The economic approach refers to creating change for

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The economic approach “refers to creating change for the purpose of creating shareholder value” (Hellriegel and Slocum, 2009, page 498). A company using this approach has a profit- based purpose, top-down leadership, is focused on structure and strategy, and motivates employees using incentives to lead their performance; this is the exact case for Scout Mortgage. They are a company based on making a profit from their services. In 2004 alone they funded $600+ million in mortgages (Hellriegel and Slocum, 2009, page 532). The owners of Scout, John Mangels and Steve Walsh, run the company and create a top-down management atmosphere. They focus more on the structure and strategy of the company, as opposed to an organizational development approach; they had 25 loan officers on staff plus an equal size support staff, all working on commission. After the change, they switched the structure to all-salaried employees and got rid of their existing staff. Lastly, they used high commissions to motivate their employees. The more loans Scout’s loan officers closed, the more revenue the company
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generated and the more money each individual officer received. After the change, Scout essentially loses this motivational tool due to the lowered commissions and switching the employees to low salaries (compared to their previous income). In conclusion, this decision was good for Scout Mortgage. Despite all of the stress and conflict, Steve Walsh and John Mangels were able to gain market share for their company and pass their savings onto their customers. This has helped them grow exponentially and achieve their goal of being a lower cost and lower rate mortgage broker. With the loss of their commissioned staff and complete salary restructure, they have moved on to bigger and better things and are not looking back. They built their company from the ground up and will continue to see it flourish in the future.
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Resources Hellriegel, D., & Slocum, J.W. (2009). Organizational behavior. (12ed., Vol. e). Mason, OH: Southwest Cengage Learning. Mortgage, S. (2010). Scout mortgage . Retrieved from
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