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Scott Mortgage

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Submitted By tammyjames
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Running head: SCOTT MORTGAGE

Scott Mortgage
James Jones
Organizational Behavior
14 June 2010

Abstract
This paper discusses the nature of change in a mortgage lending firm. It takes a look at the reaction to change from the employee and organizational view points. The characteristics of Ethical Intensity are reviewed as pertaining to the decision making process. It identifies the Decision Making Model and Approach to Change that Scout Mortgage used in revamping its human capital structure.

Nature of Change
The 21th Century has ushered in several factors that have been the catalyst for a dynamically transforming environment. Scout Mortgage, a loan mortgage broker since 1999 (Hellriegel & Slocum, 2009) has experienced the bullish and the bearish economic environment. In a work environment, the typical factors of change are driven by technological advancements which enable global-market-reach or globalization. With the increase of information technology and global communications, the world is communitively smaller. Any situation that affects a local market can be transformed into a national or international issue. The domestic housing sector economic downturn along with other Wall Street unethical and irresponsible actions have not only lead to a national but international recession and market collapse. In the case of Scout Mortgage, the technological advances have changed the way the company’s Loan Officers conducts business. Technology has automated a lot of task that where the responsibility of the loan officer. This decrease of responsibility along with the derailed housing market has forced Scout’s leadership to make an unwelcomed change.
Change Reaction
Typically, employees react negatively to change. Because of human nature and the fear of the unknown, which chain brings, it’s only natural that there is opposition to change. The over whelming factor for Scout’s employees has to be the economic changes that will occur in their lives. There is the perception that things should remain status quo, since the employees have made the company what it is today. There is also the factor of habit and the mortgage industry is predominantly compensated via the commission model, some employees feel this should remain.
Scout Mortgage management may have jeopardize the firm by waiting to late to decisively act. The initial change, all newly hired loan officers would be on salary, but the existing officers would retain a commission compensation model. Inevitably, the difference in pay leaked out and caused severe damage among the workforce and to the work environment. Scout Management’s half-hearted effort didn’t generate the results the firm desired. This led to the more drastic changes and a complete shake-up of the company and its compensation model.
Ethical Intensity
Ethical intensity generated by the ramifications of the changes that Scout Mortgage Managers implemented were of a large magnitude and immediate. They affected those that were close to the management team and the majority of the workforce. The loan officers at Scout were the most impacted. Technology has enabled some of their task to be automated and some of their services were no longer needed. Scout management deliberate long and hard on how to resolve the economic challenges the company faced. It was a strong possibility that no action by the management team would lead the firm into bankruptcy. Any effective action would be felt by the majority of the firm and it would result in radical changes.
Decision Making Model
Walsh and Mangel, Scout’s Management Team had to make a tough decision to keep the company afloat. Initially, they made a half-hearted attempt to move the company forward. Their actions were characteristic of the Bounded Rational Model, which was not the most beneficially action that could have been taken. It was more of a compromise, but failed to achieve the desired and necessary results to keep the company operational. In hiring new loan officers under a new salary compensation plan and retaining veteran officers under the commission model this lead to controversy in the workplace. A decision model more in line with the Rational Model was needed and subsequently used by the management team. This resulted in a complete revamping of the compensation structure of the company. Since 2007 the company has used this model and it seems to have been the necessary action need to keep the company profitable.
Approach to Change
The change at Scout was planned deliberate change brought on by a need to stay competitive and remain solvent. Of the two categories of the change approached discussed in our text, the Economic approach best addressed Scout’s need for change. There seemed to be a delayed approach to change in this case study. As the firm saw its business volume decrease by more than fifty percent from 2004 to 2006, a significant change need to be implemented if the firm wanted to remain above water. Some aspects of the Organizational Development Approach were evident as it was required to prepare the new salaried loan officers to permit the firm to successfully meet the expectations of the technology enable consumer. Overall, the changes at Scout were driven by Economic factors.
Conclusion
Scout Mortgage was conceived during the economic mortgage boom of the late 90’s and early 2000’s timeframe. As the economy changed and reversed itself, Wall Street saw a significant downturn in the housing sector and the American economy. A combination of decision models and approaches were used by Scout resulting in drastic measures and restructuring of its compensation model. This has enable them to migrate from a traditional based firm that served them well in the housing boom to a an informational enhanced comparison savvy mortgagor. Scout is betting that their changes to guarantee the lowest rates and Complimentary Mortgage Management Service (Scout Mortgage, n.d.) will surpass the test of time.
Reference

Hellriegel, D., & Slocum, J W., Jr. (2009). Organizational behavior: 2010 custom edition (12th ed.). Mason, OH: South-Western Cengage Learning.
Scout Mortgage. (n.d.). Retrieved from the following website: http://www.scoutmortgage.com/about/why

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