When Rich Weidel took over his family-owned lender Princeton Mortgage, the company had funded 11 loans in January of 2018, employed about a dozen people and had zero loan officers.
Just three years later, they’re on track to do about $1.5 billion in mortgage originations and were ranked as the 502nd-fastest growing company in America, according to INC Magazine’s latest 5,000 list.
HousingWire sat down with Weidel last week to learn about the challenges in rapidly growing the mortgage lender, hiring people from outside the industry, and why paying average performers poorly and great performers very well is the smart approach.
Inc. 5000 Coverage | Housing Verticals
Here is our HW+ interview with Weidel, which has been edited for length and clarity.
James Kleimann: You were just named to the INC 5000 list – one of about a half-dozen mortgage lenders. What was the reaction at Princeton Mortgage to the news?
Rich Weidel: For the team, it’s very validating. What I mean by that is that we got together three or four years ago, we looked at Scotsman Guide and said, “Hey, what’s possible to do in a 10-year period?” We looked at from 2008 to 2018, what companies had achieved and grown, and we said, let’s go do it. For us, the thing that brings Princeton together is this sort of sense of adventure. We want to do really great work with really good people and see what we can achieve.
JK: Could you talk about some of the operational challenges in growing so quickly?
RW: So when you’re growing like we’ve grown, most companies do this level of growth, either never or a 20- or 30-year period. So we jam 20 or 30 years of problems in the three-and-a-half years. And so at any given day, you just feel like you’re failing and something’s broken and something’s not working, and you’ve outgrown it. You go with a process or you hire a leader and they’re great, but they’re only great for six months because the growth just blows through that. So you’re constantly in build mode and get to sit back and say, “You know what, while there’s a lot of stuff we wish we were better at, we’re pretty much outperforming every other company except for 501 of them.”
JK: When you sat down and asked what was achievable in 10 years, where do you start in terms of the hiring process?
RW: So, Step A for us – there’s probably other ways of doing it – was, I looked for people that were attracted to the vision. And the vision being, “Hey, we want to build something really special.” And so at that point we didn’t even know necessarily what direction it would be, what channels would it be in or what our value propositions would be or how we would differentiate it. For me, it was more of a people-first decision of, let me find people who I really like, who are really motivated, have a ton of innate ability, have great character and let’s figure this out together. I just focused on skill-set, I just focused on finding really super people that wanted to build something.
JK: So you establish a vision, but what kind of skills do you need to execute on it?
RW: The reality was, at the beginning, seasoned executives had no interest in coming to work with us. Now they do… At the beginning, the people that were super experienced and credentialed, they didn’t want to come to a company that’s like, “Hey, we’re going to go build something.” It’s too risky for a lot of them. And so you end up hiring more people that have the ambition rather than the experience… We hired people outside the industry. We hired people from inside the industry…The strategy was just, let me go find the absolute best people I can.
JK: How do you find the “absolute best people”? Is there a certain kind of profile for that candidate? What does the process look like from a recruiting standpoint?
RW: We were willing to look far and wide for those people and overlook a lot of other things that maybe if you had a real job scorecard in an interview process, you might disqualify them. But I think a lot of time we hire for an absence of weaknesses instead of, we’re looking for superb strengths. And so I was looking for the people that might have some weaknesses, but they had a few areas where they were really, really superb. And we try to keep doing that today. [With] standard interview processes and resumes and skill sets, it leads to kind of mediocrity because you’re looking for people that just don’t have any glaring weaknesses. Well, what you’re missing is the superstars within that. And a lot of your superstars do have glaring weaknesses as well.
JK: The last time we spoke, you were telling me about a new model for recruiting, onboarding and providing career path options for candidates. How has that evolved?
RW: What we found is that the biggest bottleneck to a scaling company is leadership density and the caliber of the people that you have. And as the company gets bigger, complexity increases exponentially. And so you constantly need to increase in talent density. Our core competency as an organization is recruiting. And that’s just not sales recruiting, but recruiting for all positions. I think our recruiting team compared to other companies, our size is probably three to four times as large. We’ve put a huge amount of energy and time and money into building out a recruiting function that can sort through and find the really, really, really special people. If we find somebody who’s really good, we could typically hire them and we can typically have them stay and stick. The hardest part is finding those really, really good people.
JK: The model as I remember it at Princeton Mortgage was described as pretty bifurcated – really giving new recruits feedback and career path options but not overwhelming them. Did you stick with that?
RW: Yeah, so I’d say there’s two things. Most people in our experience are not in a high trajectory growth path. I’ll tell you where we’ve emerged or evolved. We used to want everybody to grow into a superstar. I think we’ve become more realistic about that – not everybody wants to become a superstar and grow through their career and have huge amounts of responsibility. And so we’ve moved our career planning into more of a model where we’re helping people plan their careers at the speed that they want it to go. And so we’re over-investing in people that are on a high growth trajectory, vis-a-vis somebody says, “You know what, I’m doing a really good job. I’m really happy right now. I don’t really want to grow,” because cool. That’s great, stay there, but we’re not going to put a bunch of training and coaching resources into that person if they don’t want to grow, because then we found that that’s really futile. Somebody doesn’t want to grow, there’s nothing we can do to get them to grow.stick with that?
JK: Princeton Mortgage works in both wholesale and retail channels. What kind of macro strategies did you put into place in 2018 in terms of channel mix?
RW: We remain opportunistic. And so our fundamental strategy is people first, culture second, results third. So if you can get the right people and you can get them in the right culture, and then you should be able to out perform from a results standpoint. And so our mix of product, panel, geography, that all shifts with the marketplace, rather than us saying, “I fundamentally believe that this is the best thing to be doing” because we think that that gets disconnected from reality. As we’re constantly looking at reality and saying, “Hey, what is realistically the best business plan for today?”
JK: Competition over the last year-and-a-half in the mortgage industry has been very fierce. How do you find the right talent but not engage in a bidding war and blow all your capital? Or maybe you do?
RW: I find that most companies pay unfairly. What I mean by that is that the delta between performance, between average and top performer might be 5 or 6X, but the compensation delta might only be 15%. And so we’ve revamped over the last year or so our entire compensation model so that we have an incentive structure built for our team… essentially we pay top performers more than anybody else, but we pay average performers less than everybody else.
JK: Practically speaking, what does that look like?
RW: Processing for example – for an average processor in the United States, I think it’s about 25 units a month. And so we use some rough numbers, but let’s say a processor [does] 25 units, that’s the average, that processor might earn an $800 bonus that month. And it winds up being something like a $350 cost per loan. Our top processors that might do 50 or 60 units can actually earn like a $7,000 bonus. And that process or cost per funded loan is only like $250 or $275.
From the beginning, we wanted to have a fewer, better-people model where we paid unfairly in that the people who really performed, we wanted to pay more than the market does. And the people who are average, we want to pay less than. And then that creates a situation where your average performers kind of work themselves out, because an average performer, could leave Princeton Mortgage and go make more money elsewhere. But a top performer would say, “I’m making more money at Princeton Mortgage than I’ve made before.” And it’s actually the virtuous cycle of lowering our overall cost per funded loan.
