Harrison Barnes » mortgage

If You Want to Earn More, You Need to Be Worth More

Harrison Barnes — Thu, 02 Jun 2011 05:20:16 +0000

Your financial requirements and what you would like to earn have nothing to do with what you are worth in the market. In running my various organizations, I have hired superstars from the very best universities with the very best work histories who ended up contributing next to nothing to the organization. I have also hired people who started out making close to minimum wage, and whose contributions were so great their salaries doubled, and in some cases even quadrupled. Several years ago, the contribution of one of our departments, which was then around 10 people, was so great I literally doubled each and every member’s salary in one short 15 minute meeting. Are you someone who contributes so much to your organization your salary merits doubling? Or do you merely have a sense of entitlement and feel you are worth more than you are paid? I cannot tell you how many times I have heard statements like the following: “I made this much four years ago; therefore I should be making more right now.” “My wife told me that I need to get a raise.” “I think it is really important that I get this car because it will show some outward sign of success.” “I know of someone who makes even more money than this in [some other city] and, therefore, I need to make that much as well.” “This is an expensive city, and I need to be paid that much to live well.” “I would like to have some extra spending money for travel and other things, after paying the mortgage on my house.” “I need to make enough money to afford to send my kids to a private school.” These are actual statements I have heard from people over the years. The sense of entitlement that drives people to make these sorts of demands needs to have a basis in reality. Again, your financial requirements have nothing to do with how much you are worth in the market. Unless you are truly indispensable, your employer simply does not care what those requirements are. You are paid a certain amount based on your ability to generate value for your employer, and, with very few exceptions, that value generally must be far greater than what you are paid. Your contribution to any organization must generally be at least three times greater than the reward you are seeking. Far too many people fail to realize what they are paid is based on the company’s profitability. Organizations have overhead, such as rent, advertising, and the cost of manufacturing the products or services they provide. Organizations need to have reserves in order to pay you when money is not coming in. Organizations need money for research and development. Organizations need money to pay for your health benefits and social security taxes, to print brochures, pay for office machine maintenance and more. Since I am a legal recruiter, I would like to share with you some information about how partners are traditionally compensated in law firms. There are numerous compensation systems. However, the one I am about to share with you is the most prevalent. When many young attorneys graduate from elite law schools, they tell themselves when they join equally elite law firms they will one day make astronomical amounts of money. About 10 years ago, I remember the number young attorneys my age were throwing around was $1 million. How does an attorney make $1 million a year? Remember: any amount of money you are paid will have to add much more than that to the firm’s bottom line. Typically, the rule is that for every $1 a partner makes they have contributed at least $3 to the firm. That means that the partner is lucky to receive only 33 percent of what he or she brings in as business to the firm. How does a partner contribute a total of $3 million to the pot for a firm? The partner brings in loads of business, works extremely hard, and then collects the money that has been billed. The partner also has associates doing work, he ensures their work is getting done and that all invoices are getting paid. If partners in the world’s largest law firms are lucky to receive only a 33 percent return on the contribution they are making, you should understand you will need to make a giant contribution to any organization you are part of in order to justify the amount you would like to be paid. In order to justify a high salary, it is important you begin concentrating on what you can do to make your contribution even greater than it is now. You need to make yourself indispensable to your employer by virtue of your hard work and contribution. There are certain people within any organization who are indispensable, and others who are not. These employees usually don’t last very long in organizations. I want to tell you a quick story about one of the worst hiring mistakes I ever made. It involved hiring a manager to lead a small company I was starting at the time. In order to try out for the job and show me what he could do, I asked the man to put together some financial figures that took into account the potential performance of the company and what he believed he should be paid if each milestone was met. Since it would take several hours to go over these figures, I agreed to meet the man at my home on a Sunday afternoon to go over them until we could reach an agreement. After three to four hours of reviewing these figures with him, I realized there was absolutely no way the company could make any money and that, no matter how well or how poorly the company did, the man would end up making plenty of money from the business. It really didn’t make a lot of sense, and I saw immediately this man was not interested in making a contribution to the company. He was only interested in taking money from the company as quickly as possible. There were many warning signs I should have noticed early on. The man was extremely flashy in the way he dressed. He bragged about always getting stuff for free. His car had been modified, and was very over-the-top. Basically, the man made me feel uncomfortable. By 10 p.m. that Sunday, I realized I could not reach any sort of agreement with this man. Instead of offering him the job to lead the company, I offered him a commissioned sales-type job in another company. The man had stellar qualifications and had formerly been the leader of a large division of a national company. The man responded by telling me how he had a home in Beverly Hills with an expensive mortgage payment, a nanny he needed to pay, a private school he sent his daughter to, and that his wife really liked to shop for expensive shoes. Therefore, he told me, he needed to bring home a certain amount of money every two weeks to pay all these extravagant expenses. I told him I understood and I agreed to loan him a massive amount of money against his future commissions over the next several months, as he started his job. This man ended up being the worst performing salesman in the company’s history. He failed like no other and disappeared with all of the money he was lent. To this day, I still do not know where he is. The primary mistake I made here was not paying attention to the various signs this man would make an extremely bad hire. Mainly, he was entirely focused on what he believed he deserved, and not at all focused on what he could contribute. The most revealing thing was his business plan, which basically did not permit the company to make money and survive. In order to thrive in your job, you need to be the sort of person who over delivers and provides incredible value to your employer and organization. You need to focus on over delivering in order to be worth more than the other people who are doing similar jobs. I am from Detroit and an interesting subject to me is the decline of the American automobile industry. I remember in 1984, when I was 14, my mother purchased a Honda Accord. Before she purchased the car, we went and looked at numerous other, American cars. Even then, I realized that the quality of the Honda far surpassed any American car in the same price range. You could tell by the way the car started, the way the doors closed, the way the lights clicked when you turned them on, the way the radio fit into the dashboard, the hue of the paint, the tightness of the ride, and more. As a young teenager, I thought someone would have to be an absolute idiot to purchase an American car in the same price range. At the time I did not even know about things like resale value, how long the car would last, and overall brand reliability. Purchasing the Accord would actually be even more valuable to someone in the long run, once reliability and resale were factored into the equation. In this respect, it made even less sense to purchase an American car. Ten years later, I sold that Accord to a classmate of mine for around $4,000. If it had been an American car (assuming it were still running), the sale price would have probably been around $400. My main point is the Honda provided far more value than its competitors at the time. It was worth far more than its American counterparts, even though it was priced less. It is no wonder, then, the market share of Japanese manufactured cars has grown rapidly in the United States, while the market for American cars has declined. It is an issue of providing more value for the money. Since your labor is a commodity to your employer, you should aim to become a higher-priced commodity that is worth far more than your competition. In order to merit raises and other employment related benefits, you need to shine and really stand out as someone who provides tremendous value. Do not expect to be paid a certain amount simply because it is what you want. Get paid more because you are worth more and because you deserve more. THE LESSON You are a commodity, and your security and success depends on creating much more value to your employer than you receive. Expect a certain amount because you are worth it, not because it is what you want. By putting in a tremendous effort and generating value, you become indispensable and can justify higher pay.

You Need to Be Relevant to Your Employer

Harrison Barnes — Thu, 09 Jun 2011 05:14:31 +0000

In the mortgage industry many jobs have simply disappeared. This has put tens of thousands of people out of work. People who lose their jobs in the mortgage industry generally have a couple of options. Frequently they look for a new job in the same industry, because it’s the industry they know. They do their best to network, and email their resume out to every opening they can find in the mortgage industry. “The job market is really tight,” they will tell you. They may get an occasional interview, but they do not get the job because the companies they are interviewing with eventually realize they do not have the business to hire the person. They may also realize there is someone out there who is more qualified. The criteria for these jobs has become much more stringent. Eventually, after weeks or months of looking for a job, the person may say something like: “I need to wait for the market to pick up. I simply cannot find a job.” To illustrate further the current state of the mortgage industry, the headquarters of Countrywide Mortgage is located in Hidden Hills, near Los Angeles. As you might imagine, there are acres of buildings for Countrywide and other mortgage companies around this area sitting practically empty. Not too long ago, these buildings were filled with thousands of people selling mortgages to mortgage brokers and others. Now, most of these people are out of jobs. All around this area, businesses are closing and people are pretty desperate. In the early evenings, if you drive by these Countrywide buildings, you can see inside. There should be hundreds of people, however, in most cases you see no one. Recently, I was playing golf with a friend who lives in Hidden Hills. When he arrived to play, he was very upset. The night before, my friend had been invited to a small party at his friend’s multimillion dollar house. The friend was an unemployed mortgage broker who’d purchased the house when he was employed and doing very well. He’d been told the party was a social occasion. Happy to go, he’d shown up wearing jeans. When he arrived he immediately realized something was wrong – his friend was wearing a suit, and everything seemed a little “too professional.” A few minutes later, he was given a brochure about some Donald Trump condominium going up in Florida. His friend started showing a movie about the development and began telling everyone at the party if they “wanted in,” he could immediately assist them with financing a condominium. Everyone was astonished. A group of people who’d been invited to a party were suddenly being encouraged to buy and finance condominiums thousands of miles away they’d never seen in their entire lives. My friend got up and left the party upset he’d been suckered into a sales presentation. While I have nothing against aggressive sales practices, what this story represents to me is someone who is holding on to a paradigm that no longer exists. While people may have been speculating on condominiums sight unseen years ago, this is no longer the case. Here, the mortgage broker was doing everything he could to hold onto a profession and a life that no longer existed for him. This example is extremely important to understand because it has a lot to do with you, your career, and what could end up happening in your life. From what I understand, the mortgage broker in this example was on his way to losing his house through foreclosure. His world was literally crumbling around him. Like the man in the store, he was making a fundamental error so many people make: He did not understand how to adapt to a new paradigm. Understanding your paradigm and what you do for a living is the most important thing you can possibly do with your career because paradigms are always changing. The sun does not shine on every specific type of job forever. We get comfortable with one specific type of job and believe we should always do this. A couple of weeks ago, while shopping, I met a man who was working in the computer industry. He told me he had made over $250,000 a year just two years ago writing software for mortgage companies. Now, he was working in a store selling sweaters and shirts to men for probably no more than $12 an hour. “There are no jobs for programmers in the mortgage industry,” he told me. The man who was trying to sell mortgages and Trump Condominiums in Florida was in the business of sales. If he realized this, he would likely not be having the problems he is having now. He could apply to every sales job available and probably easily get one. The man I met selling sweaters in the store was also in a business: The business of programming. Instead of applying to every programming job available, he was stuck in believing he was a specialist in programming computers for mortgages and, for this reason, he could not find a job. In everything you do, you need to understand what your basic business is. Far too many companies and individuals fail to understand this. They end up “going out of business”. Some of the largest and most profitable companies in the United States used to be railroad companies. These were the “Internet moguls” and tycoons during their age. However, when trucks came along, none of these railroad companies entered the trucking industry. Instead, they clung to the belief they were in the railroad business. If they had realized they were actually in the transportation business, they could have started offering trucking and other transportation services to their clients. Because of their belief they were in the railroad and not the transportation business, many great railroad companies ended up going out of business. In your career, it is essential you realize what business you are in. You should not be blinded by the specifics of what you do and, instead, should understand the generality of what your specific profession in fact is. This is the way to stay employed, and it is also the means to continual improvement. W. Edward Deming gives an excellent example of a time when there were carburetors in all cars. The people who made carburetors continued to improve their product. Soon, however, fuel injection was developed, and everyone stopped using carburetors. With very few exceptions, many very large companies that formerly made carburetors went out of business. They should have realized they were in the business of finding better ways of putting the correct mixture of fuel and air in the combustion chamber of engines. Something similar happened to the makers of Swiss watches in Switzerland. The Swiss invented the quartz movement; however, they failed to realize the gigantic impact this would ultimately have on their business. The Swiss continued to make mechanical watches and market these even after inventing the quartz movement. Eventually, the number of people making watches in Switzerland went from 65,000 to around 10,000 in a decade. The Swiss failed to realize they were in the business of making watches and they did not take into account the needs of their market. What you need to do in your career is the same thing companies need to do: you need to understand you market. When you understand your market, you have the ability to provide your customers with products and services that meet their needs. You and your career are a product. You need to sell yourself to the correct audience and know where and how to market yourself in the best way possible. You need to know what your audience wants and requires. In 2001, General Motors released the Pontiac Aztek. The car was voted the ugliest car in the world by the British newspaper, The Telegraph. The vehicle was criticized many times in Steve McConnell’s book about software design, Code Complete 2: The Pontiac Aztek and the Perils of Design by Committee. According to another commentator, Dan Norman:

In the mid-1990s, then-General Motors Corp. Chairman John G. Smale decided to bring the world’s biggest automaker a dose of the ‘give-the-people-what-they-want’ethic that’d animated Smale’s old company, Procter & Gamble Co. And what the people wanted was sexy, edgy and a bit off-key – in short, a head-turner. General Motors’ culture took over from there. Design would be by committee, the focus groups extensive. And production would have to stick to a tight budget, with all that sex appeal packed onto an existing minivan platform. The result rolled off the assembly line in 2000: the Pontiac Aztek, considered by many to be one of the ugliest cars produced in decades and a flop from Day One. The Aztek represented all that is wrong with GM’s design process, that official said. The concept car actually did something few GM designs do: arrive before a trend — this time, the crossover SUV that combined the attributes of a truck and a passenger car. And GM had high hopes to sell 50,000 to 70,000 Azteks a year, putting Pontiac on the cutting edge. Then came production, the executive said. The penny-pinchers demanded costs be kept low by putting the concept car on an existing minivan platform. That destroyed the original proportions and produced the vehicle’s bizarre, pushed-up back end. But the designers kept telling themselves it was good enough. “By the time it was done, it came out as this horrible, least-common-denominator vehicle where everyone said, ‘How could you put that on the road?’” the official said. Sales never reached the 30,000 level needed to make money on the Aztek, so it abruptly went out of production. The tongue-in-cheek hosts of National Public Radio’s “Car Talk” named it the ugliest car of 2005. “It looks the way Montezuma’s revenge feels,” one listener quipped. http://www.codinghorror.com/blog/archives/000321.html

In an oval office interview in January of 2006, President George Bush said he believed General Motors and Ford needed to produce “a product that’s relevant.” The idea of producing a relevant product is one of the most important things any manufacturer can do. Being a relevant product is also something essential for your success, as well. In a bad economic climate, one of the strangest things people do is try and continue being a ‘product’ that is no longer needed. This is nonsensical. You need to be relevant and understand what the skill is you are offering. The worst thing you can do is not be relevant to the market you are serving. It’s easy to be relevant when you understand what you are doing and what purpose you serve. Being relevant is about much more than just getting a job, however. Being relevant also relates to serving your employer with the skills they need. You need to understand your market and what your customers want. One of the biggest failures in my career was due to not understanding my market. When I got out of law school, I worked for a federal judge who had recently been appointed to the bench. My interest in this job was being brilliant and showing how smart I was, what a good writer I was, and how much detail I could put into opinions and more. I did a very good job with the harder intellectual aspects of the work. The judge I worked for admired my intellectual abilities, but his biggest concern was for me to produce work that was completely error free. Because I was so interested in the intellectual aspects of the work, I did not always give him what he wanted in terms of error free work. This was upsetting to him. Because of my concern with the “meat” of what I was doing, and not the details, I ended up leaving this position after one year, when I’d been hired for two. Had I not left, I am pretty confident I would have lost my job. I was not giving my employer what he wanted and, instead, was making up my own rules. The next legal job I held, I was sought out for my intellectual insight into legal issues. You need to know your audience. When you think about your career, how often have you made up your own rules? You need to understand your audience. You need to know you are in the business of selling a product to people, and you need to give them what they want. You are a product, and your job is to give your audience exactly what it wants. This is the way to get, and keep a job.