Have you ever sat back in an airport lounge and watched the 20-minute turnaround of a Boeing 737 conducting short-haul sectors?
Leading up the aircraft’s arrival at a gate there’s a team of people that position themselves so they’re poised to pounce on the aircraft once the engines start to wind down. As the aircraft comes to rest and the aircraft is chocked, the team of support staff swarm on the aircraft with an orchestrated precision while the passengers disembark. Baggage is offloaded, waste tanks are emptied, fuel is loaded, catering is boarded, engineers conduct pre-flight checks, a pre-flight walk around is completed, and the pilots – sitting in the conductors’ seats - work with a laser-like focus on planning for the next sector with relation to the most suitable flight plan, weather, and other operational considerations. The pilots continue to run through checklists, obtain airways clearances, and conduct passenger announcements while a new batch of self-loading-freight boards the aircraft.
Have you ever wondered how this turnaround can be completed with such precision? If you’ve ever watched more than one aircraft turnaround you’ll appreciate that they’re all almost identical. Even the language used between flight crew, cabin crew, ground handlers, and other crew doesn’t waiver from a defined script. Pilots chatter back-and-forth with a monotony that repeats itself almost word-for-word to the point where one pilot can fly with any other on another day and the language used is identical (in fact, a sterile cockpit environment prohibits non-operational chatter below 10’000 feet). The cockpit actions are repeated with a precision that is measured to the second. Next time you’re taking a flight take notice of the seconds it takes for the seatbelt sign to be illuminated once the fuel truck disconnects; wait another 15 seconds and the cabin manager will make an announcement – it’s literally a domino-effect of actions.
So, how is the operation so precise? Every individual involved in the aircraft turnaround is operating to very defined protocols. Procedure overlap is timed down to the nearest minute to create a well-oiled musical score. Not unlike a symphony orchestra, each section works independently but as part of a broader team to manufacture music which, in this case, is a safe and efficient turnaround.
Aviation has an adherence to SOPs that is envied by virtually every other industry on the planet. The reason aviation tends to take the procedures so seriously is because of the implications should any moving part fail to play its part. For safety (and commercial) reasons, standard operating procedures are taken very seriously.
Other industries tend to shy away from SOPs because of what is perceived as unnecessary cost and complexity. Some industries shy away from strict adherence because, culturally, they ‘know better’. For example, each year over 50000 Australians suffer permanent injury as a result of medical negligence - much of it mitigated by corrective use of SOPs. While the comparison may not be entirely fair, if the same ‘negligence’ was shared by the aviation industry we’d see one Boeing 737 crash every single day. What damage is unknowingly being done to your business as a result of preventable error, or lack of best-practice operations?
The truth is that for any business to grow, SOPs are essential. From a financial business and compliance point of view, SOPs create a recognised measure of accountability.
Standard Operating Procedures
An SOP, or Standard Operating Procedure, is a procedure specific to your operation that describes the activities necessary to complete tasks in accordance with industry regulations, legislation, credit licences, and standard business practices. Developing an SOP framework is about systemising all of your processes and documenting them into a series of manuals that become your business operating Bible.
As much as you would like to, you can’t reproduce yourself or your skillset. However, you can dictate the manner in which employees operate in your business by way of SOPs that document tasks in a manner that is considered industry best-practice. All SOP documentation should normally be manufactured in a format consistent with globally recognised International Organisation for Standardization (ISO) guidelines for business scalability, and constructed in a way that doesn’t preclude their use should franchise opportunities present themselves in the future.
You’re unlikely to find an organisation that is more committed to SOP documentation in the finance industry than Belief; we consider them an essential component of any finance business that is committed to growth.
Our approach to SOP development is fully compliant with ISO 9001 (2015, at the time of writing) as we approach any document as being subject to a future ISO accreditation review. The ISO badge represents a commitment to customer service, business systems, leadership, decision making, and supplier relationships. Certainly, if you’re looking towards a franchise model of any kind, the ISO model sends a clear message of compliance to all company stakeholders.
We tend to take a holistic approach to SOP development in that we like to have every aspect of your business documented, from the way in which you answer your phone and how you record your company voicemail message, all the way to serious crisis management. Any software system, internal procedures, job descriptions, and relationships should all be documented without exclusion.
SOPs and/or quality assurance accreditation helps to improve customer satisfaction - in a world where the customer's voice is increasingly prominent, this is an essential business requirement. in some cases, having SOPS (or quality assurance accreditation) may assist you in attracting business that requires their completion.
Benefits of SOP Development (and ISO Compliance)
Just some of the advantages of SOP development and compliance for your business are listed below. It’s not an exhaustive list.
- Provides senior management with an efficient management process.
- Sets out clear guidelines and best-practice for employees.
- Establishes a clear compliance framework.
- Provides a 'Best Interest Duty' checklist framework.
- Facilitates growth via the replication of systems across locations.
- Sets out areas of responsibility across the organisation.
- Mandatory if you want to tender for public sector work.
- Communicates a positive message to staff and customers.
- Identifies and encourages more efficient and time saving processes.
- Highlights deficiencies.
- Reduces your costs.
- Provides continuous assessment and improvement.
- Marketing opportunities.
The finance industry is slowly moving towards, or at least further recognising, their “customer first and best interest duty”. From a compliance point-of-view, documenting how these customer outcomes will be achieved are more important than simply providing an empty promise on your website. SOP development puts a firm and transparent framework in place with a clear focus on what measures must be taken to guarantee your commitment to customers over lenders, and customer savings over business profit.
The Combined Industry Forum’s “customer first duty” (and potentially a “conflicts priority rule”), and the “good customer outcomes” mandate are essentially empty guidelines for which Mortgage Brokers are not obligated to subscribe. While industry representation has suggested that they’ll produce a “Mortgage Broking Industry Code” – essentially enabling forced compliance and ‘enforcement’ – Belief will always promote a framework be established without the encouragement or oversight from a somewhat archaic industry body.
SOPs and a recognised customer-focused accreditation is clear indication of a commitment to customer outcomes.
We Have Always Done It This Way
As a means to mitigate the damage done by personality-influenced actions, SOPs provide guidance to ensure best-practice for task-based business operations.
Hopper’s Backwards Clock
Rear Admiral Grace Murray Hopper (9 December 1906 – 1 January 1992) was a U.S. Naval officer, and an early computer programmer. She was the developer of the first compiler for a computer programming language; at the end of her service she was the oldest serving officer in the United States Navy. She is probably best known for her “We've always done it this way” quote.
As a Naval officer it’s likely that Hopper’s quote was motivated in part by the frustrations of working within a military bureaucracy resistant to any change. But as a programmer and Naval strategist she understood that information wasn’t of use unless it was shared, turned into intelligence or knowledge, and then further developed from best practice into better practice.
Academics and historians have argued the interpretation of the ‘counter-clockwise rotating clock’ for as long as it’s been shared. We like to think Hopper’s remark was early tech-speak for ‘Think Different’. If doing what you’re doing doesn’t achieve results, then it’s time to do something else.
The point of the story? We accept brokers into our more advanced programs routinely that are confronted by the changes we suggest, or the programs we encourage... yet we introduce them because we know what works - we're operating to a set of our own internal SOP's that represents a true blueprint for success (and we're not just 'telling you what you should be doing'... we give you the software and support to make it happen). Our brokers can leap-frog the learning process and immerse themselves in business practices that just work. That said, many brokers are resistant to change because 'they've always done it this way'. In moving to the Yabber model of providing digital excellence, we don't inject ourselves into businesses as we once did; we'll still provide you with what we know works, but it'll be your decision to follow our best-practice and high-performing recommendations.
Why Are We Still Doing It This Way?
The question must be asked: if we know what works, and we're able to definitively identify industry or technology trends, why will brokers continue to operate in a manner that is contrary to better business outcomes? The answer of course, isn't that we can't teach an old dog new tricks (because we can)... it's because we can't train a deaf dog how to listen. In providing digital systems that empower you to have a massive impact within your operation, and by providing an optional education via BeLearn, you can drip-feed our recommendations - or choose to ignore them - at any pace that floats your boat. Sometimes it's easier to introduce change if you make the introduction yourself.
Personal bias is overwhelming. Sometimes we have to look inward to understand how or why our mind-viruses cause us to inflict professional harm upon ourselves... and the following is just a brief introduction to understanding how our personality type might steer our decision making, behaviours, or understanding in various ways. Keep in mind that we're introducing various physiological biases simply so you're able to appreciate the importance of SOP's in larger organisations. They may not be entirely applicable to you, but they might apply to those you choose to invite into your team. Once you reach a certain size, SOP's are as important to your organisational system as train-tracks are to trains.
Projection & Implementation Bias
Seinfeld’s George Costanza once recognised that every decision that he has ever made in his life had been wrong, and that his life is the exact opposite of what it should be. Seinfeld convinces him that "if every instinct you have is wrong, then the opposite would have to be right". Of course it plays out in a comedic manner in George’s favour. The relevance: too often we engage in business practices only because it’s “what we’ve always done”, and we become bogged down in what we ‘know to be true’. Introducing change is often met with resistance because of a range of debilitating cognitive biases that have us clasp to and defend familiarity despite better practices being introduced.
In our article on the “Michelin Guide” we talk about the rise of the machines: comparison websites. While we support traditional broking relationships, we also understand the potential paradigm shift taking place as a result of technology supporting at least a partial shift towards online banking. Many brokers we deal with every single day have a projection bias that causes them to imagine a future based on past experience. In a world driven by technology, it’s a dangerous bias to have (also leans towards “implementation bias”). In situating their thinking within their perceptions of the past, brokers will ultimately limit their ability to develop new ideas or objectively assess new opportunities. Of course, the solution is to diversify your business interests to take full advantage of emerging markets. In consider Yabber and relationship with BeliefMedia you’ve already demonstrated that you understand technology-driven business survival is more than just industry-leading lead generation.
Implementation bias presents itself to us routinely. Brokers are often reluctant to accept Belief’s SOP suggestions because of various projection biases (also aptly known as a Belief Bias). Brokers occasionally base their decisions (or the logical strength of their arguments) based on what they believe to be true based on non-scientific conclusions. If you’ve ever come to a conclusion without scientific evaluation of its effectiveness, or you start sentences with “I think”, then it’s probably time to rethink your operating procedures. Are areas of your business based on what we know to be true, or what we believe to be true? Case in point is the process of making phone calls to cold(ish) contacts in your mobile phone or address book. We recommend this practice based on well in excess of a few billion in volume supporting residential and investment lending generated entirely by engaging in this simple exercise. This practice is in our SOP manual, and it’s in the manuals of most top-performing Aussie brokers - will it be in yours?
Confirmation bias is an inherent and stubborn flaw in the human condition. We like to validate our decisions and actions without a broader consideration outside the diagnosis that we initially form early on… and we’re inherently biased and emotionally motivated to form a hypothesis to support an original conclusion. We sometimes become completely invested in a decision and consumed with whatever action is required to confirm our original opinion (aggravated by the fact that we don’t have spare brain capacity to question what we’re doing). The psycho-babble suggests that our confidence systematically exceeds accuracy; implying we are often ‘more sure’ about something than we should be. In times of crisis, or simply on occasions where workload and stress is high, we often become so task-saturated that we don’t have spare cognitive processing power to question our actions. This is where SOPs fit in. Regardless of task-saturation, operating procedures provides guidance and frees up cognitive power for task completion. A simple example of how this might apply is when you turn off a car radio because you’re disorientated; turning off the radio unloads some of our spare cognitive brain-power and makes it available for task completion.
Overconfidence leads to a situation where we form an irrational escalation of commitment, or commitment bias, leading to anchoring (or tunnel vision). The longer we vacate dynamic lateral thinking and tolerate a cognitive dissonance, the more and more we commit to a bad decision and “make the wrong decision the right decision”. So, the whole “we’ve always done it this way” quote slowly takes on another form; “I have to do it this way because this is what works”.
SOPs are an escape from the infinite loop that commitment bias provides. SOPs will often force us to consult a decision making model (as discussed in another booklet) so our personal bias’s don’t interfere with best-practice fact-based outcomes.
When a broker is inducted into your business (often a mentee), the training you provide them carries through their early careers. Don’t you have an obligation to get it right? Shouldn’t we have documented best-practice to ensure they’re operating at best efficiency within a framework that provides for best results (both for them and the customer)?
The ‘illusion of control” bias is based around the belief that some brokers form a type of confidence that they have some measure of control when in fact they have very little. Their illusory superiority (and optimism bias) is supported by minimal training, the validation from others, paper qualifications, previous competency and other external influences that serves to inflate an individual’s personal ego. Basically, just because we’re qualified at something doesn’t necessarily mean that we’re any good at it (despite what our mother keeps telling us). This means we need checklists and SOP’s, and we need visualisation or briefings and procedures to mitigate the potential for a screw up.
Implementing SOPs in an organisation is an opportunity for professional development for all staff. Discussing best practice, better practice, implementation timelines, cost benefits, risks, and so on, are all means to improve upon procedures but also educate stakeholders and mitigate the risks associated with introducing change.
In the field of psychology, the Dunning–Kruger effect is a cognitive bias in which people of low ability have illusory superiority and mistakenly assess their cognitive ability as greater than it is. The cognitive bias of illusory superiority comes from the inability of low-ability (of high confidence) people to recognize their lack of ability. Without the self-awareness of metacognition, low-ability people cannot objectively evaluate their actual competence or incompetence. The psychological phenomenon of illusory superiority was identified as a form of cognitive bias in Kruger and Dunning's 1999 study "Unskilled and Unaware of It: How Difficulties in Recognizing One's Own Incompetence Lead to Inflated Self-Assessments". The identification derived from the cognitive bias evident in the criminal case of McArthur Wheeler, who robbed banks with his face covered with lemon juice, which he believed would make it invisible to the surveillance cameras. This belief was based on his misunderstanding of the chemical properties of lemon juice as an invisible ink.
Incidentally, the Dunning-Kruger effect is the same physiological phenomenon that plagues the marketing world – particularly the finance field where representation is very poor. We often describe our competition as providing a service with “lemon juice smeared over their faces”.
In order to assist mortgage brokers that aren’t ‘top of their game’, or for those that are new to the industry (they’ll all suffer from DKE to an extent), SOPs are essential. We need guidance, education, and other material that serves to provide them with a step-by-step framework for task completion, but also an education component so they’re more suitably tasked with making their own self-assessments.
We’ve Heard it all Before
As mentioned earlier, every now and again Belief will suggest changes to the workflow (this applies in a more significant way to of our managed clients). It’s important to understand that we’ve engaged with countless businesses over 20 years and we know what works. While you may be reluctant to accept an early diagnosis of your business practices, or you may be unwilling to participate in some areas of our program, failing to abide by our best practice (which itself is in a constant state of flux) will compromise your early success. That said, any SOP we might recommend will evolve to more closely align with your own business practices and culture.
Building Standard Operating Procedures
Building SOPs can be a long process, but it doesn't have to be difficult. Before we start with the process we tend to have businesses write down every operation, task, procedure, and communication type that they might use internally. Additionally, we ask that every software system, third-party tools, and other subscriptions be written down. Once a large portion of documentation exists we can slowly build procedures around the tasks that you might consider routine. Further, we can introduce automation whenever we’re able to remove any duplicate data entry or unnecessary human actions.
You should endeavour to build multiple manuals. For example, a marketing manual is usually separate, perhaps as a Part ‘B’ manual, and our Yabber[//tag] documentation is usually provided as part of our Part 'Y' manual (they're updated and maintained by us). Your primary manual should be your 'Operational Manual', and there may be others such as a 'Policy and Procedure' manual, 'Human Resource Manual', and so on. If a franchise model is employed then it’s not uncommon to have a separate manual that dictates core brand responsibilities (although this is normally included in your Part A 'Operations Manual').
While software is available to create SOPs (and we expect to build our own online software in the future), a well-formatted Microsoft Word document or similar is also suitable as an immediate alternative.
Your manuals become a ‘living’ controlled document. All changes should be communicated to appropriate stakeholders, edits should be noted in each document revision, and the document controller should constantly seek to provide a conduit for feedback so your manuals might reflect your company’s forward vision.
Again, whether or not you choose to take the ISO path, we recommend all documentation cover the necessary ISO modules to ensure compliance for future business opportunities.
Royal Commission Exhibits as a Resource
Of the 30+ thousand exhibit documents there are SOP manuals for the larger banks, larger franchises, and other organisations. The exhibits are littered with compliance manuals, dispute resolution manuals, and supporting material necessary for the compilation of an ACL submission. In fact, there’s really no end to the material that you might draw upon in setting up your own internal practices, or perhaps documentation necessary if you’re drawn towards building your own franchise model.
This article wasn’t intended to do anything other than introduce very broad SOP considerations. If you're considering this path, the creation of the documentation itself presents a range of issues that should be addressed early to guarantee document scalability.
The question you should be asking yourself now is whether your company should consider implementing SOPs now, and if so, how long it might be before you visit the possibility of quality assurance (ISO) accreditation. Ironically, there are various biases in play by way of changing financial landscapes and fluid legislation that may compromise your ability to make a decision at this point in time.
We would tend to unreservedly recommend the introduction of SOP documentation for any business with three of more employees, any business that has its own Credit Licence, or any business that plans on mentoring brokers. Early in a business' life we might recommend we build an ‘employee handbook’ that is essentially a collection of notes and videos that might one day be formalised into an SOP format.
Bottom line is this: if you plan to grow you should also consider plan to implement SOPs.