Loan officers could live comfortably closing three

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Loan officers could live comfortably closing three loans a week at $4000-$7000 commission per loan closed (Hellriegel and Slocum, 2009, page 532). When interest rates crept up in 2004 business started to taper off, and by 2006, the industry had dropped to about $240 million in funded mortgages (Hellriegel and Slocum, 2009, page 532). Their loan officers were still closing loans, but not enough to keep the company afloat at their current rates and a change had to be implemented. Walsh and Mangels sat down all their employees (after trying a different strategy of hiring salaried workers and leaving the loan officers’ pay alone) and told everyone that they were switching all members over to salary-based pay at a flat $36,000 per year with commission of $100 per loan closed (Hellriegel and Slocum, 2009, page 533). With this change came loss of employees. They fired five loan officers and three salaried workers. Most of the commissioned staff left the company. Losing their monetary compensation killed their motivation and enticed them to seek work elsewhere for better pay. Employees had no incentive to stay and no longer felt stimulated to go above and beyond for their company. The change to all-employee salary- based pay was stimulated by workplace stress.
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When Scout started considering changing the pay of their commissioned loan officers, they originally tried a different strategy first. The problem they faced had an easy solution: hire on salaried workers and get rid of their commissioned staff to cut down on costs. However, Mangels and Walsh recognized that firing their top officers could hurt customer service and possibly lose large amounts of closed loans, hurting the business even further. There was also the issue of interpersonal relations at hand. Many of the employees felt like family and friends. Firing them or cutting their salaries could very well bring harm to those relationships, something that Steve and John didn’t want to happen. Instead, they decided to hire a handful of salaried workers, starting at $40,000 per year, and left the existing staff’s commission-based salaries alone. This seemed like a great fix but the new hires faced the issue of role conflict, feeling as though they weren’t being fairly compensated because of the differences in pay grades. This caused many to ask to be switched to a commission-based salary. According to Mangels, “There was whispering, ‘Why are you guys working for $4000 per month when you could be making $12,000?” (Hellriegel and Slocum, 2009, page 533). This caused tension for the new hires and the owners knew they couldn’t keep their employees wages at different levels. The workplace stress caused other problems for Scout’s owners. For Mangels and Walsh, this decision caused them both great intrapersonal conflict. The intrapersonal conflict they struggled with falls under the approach-avoidance category, meaning, “an individual must decide whether to do something that is expected to have both positive and negative outcomes” (Hellriegel and Slocum, 2009). The positive outcomes of their decision would be saving money on payroll and being able to pass those savings on to the customers.
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