Without mistakes, lessons would never be learned. And Bill Dudgeon, managing director of The Mortgage Business (TMB), believes that by personal experience of seeing what does not work, he has gained a good understanding of just what does.
Having taken the brave decision to pull out of the market for six weeks in 2004 he is better placed than most managing directors in mortgages to speak from experience when he talks about successfully running a large business.
Dudgeon started his career in financial services after completing his A-levels. Like many, it was an industry he drifted into, having been good at mathematics at school. He says: “There was no wake-up in the morning and a flash of lightening that told me to become an accountant, it is just something that happened.”
Dudgeon became interested in the operational side of business when he joined mail order company Littlewoods, his third job after leaving school.
He says Littlewoods was ahead of the game when it came to training and he quickly became interested in areas such as productivity management and work flows. His time at Littlewoods provided some valuable lessons, including the company’s failed foray into Christmas hampers, which it made in an effort to diversify its business. The hamper operation involved people paying a set amount each month to receive a hamper of goods at Christmas.
Dudgeon says: “We thought that was a great idea because the cash flow was great and the money was rolling in. The only problem was the company we used to deliver the hampers had not recorded the orders properly, so when it came to December when people should have been getting their nice hamper, the phone was running red hot.
“I spent weeks on the phone with my other colleagues, ringing managers of high street stores and getting them to give the customer a trolley and let them take the goods off the shelf.”
Moving forward
The hamper operation was sold after 12 months but Dudgeon remained at the company until 1988, leaving to join finance house North West Securities, part of the Bank of Scotland.
The company specialised in car finance, before branching out into other areas such as personal loans and credit cards. It eventually developed into Capital Bank, which in 1989 launched TMB.
He then joined TMB as administration manager in 1994, before taking on the role of business development director. He was moved to TMB because he says he was seen within Capital Bank and the Bank of Scotland as a safe pair of hands, with his accountancy and auditing background. Dudgeon says: “Within a growing company you need to bring in controls and structures and I was probably put in to sort out a few issues. At the time, they had sacked the entire sales force, so we did not have an external presence and there were some doubts about the whole future of TMB. From 1994 onwards we did the business plan and really turned it into the company it is now.”
TMB started as a small company with managers doing anything and everything, giving them a good understanding of all areas of the business. He says: “In those days there were only 50 of us, so I looked after all the administration from new business to possessions.”
Dudgeon was eventually promoted to business development director, before being made managing director in 2000. He says: “In the board now, we have all managed different parts of the business for different lengths of time. That means we have got a senior team that knows mortgages back to front and inside out.”
According to Dudgeon, working at TMB at the start was like Einstein with the light bulb. “Einstein carried out about 3000 experiments before he found the one that worked. We did not do 3000 things, but we did a lot of things that did not work. So now we know what does not work, but more importantly we know what does work.”
The formula was successful and the business grew to 300 staff by 2003. But when Halifax and the Bank of Scotland merged in 2001, changes were in the wind. New technology was created for the group and staff levels at TMB were reduced to 130, with processing outsourced within HBOS.
Decisions also had to be made if it was viable to continue with five brands, including TMB. Dudgeon says although some brands overlapped in certain areas of the market and within certain distribution channels, they were all successful. He says: “The decision was taken to accept that and move forward with the five-brand strategy, which in the latest HBOS results once again has shown to be extremely successful.
“It is something that is revisited all the time – HBOS dominates the UK mortgage market and it has to keep revisiting if five brands is the right way to do it.”
Dudgeon said other lenders had started to add new brands to their stable, so it was clearly a strategy that was appealing. He says: “To take a 25% share of UK mortgages, we have to have a product range and a brand range that appeals to everybody. We have got intermediary brands, direct to consumer brands, high street brands and internet brands, so we have really covered the whole market with the five brands.”
In the future, Dudgeon says he is concentrating on getting TMB back to being known as an innovative lender. He says: “To look at the future, we need to look at where we are and how we got there. We had rapid growth through to 2003, where we annually outstripped the growth of the market. We then had the merger and the system changes and in July 2004 we pulled out of the market for six weeks. We are still feeling the repercussions of that to some extent, although brokers have stayed loyal to us.”
Dudgeon says HBOS had decided that in 2004 it was looking to take less of a market share but take higher quality business. He says: “The problem was all the lenders were going hammer and tongs in 2003 and then some of the decisions were made to change those aspirations in 2004 and it was like trying to stop a super-tanker.”
TMB was on track to lend £5bn or £6bn in 2004, before pulling out of the market. It re-entered in September with a limited product range. Dudgeon says: “It is only now that we have fully re-entered with a competitively priced product range. Our distribution has stayed loyal to us but with a lower level of distribution. It was a wake-up call for all of us – we had to pull out of the market and, as business people, brokers had to decide whether to stay loyal to TMB or put their business elsewhere.”
Dudgeon says TMB is now enhancing its technology, with the launch of online insurance products and an e-conveyancing service.
TMB will also be introducing an affordability model to replace the traditional income multiplier model. After many years in the industry, Dudgeon said the main thing he has learnt is the need to enjoy it but to always be innovative.
He says: “I enjoy the industry – it is competitive but it is friendly at the same time. Some of the people I have worked with at TMB, who now work with competitors, are still friends. We need to re-establish ourselves as an innovative lender. The reason we were so successful in TMB was we had a number of competitive advantages – we believe we have still got those and we need to re-emphasise that along with the new technology.”
