Changes at Scout Mortgage - Changes at Scout Mortgage MGMT...

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Changes at Scout Mortgage MGMT 325 – 05 8:00 a.m. December 7 th , 2012
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“John Mangels and Steve Walsh had been dreading the decision for years. But the nature of their industry had changed, and now to stay healthy the business had to somehow change, too” (Hellriegel and Slocum, 2009, age 532). This is where our case starts. Mangels and Walsh, co- founders of Scout Mortgage - a mortgage broker company, are about to make a company- changing decision that will turn Scout upside down. In this paper, we will discuss the owners’ decision, what changes were made and how these changes have affected the company and its productivity. About the Company Scout Mortgage is a mortgage broker based out of Scottsdale, Arizona. The services that they offer are refinancing, new mortgages, and complimentary pre-qualifying for mortgages (Mortgage, S., 2010). They offer a lower interest rate than the national average (3.25% versus 3.34%) (Mortgage, S., 2010). Their company is based on offering the lowest prices possible. On their website homepage they state, “We guarantee the absolute lowest rates and lowest closing costs available because we shop among 40 banks for the best deal” (Mortgage, S., 2010). After they embarked in their new direction Walsh commented, “If we can offer absolutely the lowest rate possible, will we gain market share? It has to be a yes. It could be the greatest or best decision we ever made…” (Hellriegel and Slocum, 2009, page 533). Their goal as a company, after the big salary change, is to pass on the savings to customers. Summary “Changes at Scout Mortgage” is a case about, as it states in the title, change. Scout Mortgage was founded and built by John Mangels and Steve Walsh, co-workers who met while
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working at another mortgage company. Their agents’ salaries are based on commission, which is not uncommon in this industry. When the mortgage market was booming, top sellers were making upwards of $300,000/year. Typically for Scout’s employees, each mortgage that they closed earned them a commission of $4,000 to $7,000 that was split 50/50 with the company (Hellriegel and Slocum, 2009, page 533). As the market changed, however, Mangels and Walsh started to realize that they would have to change along with it. In 2004 interest rates started rising, which cut down on the amount of money that people were spending. This cutback cut down on the amount of money that Scout was generating. Changes in technology also greatly affected the company. Search engines and automated software cut down on the use of agents in the field, making companies like Scout “highly paid phone banks” (Hellreigel & Slocum, 2009, page 533). Change needed to be made but how that was to be implemented was tricky. To get rid of loan officers altogether for cheaper salaried employees would change the whole outlook of the industry, not to mention they would lose talented workers, some who could close up to twenty loans per month. There were also personal relationships that would make a change like that difficult. Due to these issues, they instead hired salaried workers starting at $40,000 while keeping the current loan officers on commission.
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  • Fall '12
  • Andre
  • Salary, Hellriegel, Steve Walsh, loan officers, John Mangels

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