Jeff Judy

Jeff's Thoughts - July 13, 2016

Do You Need to Caulk Some Seams?

While different institutions handle the details of the credit process in somewhat different ways, they all depend on passing the credit request through a sequence of roles. In other words, each credit is handled by several members of the credit staff over its life cycle.

That means that information has to be passed from one person to the next along the way. And I am often surprised at how casual those handoffs are at many institutions.

It is not uncommon for the "seams" between roles to be somewhat "leaky", in the sense that not all the needed information gets passed to the next player in the process on the first try. Perhaps a credit analyst has to go back to a loan officer, who has to go back to the customer, to fill in a gap. Perhaps the file is passed on for loan documentation and something gets left out.

As I say, this is pretty common. Is it even worth fixing? And how can you "caulk" those leaky seams?

I believe that the secret to plugging these leaks is formalizing handoffs. Make effective handoffs part of the training, and part of the job description, for every player in the credit process. Consider the quality and completeness of the handoffs in performance appraisals.

Develop checklists that both parties at the "seam" review at each handoff, much as a pilot and co-pilot work through a checklist before flying that plane you're on.

There are many reasons why these information handoffs deserve extra attention.

First, there's simple efficiency and productivity. When one staff member has to go back to another to get information that should have been included in the first place, that's a waste of time. Good handoffs give you a productivity advantage over your rivals.

Second, customer service suffers when handoffs are incomplete. Going back to the customer again, and perhaps again, delaying your response to their request, never makes a good impression.

Third, inaccurate or missing information generally carries through to the documentation, and that opens the door to problems if the customer defaults. You may find, in the end, that you don't have the leverage with the borrower you thought you had.

Finally, when information handling is too informal and inconsistent, that can lead to compliance problems, lender liability issues, and heightened regulator attention.

Tighten up the seams in your credit workflow. You will find the (perceived) inconvenience of a checklist and a formal handoff to be well worth the trouble if it helps avoid these kinds of problems.