH FLOW SLOWS Figures from Dun & Bradstreet (D&B) suggest that cash flow has slowed this year, placing further strain on a range of industries already experiencing low confidence because of weak trading activity and high operating costs.

Businesses are waiting nearly eight weeks to be paid by other companies, according to D&B’s Trade Payments Analysis, with the average invoice payment time rising to 55 days during the first quarter of 2013.

This figure compares to a national average of 52 days in the previous quarter and 53 days a year earlier.

After easing during the last half of 2012, payment times have increased this year as a combination of weak sales activity, a high Australian dollar, and concerns about operating costs affecting businesses’ ability to pay on time. Operational costs were identified as the biggest barrier to growth for businesses in the quarter ahead, according to the latest D&B Business

Expectations Survey.

The slow payment cycle, as revealed by analysis of millions of accounts-receivables records, is being felt by the nation’s businesses, with D&B finding that 56% of businesses expect cash flow will be an issue for their operations in the quarter ahead.

D&B’s analysis has also found that the nation’s biggest companies are the slowest to pay, with those companies employing more than 500 employees taking 58 days to settle their accounts in Q1.

The majority of all invoice payments in Australia are being paid late, with 48% of accounts settled between one and 30 days beyond standard payment terms (30 days), while 38% are paid on time.

Companies with fewer than 20 staff are taking, on average, 53 days to make payments, whereas those employing more than 500 people average more than 57 days to pay their bills. The fastest-paying companies are medium-sized operations employing between 50 and 199 people, which are settling their accounts in 50 days.

56%

of businesses expect cash flow will be an issue

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BUSINESS STRATEGY / BRANSON ON BUSINESS

VIRGIN TERRITORY

Like him or loathe him, Sir Richard Branson is one of the most successful entrepreneurs in the world. In this exclusive interview, CMP probes the Virgin mastermind about the secrets to his success Canadian Mortgage Professional: Many of our readers run small- to medium-sized brokerages. What’s the difference between a business that chugs along at a happy medium and one that develops into an industry-leading empire, if you will? Essentially, how do you go about building an empire rather than just a business?

Sir Richard Branson: Big or small, I believe that all successful and innovative companies need to have an excellent product or service, they need strong management to execute the plan and a good brand to give it the edge over competitors.

Often entrepreneurs can create a good product and a brand but lack the management to help expand and create a truly great company – people are the core differentiator between a business that just chugs along and one that grows into an empire.

An entrepreneur needs to build up a very strong and capable management team and delegate out the responsibility to run the existing companies to them, so that he or she can focus on new ideas and finding the next business to start up. Just remember that it is impossible to run a business without taking risks. Virgin would not be the company it is today if we had not taken risks. I couldn’t tell you which was the riskiest – there has been quite a few!

CMP: Both Virgin and Sir Richard Branson are names that are known the world over. How important is a strategic approach to branding – personal and/or corporate? Can they be separated?

What are the must-do’s when building a brand?

RB: Brands ultimately belong to the consumer.

While a business can influence its brand by what it does and how it behaves, it is what the customer thinks at the end of the day that is the only important thing. With this in mind, I think that it is important to try and identify early on what attitude you would like your brand to convey, and then go about building it!

Brands need to be constantly nurtured, to be kept fresh and be seen. When I was thinking about setting up my own airline, the late Freddie Laker said to me: “You’ll never have the advertising power to outsell British Airways. You are going to have to get out there and use yourself. Make a fool of yourself. Otherwise you won’t survive.” I’ve been following his advice ever since and used myself to get the Virgin brand in the headlines and become more visible.

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MORTGAGEBROKERNEWS.CA INSURANCEBUSINESS.CA

“People are the core differentiator between a business that just chugs along and one that grows into an empire” NOVEMBER OCTOBER 2013 | 11

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BUSINESS STRATEGY / BRANSON ON BUSINESS

BRANSON ON… RELAXING CMP: It’s all too easy for an entrepreneur to get stuck dealing with the daily workings of a business. How important is it for an entrepreneur to get out of the office and do other things? What helps you refresh yourself mentally and physically?

RB: I do try to keep fit – anytime I’m near a Virgin Active club I make sure I get in there and work out. I love tennis and kite-surfing and pretty much do some sort of exercise every day, without making it too rigid, as that just doesn’t work for me. I enjoy being outside and being active – keeping fit as a result is almost a by-product of doing something I enjoy! I recently completed the Pick n Pay Cape Argus Cycle Tour, a wonderful 109-kilometre ride with 36,000 cyclists, and an extraordinary atmosphere with breathtaking views.

I have always believed that I needed to find good people to run my businesses and to delegate day-to-day management to others. I did this from a very early age and, importantly, that has allowed me to go and set up new ventures, sometimes in a new sector or country.

CMP: Our readers’ businesses deal with intangible services in the financial sector. What are your tips for effectively marketing and selling intangibles?

What have you learnt from ventures such as the Virgin Money companies?

RB: Even today, the Virgin brand is not a product like Coca-Cola or McDonald’s; it’s an attitude and a way of life to many. At Virgin Money, we’re building a better kind of bank. A bank that genuinely cares about the customer and provides a better experience and better-value financial products in a straightforward, transparent way. I think that it is important to build up a strong brand when selling an intangible service as it makes your service distinct and different from anyone else’s.

CMP: You’re famous for your “Screw it, let’s do it” approach, which has led to missteps, as well as successes.

What is your biggest business failure, and why?

How do you pick yourself up from mistakes – both personally and financially?

RB: Whenever I experience any kind of setbacks, I always pick myself up and try again. I prepare myself to have another stab at things with the knowledge I have gained from the previous failure. My parents always taught me never to look back in regret but to move on to the next thing. The amount of time people waste on failures rather than putting that energy into another project always amazes me. I have fun heading the Virgin group of businesses, so a setback is never a bad experience, just a learning curve.

CMP: Part of the skill of a successful entrepreneur is identifying tomorrow’s growth sectors and opportunities – Virgin Galactic being one of the most high-profile examples of this. How do you discover tomorrow’s opportunities today?

RB: There are many different reasons for entering new businesses. It can be as simple as a business sector really interests me or one of our directors at Virgin, and we see areas in that sector where our brand can make a real difference to the consumer.

Sometimes it is as simple as the fact that an existing service has frustrated us and we believe we could do it better.

Having the will to say ‘screw it, let’s do it’ and make things happen is what sets entrepreneurs apart. It takes bravery to start a business, but 12 | NOVEMBER 2013

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people with enterprising spirit who seize chances when they come along will be the ones who drive the economy and make a difference in the future.

CMP: Another aspect of business that every entrepreneur understands is getting the right people around you.

How do you find the best talent for your businesses – and how do you keep them interested and engaged?

RB: We don’t really have a general recruiting process at Virgin – it depends on the type of business and the position we are looking to fill.

However, as a rule we tend to pick out employees who are inquisitive about the bigger picture, and have a ‘can do’ attitude, are positive and enthusiastic and, most importantly, have a strong sense of fun! I have found that choosing enthusiastic, talented and positive people has helped to shape a positive character for our businesses.

CMP: Innovation is clearly something that is central to the Virgin ethos. How do you unlock this, both personally and in your business teams? Can you create a culture of innovation and, if so, how?

RB: I believe our culture of innovation is a result of our ability to adapt to changes quickly. We run our companies small; there is very little red tape and certainly no bureaucracy – we make decisions quickly and implement them, before our competitors in the market have held their fifth meeting on the same issue.

Additionally, Virgin has many, many entrepreneurs within the organisation. In business, the picture is constantly moving and changing so I try to employ people who enjoy thinking outside the box and are constantly creative and inspiring.

Our people don’t just think about the numbers but think about how a deal will enhance the whole brand.

CMP: You’re a globally recognised philanthropist and supporter of charities. How important is it to devote time and capital to not-for-profit work as a businessperson? Does it matter what size your business is? Is it more important to donate time or capital?

RB: I believe that today’s businesses – regardless of their size – must be prepared to do good in societies around the globe. I am optimistic that we

BRANSON ON… TECHNOLOGY CMP: From big data to social media, the digital revolution is disrupting industries across the world, with business models being forced to change, whether they want to or not. As an entrepreneur with a history of disrupting established industries, does the potential of digital excite you? What’s your advice on how to make the most of emerging technologies?

RB: The mobile revolution has allowed entrepreneurs to better talk to their customers, suppliers and staff in real time to determine exactly how each one is responding to particular situations, and determine exactly what they want and need. An entrepreneur who takes full advantage of this is well on the way to making himself a success, because he knows how to approach his consumers and how to deliver his offer in just the right way. I know it’s a cliché, but knowledge is power.

Virgin is a major advocate of social media and the power it can hold for companies. My advice to the businesses of the future would be to improve their social media presence and use it as a way of knowing their customers more intimately. It can act as a wonderful warning system for businesses as well as a cost-effective way to get your message out.

“The amount of time people waste on failures rather than putting that energy into another project always amazes me” can make the world a far better, safer and more equitable place, but business and enterprise must sit at the heart of this process. We need government, business and the social sector to work together for the benefit of everyone.

It should no longer be just about typical ‘corporate social responsibility’ where the ‘responsibility’ bit is usually the realm of a small team buried in a basement office – now it should be about every single person in a business taking responsibility to make a difference in everything they do, at work and in their personal lives.

Virgin Unite, the non-profit arm of the Virgin Group, call this approach ‘Capitalism 24902’ because it’s focused on getting business leaders all over the world — all 24,902 miles of it — to look at how we can do what is right for people and the planet. Virgin Unite also helped incubate a recently launched not-for-profit organisation called ‘The B Team,’ which is framing a new approach to business where people and the planet are priorities, alongside profit.

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BUSINESS STRATEGY / CANADIAN FIRST FINANCIAL CENTRES

MORE

THINGS

TO MORE CLIENTS

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Brokers committed to deepening client connections are increasingly pointing to a beefier, more powerful Canadian First Financial as a way of achieving that goal.

Here’s why Ever get the feeling that business is walking out your Founded in 2007, Canadian First Financial created door? You’re not alone. a one-stop-shop model, providing retail broker-partFor years mortgage brokers have had to say “no” ners with a dedicated insurance/financial planner. to requests for advice from clients concerning other These brokers are what Canadian First Financial areas of their financial portfolio or refer them to founder and Chief Commercial Officer Karl Straky another professional and hope it paid off in the form refers to as “early adopters.”

Their ranks may soon swell, as 2013 saw Canadiof more referrals for their mortgage business.

When times were good, it didn’t an First Financial granted a Schedule seem like anything to worry about; 1 bank licence and complete the acquisition of mortgage lender doing mortgages was enough. Now, a growing number of brokers have MonCana Bank of Canada. The goal come to realize that they can’t rely on of helping brokers offer a broader a single transaction to make a living. range of products and services has “The era of mortgage brokers only taken a giant step forward.

“This acquisition marks another providing mortgages and being financially successful has come and gone,” milestone in the creation of a new says broker Peter Majthenyi of Morttype of financial organization that gage Architects in Toronto. will deliver one-stop shopping convenience for retail banking, wealth “As much as people think they know, they need to talk to people who management and insurance products are experts, whether it’s a mortgage and services,” says Peter Vukanovich, broker or investment planner,” says president and CEO of Canadian First Paula Roberts of Dominion Lending Financial.

Centres – The Roberts Group in UnFor Canadian First Financial broionville, Ont. ker-owners, having a deposit-taking “Brokers need the ability to build Brian Matthey bank behind them is key. a fence around their clients, instead “One of the primary strengths of relying on outside referral sources,” adds Adam behind Canadian First is having access to our own Bazuk of Dominion Lending Centres – YBM Group balance sheet,” says Majthenyi. “It’s the difference that will allow us to develop and manufacture retail in Thornton, Ont. “If I can get a client in the door and help them banking products. with their mortgage, then I could do a lot more for “Now, not only can I leverage my relationship with my client,” says Brian Matthey, broker/owner of the client and build upon the mortgage by giving Verico – The Mortgage Professionals in Kingston, them insurance and wealth management, but over Ont. time I will be able to offer a full range of banking In addition to their agreement that doing more products and services.”

It’s a role reversal, according to industry veteran for clients is a necessary step in the evolution of mortgage brokers, this group has something else in Gord Dahlen, who recently joined the Canadian First common – they are all owners of a Canadian First Financial team as vice-president for retail banking Financial Centre (Canadian First Financial). network development.

If I can get a client in the door and help them with their mortgage, then I could do a lot more for my client

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BUSINESS STRATEGY / CANADIAN FIRST FINANCIAL CENTRES

A LAST WORD ON CANADIAN FIRST FINANCIAL

“Brokers are under significant pressure to keep their clients and even win clients in the first place,” he says. “Now we’re building a bank (for brokers) and we’re going to manufacture products that they can own.

“Now brokers can say to their clients ‘I can offer you value not just in one aspect of your financial life, but several.’”

It’s not just talk. For Canadian First Financial, it’s about helping brokers do more, while at the same time making sure to protect their core business – mortgages.

“If you can retain 5 per cent of your clients because you offer a broader range of products and services and you can attract 5 per cent additional client growth for the same reason, that’s 10 per cent growth in your mortgage business,” explains Straky.

That not just talk, argue broker partners.

“I know I’ve done more mortgage business today because of the Canadian First Financial Centre I opened in 2009,” says Bazuk.

Doing more is also about being different and unique, says Straky.

“At the end of the day, mortgage brokers do a great job of getting client relationships and they underestimate the value of those relationships and what they can do with them.

“This is where Canadian First Financial provides the uniqueness to the mortgage value proposition that the broker is striving to build.”

According to Straky, offering to help clients with their retirement planning or insurance needs makes your business different from the broker who only sells mortgages. It also allows for introducing other products and services around the mortgage, such as unsecured lines of credit and bank accounts.

For Straky, owner-managed, community-based Canadian First Financial Centres are “like the banks of old, when you recognized the person, knew them and felt a relationship.”

“When we opened our Canadian First Financial Centre, we had a lot of people visit who didn’t need a mortgage, but came because they knew us in the community and liked us,” recalls Roberts.

Matthey for one believes that relationship between broker and client is what will help the Canadian First brand succeed.

“Top brokers already have thousands of client relationships. The Canadian First Financial model empowers brokers to do more for these clients. And with an ownership interest, it’s a true win/win – for

Canadian First Financial Centres were started in 2007 to provide a one-stop-shop model whereby mortgage brokers could have a dedicated insurance/financial planning branch co-located with their brokerages.

In 2011 Canadian First Financial introduced the Referral Partner program, which offered smaller retail brokerages access to financial and insurance advisors as mobile specialists.

In June of 2013, Canadian First Financial was issued a bank licence to incorporate as a Schedule 1 bank. “Our unique business model enables independent financial professionals to do more for their customers,” said President and CEO Peter Vukanovich. “The approval of the licence is a landmark step towards creating a new and different banking service for Canadians.”

In October of 2013, Canadian First Financial completed the acquisition of MonCana Bank of Canada, something industry experts viewed as creating a broker-owned bank; one with the resources and products to help provide an advantage over the competition at the big banks.

“Canadian First Financial is building a retail banking strategy on top of the mortgage banking business of MonCana,” said Karl Straky, founder and chief commercial officer of Canadian First Financial. “Having a Schedule 1 bank licence means that our bank can engage in deposit-taking activities. Over time, we plan to empower mortgage brokers with the ability to expand their product offering and solve more of the financial needs of their clients.”

brokers and Canadian First.”

Clients understand, says Roberts. In the role of mortgage broker you are able to see the client’s entire financial portfolio and by offering other products and services though a Canadian First Financial Centre, clients know you’re looking after their best interests.

“So if I have a client with a massive amount of debt, I’m going to talk to them about getting a better mortgage at a lower rate and getting rid of the debt,” explains Roberts. “Now without those debt payments, they can consider putting that extra money into an investment account and start creating wealth.”

It’s just the start for Canadian First Financial as well, according to Vukanovich. “Our priorities as a company for the next year are to build up the size of the network, implement a number of mortgage lending and banking products and revamp our wealth and insurance relationships.

“2014 is going to be our breakout year.”

With mortgage brokers under pressure to keep clients or even to win them in the first place, they are looking for something to help them take their business to the next level. According to Straky, that means a different experience.

“We want people to know that this trusted advisor who helped them with home ownership can now help them with banking products and other needs.”

The mortgage broker as a one-stop financial shop?

That is definitely something new, says Dahlen. “I can’t think of anything that has happened in the last 25 years that’s more interesting than having a broker-owned bank where brokers will be able to control their own destiny.”

2014 is going to be our breakout year

C

t 4 t

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BUSINESS STRATEGY / COMPETITIVE ADVANTAGE

YOUR BUSINESS STRATEGY:

CREATING COMPETITIVE ADVANTAGE

WITH EDI ENTERPRISE PERFORMANCE GROUP

There’s no substitute for a well-thoughtout plan, so why are brokerages — big, small and medium-sized — failing to come up with one? EDI points them in the right direction Strategy is defined as the planned actions or planned major initiatives taken by a company’s leadership to reach a set of predetermined, measurable goals or objectives. Strategy allows a company to transform from its current state to its visionary state and not to accept the status quo.

In simple terms, it is creating a vision, defining measurable goals, analyzing your current business state, identifying the specific projects and programs required to meet the goals, identifying the required resources to complete, and setting a realistic timetable and plan for completion. As a business, strategic planning is the first step necessary for maximizing return. It is promoted by the most successful business leaders of the world and all the top business schools.

So why is the process so underutilized? Why do the majority of small to midsized businesses not operate with a strategic plan or a budget? Why do leaders of small business prefer not to have anything 18 | NOVEMBER 2013

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in writing and prefer to react on a day-to-day basis?

For those that create a business plan once a year; why is this not enough for success? And the question all businesses that have not grown over the last five years should ask: why do successful entrepreneurs and business leaders invest in the process year after year?

In driving to some answers, let’s start with the Strategic Planning Framework.

CREATING REAL VISION Stephen Covey has coined a phrase, “start with the end in mind.” At EDI, we also believe in this critical first step. You need to create a vision of what your business looks like long term before we can even decide what the first step is. Start with your vision for 2018 and “paint the picture,” or in other words, describe what your business looks like 5-10 years out

? ar 2018 in the ye g in d n e /fu volume hat is th ur total e and w v o a y h is u t o a Wh nts do y ent age agents depend licenced in y e n v a a f h m o u How l? Do yo d a team s mode you buil o d r o le t busines ab a spli and vari ou earn your of salary where y ix odel for m m a le h b it a t w fi s ro e e ep employ hat is th tion? W a s n e p com usiness t your b a h t e ? m co future hosen? ission in model c t comm e e h n t e n h o t sed What is what 2018 ba nded at he year t fu in re s a n r s ea c where ction e specifi l transa b a u u o n y n a n ca ny How ma alue and from? rtgage v o coming m e e b g l il w is the s avera d a nd what and le a s e s v e a in h s you the bu yees do l emplo a t to y n How ma etition? e comp h t t a ? e t b cos p to ss set u r busine u rs? o y is How erentiato key diff e h t re What a

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BUSINESS STRATEGY / COMPETITIVE ADVANTAGE

KEY ECONOMIC DRIVERS

Best practice dictates that we identify the key economic drivers of the business and set a measurable goal for each and do so in measurable detail for the following: This exercise seems like guesswork, however the more detailed the assumptions are, the better the described vision, the more committed we are, and the more likely we will actually win. Our experience with hundreds of successful clients across North America, Europe, and Southern Africa has taught us that long term vision is as important to success as a specific 12-month plan and both are required for success.

As we finalize our vision there is one important step that must be taken to unify the team. The vision must be consulted on with the key members to vet assumptions and solidify buy-in.

SETTING MEASURABLE GOALS Once everyone is on the same page and agreement is struck we are then ready to set our 12-month goals for the company. Best practice dictates that we

1. Agent model of growth • Net agent recruiting for the next 12 months (recruiting and attrition assumptions for experienced agents) • Average contribution per agent for the next 12 months for all agents (how much the average agent contributes to the business after they are paid their split) • Total funding/volume, gross commission earned, and net commissions kept by the business for the next 12 months • Number of leads provided by the business, if any, and related commission split 2. Team model • Total funding/volume for the next 12 months • Number of transactions funded • Number of applications taken • Number of leads required • Number of licensed agents on the team 3. Funding volume by lender • What is the planned distribution to lending partners to attain status and meet commitments?

• Identify new lenders that we want to develop to strengthen our offering

identify the key economic drivers of the business and set a measurable goal for each:

STRATEGIC AUDIT Once these goals have been set it allows us to look at our current operation to assess our ability to deliver.

The process of analysis is referred to as a strategic audit and involves knowing our numbers from the past year and specifically understanding key metrics such as: • # of leads, applications, and deals funded (organized by source) • Cost per lead to the business for each source • Conversion % of leads to applications taken • Conversion % of applications taken to deals funded • Overall cost per deal funded and resulting margin From this analysis we can then identify our strengths, weaknesses, opportunities, and threats (SWOT). The key to an effective SWOT analysis is to focus on what differentiates us from our 20 | NOVEMBER 2013

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competition and be audaciously truthful about ourselves. Only after this candid level of recognition can we set up a plan to succeed.

STRATEGIES Now we are getting into the design and action of what we are going to do. The specifics of what we are changing in the business to take advantage of opportunity, leverage our strengths, resolve our current weaknesses, and react to our changing business environment. The secret here is identifying the key strategies that are going to provide the most return for the business both in qualitative and quantitative results. The business only has so much resource to invest and therefore we must be realistic in what we can accomplish in 12 months.

The best practice in drafting your strategies is following the acronym S.M.A.R.T. (specific, measurable, attainable, relevant, timetable). We write our strategies: • to be very specific on outcome • to have a measurable component to gauge our success and guide our implementation • to be attainable and realistic to keep us motivated • to be relevant to our vision – or why are we doing it?

• to have a clear due date for completion Strategies must be documented and assigned so that there is a high degree of commitment and accountability. To ensure buy in with the team, the tactics (“to do’s”), should be created with the team with responsibility assigned and deadlines established. Dictating at this point in the process is a contributor to failure. Many leaders try and force their designed strategy on the team and find that the buy-in suffers and the resulting effort for success is negatively impacted. Invest in buy-in and include the team in plan design and you will reap the rewards in successful implementation and result.

IMPLEMENTATION Many plans are not worth the paper that they are written on due to poor execution. There a few key areas to focus on to improve your organization’s ability to implement effectively: • Spend time on the creation of your plan according to steps mentioned already • The physical plan must be used and reviewed

weekly and updated/adjusted regularly The organization should create key performance indicator (KPI) reporting of economic drivers that measure the improvement of the business and the effective results of strategy. EDI refers to this process as Dashboarding • Create a process of accountability. We all need accountability to perform at a higher level. Best practice is reviewing deliverables at least every two weeks as a team.

• Operate with candour. We are not moving forward if we are not honest with ourselves.

The business strategy and the business budget work together to drive implementation. You cannot have one without the other to effectively improve your profits. We recommend that you build the effect of change into our budget according to the timing of our strategic plan. By creating a monthly budget showing the effects of strategic change, we create financial accountability to the plan. The budget will also show the profitability increase expected and should by the catalyst to drive motivation for success.

•

ACCOUNTABILITY It would not be responsible of us to ignore the most important driver of successful implementation. We have recommended bi-weekly accountability to a plan of attack and review of the related results. We also recommend that you invest in a professional to provide “objective” advice and unbiased accountability. All great success follows the same formula and if you want to drive a different result and you are tired of the status quo with your business, you must make the leap or adjust your expectation for diminishing return from your business.

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BUSINESS STRATEGY / PEOPLE AND MANAGEMENT

LEADERSHIP MORE THAN JUST EMOTIONAL INTELLIGENCE

Emotions are vital to decision-making, but giving insufficient thought to decisions can lead to disastrous results.

Neal M. Ashkanasy explains how to recognize the importance of emotions while guiding decision-making towards achieving goals and creating a healthy workplace culture

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5 LEVELS OF LEADERSHIP ORGANIZATIONAL LEVEL How leaders can contribute to healthy and productive organisations GROUP LEVEL How leaders manage emotions in groups and teams INTERPERSONAL LEVEL How leaders communicate emotional states to their subordinates INDIVIDUAL LEVEL Some leaders are better at experiencing, using, and managing emotions than others MOMENTARY LEVEL How leaders can contribute to their employees’ feelings and performance, moment by moment throughout the day

Human beings are emotional. There is no getting around it. While we try desperately to appear cool and rational, and often pretend that we achieve this state, the sad fact is that we will inevitably fail. As Nobel Laureate Daniel Kahneman explains in his book, Thinking, Fast and Slow, even decisions ostensibly taken at the highest levels of government and finance are inevitably coloured by the emotional states of leaders. Moreover, many of these decisions are based on spur-of-the-moment so-called intuition and more often than not lead us into trouble.

It is little wonder that we live in such a chaotic world.

On top of this, people cannot live full and effective lives without their emotions.

Neuropsychologist Antonio Damasio has studied how people with brain damage think and behave.

In one of his studies, Damasio discusses a patient named Elliot who had suffered damage to the ventromedial frontal lobe of his brain caused by a tumour and subsequent surgery. Elliot had been living a successful life before the tumour, and his IQ was in the 97th percentile. Following the surgery, however, two things changed in Elliot’s life. The first is that he became incapable of experiencing any emotions. He became a Spock-like pure rational man. The second is that Elliot’s life began to fall apart; he lost his job and his family.

5 4 3 2 1 Despite his high intelligence, Elliot would take more than 30 minutes to make an appointment; all afternoon to decide where to go for lunch. In other words, without being able to experience emotions, Elliot became incapable of making decisions. In subsequent research, Damasio and his colleagues showed convincingly that, far from inhibiting and distorting our decision-making capacity, emotions are an essential ingredient of our ability to make decisions affecting every aspect of our life.

For leaders, whose role it is to facilitate organizations and their members in achieving their important goals, this poses a problem. People’s emotions play an integral role in facilitating their decision-making, but such decisions are often taken with insufficient thought, leading to disastrous results.

ACHIEVING YOUR GOALS It would seem, therefore, that a core responsibility of leaders is to manage this process; in other words, to recognize the innate importance of emotions, but to guide decision-making so that important goals are achieved.

How then do they do this? My solution is based on work I am doing with Professor Ronald H. Humphrey, in which we have set out a theory of leadership based on five levels. The five levels are: NOVEMBER 2013 | 23

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BUSINESS STRATEGY / PEOPLE AND MANAGEMENT

• Momentary level: How leaders can contribute to their employees’ feelings and performance, moment by moment throughout the day • Individual level: Some leaders are better at experiencing, using, and managing emotions than others • Interpersonal level: How leaders communicate emotional states to their subordinates • Group level: How leaders manage emotions in groups and teams • Organizational level: How leaders can contribute to healthy and productive organizations Sitting at the bottom level of our model of leadership is the idea that employees, like people everywhere, are innately emotional, in every second of their being. Everything we experience in the workplace, especially the hassles and uplifts of daily work life, results in some kind of emotional reaction.

This is sometimes positive, for example, joy at being rewarded for good performance, and sometimes negative, for example, experiencing anger when a colleague fails to deliver.

Research has shown that these emotional reactions determine how we think and behave at work. Moreover, it’s not just the big things; it’s the little things that recur again and again that really make a difference. For instance, an employee who is constantly hassled by her or his boss may become disenchanted and lose the motivation to work productively. The implication is that leaders need to understand that everything they do and say is likely to have an emotional effect that will affect their organization’s productivity, not to mention the wellbeing of their employees. In this case, while recognizing that positive emotions are not always appropriate, a leader’s generally more positive emotional demeanour is likely to have beneficial effects.

EMOTIONAL INTELLIGENCE At the next level is the idea of ‘emotional intelligence’. Introduced to the world at large in 1995 by New York Times columnist Daniel Goleman in his best-selling book Emotional Intelligence: Why It Can Matter More Than IQ,

People’s emotions play an integral role in their decision-making, but such moves are often made with insufficient thought emotional intelligence quickly became very popular among business leaders. However, it has also been described as ‘just another management fad’. There is some truth to this insofar as Goleman and other popular authors have tended to make extravagant claims that emotional intelligence is some sort of magical ingredient for a successful life.

In fact, emotional intelligence was defined by psychologists Jack Mayer and Peter Salovey as simply a set of personal abilities relating to how people perceive, use, understand and manage their emotions.

Some people are good at it, while others are not so good. Thus, emotionally intelligent leaders have the ability to sense the emotions of their employees. They understand this information and can use it to manage both their own emotions and the emotions of their employees.

Relating this to the first level of the model, emotionally intelligent leaders have the ability to help their employees towards positive emotional responses that lead to productivity and individual well-being. The good news here is that, like intellectual abilities, while there is a genetic component to emotional intelligence there is also strong evidence that it can be improved through training.

EMOTIONAL LABOUR The third level of the model concerns the way emotions are communicated. The core concept here is “emotional labour.”

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First proposed by sociologist Arlie Hochschild in 1980, emotional labour involves the notion that employees can be remunerated for displaying appropriate emotions in their interactions with clients and customers. For example, a flight attendant is expected to maintain a positive demeanour irrespective of how they are feeling.

Hochschild pointed out that this can be done in one of two ways: an employee can employ “surface acting,” when they will try to feign the emotion; or they can use “deep acting,” when they will try to imagine being in the emotion, rather like “method acting” used by movie actors.

Research has demonstrated that deep acting is not only more effective than surface acting but involves less effort. In fact, employees who engage in too much surface acting tend to become emotionally drained and are prone to suffer from burnout.

More recently, together with Ronald Humphrey, I proposed that good leaders can manage the emotional states of their employees using emotional labour, and especially deep acting. An effective leader will use his or her emotional intelligence ability to know the appropriate emotional expression to display to subordinates and then use deep acting to do so.

Such a leader will thus be able to display the right emotions needed to facilitate employee productivity and well-being.

EMOTIONAL CONTAGION The next level of the model involves the role of leaders as facilitators of group or team performance. Here the underlying mechanism is “emotional contagion,” a process

whereby employees “catch” the emotional state of their leader.

This idea was first proposed by psychologist Elaine Hatfield and her colleagues and involves unconscious mimicking of the emotional expressions of others.

More recently, emotional contagion has found support in the discovery of “mirror neurons,” whereby the brain detects other people’s emotional states and automatically responds with a matching emotional state. In fact, researchers have demonstrated that emotional contagion has a powerful effect on group and team members’ emotional states. Thus, emotionally intelligent leaders who are aware of their subordinates’ emotional states and display the appropriate emotional expression using deep acting are able to affect the emotional state of their team members in a positive way.

Neal M. Ashkanasy, PhD, is professor of management in the UQ Business School at the University of Queensland. He is a Fellow of the Academy for the Social Sciences in the UK and Australia; the Association for Psychological Science; and the Society for Industrial and Organizational Psychology.

EMOTIONAL CLIMATE At the top level of the model is the idea of an organization’s “emotional climate.”

Sociologist Joseph de Rivera describes this as something that “can be palpably sensed – as when one enters a party or a city and feels an attitude of gaiety or depression, openness or fear.”

Clearly, however, this can go either way. Some organizations are characterized by a climate of fear and are unhealthy places to work. Other organizations whose leaders are emotionally intelligent and appropriately transmit positive emotional cues to their employees become “healthy organizations.”

Emotional contagion has found support in the discovery of “mirror neurons,” whereby the brain detects other people’s emotional states and automatically responds with a matching emotional state.

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BUSINESS STRATEGY / SMART BUSINESS

TRANSITIONING: The Third Space The key to success in business is the ability to leave behind the baggage from your previous interaction and show up at the next one with a mindset that will help create satisfied customers prepared. In an article based on his book, The Third Space, Adam Fraser explains all

Working in the financial services industry you are faced with many challenges. Keeping clients happy, managing the expectations of stakeholders, and keeping up with constant regulatory changes are all in a day’s work. Of all the challenges you face the greatest one is the huge number of hats you have to wear on any given day. One moment you are playing counsellor to a client; the next you are wrestling with a frustrating bank system; then selling your expertise to a prospective client. Finally you are expected to go home and turn off from work and engage with the people in your personal life. The challenge is how do you perform at your best in each space you inhabit and not carry a bad experience into the next one?

I first came across the concept of transitioning when Jim Loehr’s research showed that there was

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very little difference between the top 100 male tennis players in terms of speed, accuracy and power during the point. Where the elite players differed was what they did in between the points. First of all the elite players were able to reflect on the previous point and not carry what happened into the next point.

Secondly, they were able to relax their bodies, which calmed their minds and conserved their energy. Finally, they moved into the next point with a focused, optimistic mind. It was not what the elite players did during the point; it was what they did in between the points that made them the best.

We are just like the tennis players moving from point to point: our lives are made up of moving between different spaces. The first space is the role/environment/task you are in now; the second space is the role/environment/task you are about to transition into. For example, you may go from checking emails at your desk to sorting out a personal issue, or you may go from an internal meeting about the strategy of your business to an external meeting where it is about your client’s world. Each space requires us to be different things to different people.

The key to success in business is the ability to use the “Third Space” (the transitional gap between the first and second) to leave behind the baggage from the previous interaction and show up at the next one with a mindset that will help you gain the maximum amount of value from it.

DON’T TAKE WORK HOME One of the transitions we struggle with the most is the transition from work to home. In our research we found that people often carried the work mindset into the home; that is they tried to run their homes like their offices. This mindset is obviously not conducive to the home. Our research found that only 26% of people came home with a positive mindset and only 43% came home in a good mood. We set out to determine if the transition between work and home

could improve mood and mindset. After three years of research we found the magic formula. The perfect transition between work and home consists of three elements: Reflect: This is where you reflect on the day. The key is to reflect on the positive things that happened.

Specifically, what went well, what did you achieve and how did you get better? This activity gives you a burst of happiness and optimism.

Rest: This is where you take time to be calm and focus on the present moment. This step relaxes the mind and sets you up for constructive behaviours.

Reset: The final step is where you become clear about your intention for the home space and articulate the specific behaviours you want to exhibit. This final step has a dramatic impact on people’s behaviour as it elevates their self-awareness.

Adam Fraser is a leading researcher and expert in human performance. He has worked with elite athletes, the armed forces, and business professionals at all levels. He is at the forefront of how neuroscience and positive psychology can be used to improve workplace performance.

In one experiment we asked a group of smallbusiness owners to practise these three steps between work and home. After a month of practicing we saw a 41% improvement in their behaviour in the home.

A POSITIVE CUSTOMER EXPERIENCE NEEDS THE RIGHT MINDSET This strategy also applies to our business day.

Business owners in the financial services space have had to alter the way they interact with clients dramatically. They are expected to take a holistic view of their clients, talk to them about their hopes and dreams, manage their emotions, and spend more time justifying the fees they charge. We all struggle with change. In fact, 75% of change efforts in the workplace fail. One of the reasons we fail to change is that we get busy. We might go to a seminar about improving our business and write down some great strategies.

However, we get back to the office and are greeted by 150 emails and a panicked phone

THE

FIRST SPACE Role/environment we are now in

THIRD SPACE

SECOND SPACE

Role/environment we are transitioning into

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BUSINESS STRATEGY / SMART BUSINESS

TRANSITIONING IN PRACTICE: AMP

Glenn Gibson

DESPITE BUSY LIVES AND HECTIC SCHEDULES, BROKERS STILL NEED TO MAKE THEIR CUSTOMERS FEEL “AS IF THEY ARE THE BROKER’S ONLY CLIENT”, INDUSTRY VET GLENN GIBSON TELLS AMY ROSENFELD

calls from clients. The change gets put on the backburner and we go into survival mode.

We have run a number of very successful cultural change programs. Our strategy is simple:

“Giving great service to the customer and really thinking about each client as an individual is paramount to ensuring they receive the best service, which keeps them coming back and also referring the business,” says Glenn Gibson.

No matter how many other demands there are on a broker’s time, clients need to feel that their broker holds their needs as top priority, he says. Taking a proactive approach to customer files by keeping in mind each deadline and then sticking to it is one of the simplest ways of achieving this.

“Telling a client when they will be next contacted and by whom makes the client feel that the broker is in total control and completely focused on them,” Gibson says. “Mind you, keeping to your contact timeframes is crucial, even if something hasn’t happened in the expected timeframes. Ringing a client to tell them that something hasn’t happened is just as important as contacting them when it has.”

Taking this pre-emptive approach can also help brokers’ productivity and task management by reducing unscheduled interruptions by clients looking for updates.

Realizing the importance of a strategy aligned to customer focus, we recently created a new customer solutions division and appointed a chief customer officer.

“By aligning our customer focus approach both to brokers and customer we believe we will be in a better position to support the customer-first approach of our brokers,” says Gibson, who adds that being able to focus on each customer as an individual, regardless of a demanding workload, is crucial to building referrals and lifting your bottom line.

“People are more likely to believe what they hear from friends and relatives than they are from ads. Repeat customers and customer referrals are two of the highest converting lead sources,” he says.

“Delivering the optimum customer experience is not just about the first transaction but also the next one and the ones after that.

“When you consider the cost of acquisition of each new customer, including advertising, marketing, then the first repeat business halves that cost, and the benefit continues with each new interaction.”

STEP 1: Map out what new behaviours need to be incorporated.

STEP 2: Each time people move from one interaction to another they remind themselves of those key behaviours. The likelihood of incorporating these behaviours is far greater since they are front of mind.

The customer experience drives your business.

Services firms, more than any other sector, are built on referrals. People refer when they have had a great experience. It drives consumer behaviour.

A challenge we face is that in-store retail spend has dropped. What is the average retail experience like in this country? It sucks! Staff seem more interested in updating their Facebook statuses than serving you; things are hard to find and you have line up to be served. People are increasingly shopping online because the store experience is terrible. Yet Apple makes 50% of its profit from in-store shopping and is the most profitable store per square metre of space on the planet. When people were asked why they shopped at the Apple store rather than going online, they said it was because of the experience. They loved going to the store: it was fun; it was cool; it felt good to be in there.

When I recently asked my Facebook community to refer me to a financial planner and a mortgage broker, the reasons they gave for recommending people all revolved around the experience of dealing with them. It was things like: “They really listened to us and understood what we wanted from our financial plan”; “She was really nice to deal with, listened to us and took her time”; “They didn’t just push products on us, they understood our risk profile and tailored the plan to meet that”; and “Their level of service and care went above and beyond; they spent time understanding our needs and determined what was the best loan for us.”

How we interact with our clients determines if we are successful or not. As you transition into every client interaction, ensure you use the “Third Space” to get yourself into the right mindset to give your clients a positive customer experience. Ask yourself: “How am I showing up?” The better you show up, the more you will create satisfied customers who will help drive your business forward.

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CMA1

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31/10/2013 PMPM 07/11/201310:57:59 12:53:28

BUSINESS STRATEGY / SURVIVAL

M

SUSTAINABILITY AND ENGAGEMENT

THE KEY TO SURVIVAL

A new paradigm is emerging surrounding how a business should respect the stakeholders that are essential to its long-term prosperity, argues Jeremy Galbreath

Most companies desire to stay in business over the long run. This requires a sound business strategy, including sharp focus on the right target customers, an unbeatable value proposition, and a product or service that can be delivered to the targeted customers at a consistent profit. This wealth-creating strategy and function has been the generally accepted sole purpose of business for generations.

Today, however, there are converging forces that recognize that while businesses are in the business of making money, their economic activities require greater scrutiny – and accountability.

More specifically, stakeholder demands, the activity of non-governmental organizations, and regulatory reforms – an issue that mortgage brokers are all too familiar with – are increasingly placing pressure on firms to take into account the environmental and social implications of their economic activities. ‘Sustainability’ is an emerging business paradigm that recognises that businesses – and their economic activities – are inescapably reliant upon environment and social systems for long-term survival.

For example, businesses rely on natural resources and ecosystem services for energy, operations, and production. They rely on governments and communities for infrastructure and support.

They rely on employee skills and knowledge for competitiveness and growth.

The sustainability paradigm clearly recognizes that economic growth and wealth creation are only viable if access to this natural, human, physical, and social capital continues. Sustainability recognizes the following three corporate objectives: • economic viability • environmental integrity • social responsiveness

WHERE DOES BUSINESS FIT IN? Private business acts as the engine of economic progress in society and represents the productive resources of the economy. In this economic role, competitive, market, and regulatory forces place considerable pressure on firms to sustain their wealth-creating contributions. To remain economically viable, firms can: • plan strategically • invest in research and development activities • lower costs and realize production efficiencies • innovate to meet customer needs 30 | NOVEMBER 2013

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WP_T

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ADVISORS Are you one of Canada’s Top

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Those in the Wealth Professional Top 50 Advisors list will be able to use this ranking as a valuable marketing tool to enhance their reputation and credibility within the profession and the industry.

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BUSINESS STRATEGY / SURVIVAL

However, sustainable companies focus attention not only on their economic role but also on their environmental integrity and social responsiveness.

The economic activity of firms can impact on: • natural resource depletion • environmental degradation • disruption of communities • worker displacement • worker health and safety While some of these negative externalities are dealt with through the pricing/allocation mechanism of the market (eg carbon emission trading) and others through regulation (eg worker health and safety), many are unpriced or exploitations of the commons (eg loss of natural habitat, disruption of communities, worker displacement).

JARGON EXPLAINER:

TAKING ACTION

Given the many potential unpriced externalities of SUSTAINABILITY firms’ economic activities, sustainable companies An emerging business paradigm that move beyond market recognizes that mechanisms and businesses – and their regulatory compliance to economic activities – address environmental are inescapably reliant integrity and social upon environment and responsiveness voluntarily social systems for and proactively. long-term survival.

These two dimensions are intrinsically tied to ongoing sustainable economic activity. In the sustainability paradigm, economic viability is achieved not by indiscriminately externalizing costs onto legitimate stakeholders but rather by treating the maintenance of natural or environmental capital and the delivery of social improvements as a necessary complement to economic activity.

There is ample evidence to suggest that companies that proactively address environmental integrity and social responsiveness actually enjoy higher economic performance. However, maximising economic, environmental, and social performance is no easy task.

Ideally, sustainable companies are those that seek to maximise the utility of all stakeholders by maximizing economic outcomes while simultaneously maximizing environmental and social outcomes. But optimizing across all three dimensions is virtually impossible because the pursuit of sustainability requires trade-offs, and cost.

In trade-off situations it is difficult to achieve two or more desirable objectives simultaneously. For example, a company might accept a lower rate of return on a major strategic initiative in order to protect the natural environment. Or, when economic interests take precedence, certain environmental investments may not proceed, or a program promoting social progress might have to be postponed.

On the other hand, sustainability-focused companies might experience a higher cost structure by, for example: • paying their employees above-market wages • engaging in mitigation effects regarding environmental externalities over and above what is required by regulation • not reducing headcount rapidly in times of economic austerity • passing up valuable investment opportunities that are not consistent with their values • earning lower margins on products or services due to more expensive sourcing decisions to appease NGOs • losing customers to competitors by charging a higher price for sustainability-focused features that some customers are not willing to pay for

Jeremy Galbreath is an associate professor at the Curtin Graduate School of Business.

He is an authority in corporate social responsibility and sustainability. He holds a PhD from Curtin, an MBA from Colorado State University, and BS and MS degrees from Ball State University.

CHASING SUSTAINABILITY Pursuing the sustainability paradigm largely comes down to a few key aspects, ie the degree to which – more or less – a company takes the following actions: • emphasizes the long term versus the short term • cares more or less about the impact of their operations on other stakeholders and the environment • focuses more or less on the ethical grounds of their decisions • places relatively more or less importance on shareholders compared to other stakeholders Each of these aspects ultimately places considerable tension on decision-making and begs the question that every company must ask: “What is our strategy?”

32 | NOVEMBER 2013

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