Monitor mystery writer Dexter Van Dango takes us through a series of rants and other reminders of how many of the folks in our industry to seem lose sight of the proverbial forest for the trees regarding our conduct with our customers and, surprisingly, even with each other.
For years I enjoyed the works of longtime CBS 60 Minutes contributor, Andy Rooney. He began many of his weekly broadcasts with a simple question like, “I don’t know of anything, off hand, that mystifies Americans more than the cotton they put in pill bottles. Why do they do it?” In each case he went on to explain something simple or mundane that had become a nuisance to Rooney. Labeled America’s Grouch-in-Chief by co-contributor Morley Safer, Rooney often ranted about every day, ordinary things.
Like Rooney, at times I have been labeled a curmudgeon, another unofficial title that Rooney was proud to bear. And like him, I’m OK with that label as long as you pay me due respect for my age, experience and the knowledge I have gained through the many decisions I have made, including the mistakes. In sync with the curmudgeon label, along with the required Rooney whininess, bear with me as I choose to rant about some of the things that bug me about our business.
There are some things about the leasing business that really irritate me. For example, why do we insist on poaching people from the competition rather than growing our own talent? It really irks me that our industry fails to train, mentor and develop skilled professionals from raw talent coming out of universities looking for their first job. The loyalty and genuine gratitude that comes from having a serious mentor take interest in one’s career is almost unimaginable. Couple that with hands-on experience gained by giving a younger person a stretch assignment and helping them achieve success and you begin to receive mutual benefit. The student begins to repay the teacher through increased productivity and effective results.
Another gripe of mine is our industry’s acceptance of substandard documentation. It really bothers me when we have worked with an account through the suspect, prospect, qualification, engagement and negotiation phases of relationship building only to learn that their current leasing company accepts leases signed in Crayola on the back of a napkin from McDonald’s. Of course I am exaggerating, but with a grain of truth. I just reviewed a master services agreement that provides for the delivery of hardware, software and services. The seller wants to assign the payment obligations for the hardware and software portions of the agreement via a purchase agreement. Nowhere in that agreement is there a single representation or warranty protecting the buyer. Let the buyer beware? Large viable competitors are currently buying deals from the seller using the referenced purchase agreement. Hard to believe!
I’ll tell you what else really grinds my gears: predatory pricing. My company is large enough to hold its own stake on the competitive landscape. We like to mimic Teddy Roosevelt and “speak softly and carry a big stick.” You think I’m no threat? Try me! The more strategic the deal is to our line of business, the more competitive we will be in pursuing it. But even as one of the larger and stronger players in the field, it always amazes me when we’re competing for a large strategic transaction and we’re notified by the prospect that they have chosen someone else “whose pricing was significantly lower than yours.” How can that be? Let me give you an example of predatory pricing. We were bidding on a transaction representing the annual IT purchases for an A-rated credit. We bid just over 1.5% as a discount rate, representing a spread of roughly 75 basis points over the corresponding SWAP index. We were informed that our bid was high, by between 15 and 25 basis points. Well if that doesn’t burn my biscuits!
While I’m harping about the competition, there is another thing you should know that really gets my goat. In general, our industry lacks differentiation. Sustainable competitive advantage comes from one of two sources: price leadership or differentiation. If you are not the low-cost producer of widgets, you cannot possibly compete on price. So why is it that every bank in our industry thinks their competitive advantage is to compete on price? That’s insane!
To compete on differentiation, a company must be seen as adding value to every customer interaction. Among potential contributors to the value chain are specialized products, services, sales processes, marketing programs, logistics and many more. Differentiation can come in several forms. If your company can render credit decisions faster, pay invoices quickest, deliver timely and accurate billing statements, answer phones more consistently and perform just about any task better than your competitors, then customers may be willing to pay for that added value, which justifies your higher price. It’s not rocket science, folks. It is Business Strategy 101, right out of the textbooks.
As long as I’m unveiling my pet peeves, let me tell you about one that really chaps my hide. What ever happened to common courtesy? You call someone, leave a message and expect a call back. It is amazing how many messages I leave for people who never return the call. The same goes for email messages. You send a note with a specific request and receive no reply. It is so frustrating. Is it too much to ask for simple common courtesy? Return my call. Respond to my emails. It’s fine to say, “Thank you, but I am not interested,” but to ignore me is disrespectful.
When I asked an experienced leasing attorney what bugs him about our industry, he responded with a classic answer: “What really irks me is the lack of transparency to the end user. This is particularly prevalent in the small ticket office products space. That space is controlled by the vendors, which sometimes forces the finance companies to act in ways that they might not otherwise act. For example, when a vendor trades up a transaction in mid-term, the end user is often not told the balance that is being rolled into the new lease and whether that balance includes the residual on the equipment from the prior deal (it usually does). Wouldn’t it be nice if those transactions had the same kind of disclosures that we see in home mortgage transactions? Wouldn’t it be nice if every lessee knew precisely what it was getting and what it was paying for?” I agree wholeheartedly with his assessment. We need to do a better job of self-policing our industry activities.
This brings up another sore spot for me. Why is it that a large and prestigious industry like ours can have such opprobrious conduct in this day and age? Why don’t we have complete transparency with our end-user lessees? Years ago, The Alta Group conducted a survey of lessees to measure their opinions about leasing companies. I don’t have a copy of the survey, nor do I recall the precise detailed results. However, I do remember that there was a general backlash by lessees who felt that they had been fleeced. Some respondents didn’t want to do any repeat business with their leasing company because they felt they had been taken advantage of and had not been treated fairly.
In Rooney’s book Andy Rooney: 60 Years of Wisdom and Wit, he wrote, “The process by which each of us acquires a reputation isn’t independent of our character. It almost always depends more on the decisions we make than on chance occurrences.” Among his assortment of weird wit and wacky wisdom dispensed over the years, this one really holds true. Sure, you can get lucky and win the lottery, or maybe some long lost aunt will leave you her fortune — but not likely. No, instead the reputation you make for yourself comes from the decisions you make along the way… the good, the bad and the ugly. It is your reputation that will contribute to — or keep you from — achieving success.
If people trust you and respect you they will want to do business with you. The decisions you make contribute to your reputation. Are you developing the kind of reputation for yourself and for your company that allow you to hold your head high and take pride in your conduct? Are you measuring the amount of repeat customers you have in your portfolio? Do your customers trust you and feel as though they are being treated fairly? If you answer yes to the preceding questions, then chances are good that you and your company have the character required to build a strong reputation.
Let’s hope that our industry cleans up its act and polices the few players whose rogue behavior can soil the reputation of the industry as a whole.
Dexter Van Dango is a pen name for a real person who is a senior executive with more than 25 years of experience in the equipment leasing industry. A self-described portly, middle-aged, graying, balding leasing guy in the twilight of a mediocre career, Van Dango will provide occasional insight from the front lines via Monitor.
Barry Shafran, President and CEO , Chesswood Group Limited
Barry Shafran shares the story behind Chesswood Group’s journey from a Canadian new car dealership business with automotive lease receivables of just $80 million in 1999, to a North American public equipment finance business with a portfolio of $1.0 billion in 2019. He says the one constant and key ingredient in Chesswood’s journey is its amazing team of tenured and committed people.
Whether you are a third-party originator or a funding source/bank, the responsibility lies with all parties to build partnerships based on mutual trust, mutual commitment, shared ideas and common goals.