What does it take to be an effective leader in the age of disruption? An All-Star Team of Monitor MVP Award finalists discusses how to integrate innovation into a sustainable company vision that employees will embrace.
Leadership comes in as many shapes and styles as there are people to fill the role. A strong leader must own and exemplify organizational culture, strategy and vision while being nimble enough to lead in times of continuing economic uncertainty and rapid technological change.
We gathered some of our industry’s All-Star leaders to talk about their management styles, the keys to their success and their thoughts on the challenges and opportunities ahead.
“To be an effective leader, you must demonstrate your convictions and values on a daily basis,” says Bill Stephenson, CEO and chairman of the Executive Board of DLL. “This is something people learn through regular interaction with you, so you can’t fake it. They need to see your thought process, including when and how you choose to challenge the status quo. You need to demonstrate forward and innovative thinking and challenge your people to push themselves beyond their capabilities.”
Adam Warner, president of Key Equipment Finance, says a leader must set high expectations while also demonstrating traits of humility. “It is important for a leader to understand where to take the business financially and strategically while also motivating those who work in the organization to feel strongly about the vision.”
“If you put your keys into the ignition of your car without knowing where you want to go, there is not much probability of getting there,” says Jim Kelly, head of Wells Fargo Vendor Financial Services. “A leader has a strong vision and mental picture of where he wants to take the organization. To get there, you need passion, not only for the business but also for the team members. People need to know you have the integrity to do the right thing, especially when other folks are not watching.”
“You need to be self-aware,” says Irv Rothman, president and CEO of HPE Financial Services. “It is crucial how you represent yourself and that you understand the impact you can have on your colleagues, partners and customers. Everyone at an organization takes the cue from the top. They want to be able to read your body language, your facial expression and, most importantly, what you say.”
“The skill of finding the right people and putting them in the right position is critical,” says Tom Depping, CEO at Ascentium Capital. “Once you’ve surrounded yourself with good people, you need to learn how to deal with conflict. People will have different ideas, and you want the best ideas to boil to the top, but you don’t want a nuclear explosion. When managed well, conflict often leads to our best ideas.”
Kelly notes leaders must be able to communicate. “I don’t mean by using fancy words with sophisticated thoughts. You must communicate in plain English, using language that resonates with folks on a frequency that is meaningful to them.”
“Lastly, you have to be able to adapt and absorb,” says Rothman. “The world doesn’t stand still, so you have to be responsive to change and be the chief supporter and captain for change. Your job is to ensure that the organization is competitive and sustainable over the long haul.”
A good leader uses his life experiences to enhance leadership skills. “I’ve reported to many people over the course of my career, and I’ve seen what works and what doesn’t,” Stephenson says. “One thing that makes a significant difference is listening to our people, customers and business partners. By truly listening, it’s amazing what I’ve learned about our business, company and myself.”
Depping has learned some of his best lessons through mistakes and experience, but all of our participants agree that watching others and having mentors play a big part.
“You follow the examples set by the people you work with over the years, both the good and bad,” Rothman says. “You take what will move the organization towards successful results, and you reject those that cause dysfunction.”
Kelly is thankful for two very different leaders he encountered early in his career. “One was more of a street-smart person who taught me the importance of caring about people and reading situations. The other was more strategic and taught me to think about vision, strategy and execution along with how to build a framework for those things. I learned from them both and adapted my own style and experience to become the leader I am today.”
“You also learn about good leadership by incorporating the feedback you get along the way,” Warner says. “By watching reactions to other leaders’ styles, or through your own experience, you learn what resonates with people and gain the wisdom to hone your messaging.”
Getting the Team Behind the Vision
A vital part of leadership is getting everyone else to follow your vision. “You have to bring the strategy to life with each member of your team, showing them where they fit in and how they contribute to the overall vision,” Stephenson says. “If people come to work every day to do a task and have no idea how that task helps achieve the vision, you have failed as a leader.”
Rothman points out that it’s important to include your people in the creation of your company vision. “We take people from across all geographies and walks of life within the organization. We talk about what’s going on in the marketplace and where we think we can take the company. The vision is aspirational but must also be inspirational to the organization.”
Warner says your team must see tangible results from that vision. “It’s hard to build passion around a vision that is metrics-driven. Your vision should be created to improve the livelihood of the people you work with and the clients you support. When you have a vision that people can rally around, because they believe in it and are inspired by it, you create passion. The by-product of that passion creates great financial results.”
“I stick to a few basic premises,” Kelly says. “The first is ‘meetings one time, one place’. When there is a challenge or opportunity, everyone must be in the room to solve it together. If you don’t do it at one time in one place, one function may solve its issue but create an issue for another function. You have to get everyone on the same page with a common understanding of why we are trying to deliver on our vision. Then you hold the people accountable for the pieces they need to deliver.”
Depping stresses the importance of culture, which starts with the right management team. “The culture should encourage the team to work together in a way that is customer- and results-oriented. Our compensation plan, and everything we do, is based on this. We have grown quickly from a handful of employees to over 300 people, and from the beginning, we always emphasized teamwork.”
Effective staff engagement and development is also key to leading a successful company. Warner believes the most important component is hiring the right people for your management team. “At the executive level, technical expertise is not the most important factor. It’s more important to hire people who can carry your mission and vision to inspire your employees.”
Rothman’s leadership team ensures a cultural fit by developing talent from within. “When you do that, people know it, and you drive engagement. They know they have a career path, and they want to work here. You can build on their strengths and work to improve their weaknesses. Of course, from time to time you can’t find the resident expertise in house and you have to look elsewhere, but we find it less risky to promote from within.”
“Be consistent about what matters and reward the behaviors that support initiatives and the company culture,” advises Depping, who is a big believer in the strength of teamwork. “We set very clear goals and key performance indicators for the company, and we reward the team for accomplishing them. We also set individual goals and reward for accomplishment, but our goals are tilted more toward the team.”
“At the end of the day, people need to know you care about them, their careers, their families and their wellbeing,” Kelly says. “You have to genuinely keep your employees’ best interests in mind while also having that same authentic interest in your customers and shareholders.”
“Every day we deal with multiple languages, cultures and backgrounds,” Stephenson says of DLL, which operates in more than 30 countries. “I learned the hard way that it is a mistake to focus on the differences of how each country conducts business. You have to value those differences and trust in the strength of your people. If you convey the vision and the strategy properly, you can let the individuals determine how they will achieve them, taking into account local customs and practices. The ingenuity that has come out of that freedom continues to surprise me.”
“You get a lot of battle scars over the years,” Kelly says. “They can range from the times when you didn’t listen to your team as intently as you should have, lost deals to competitors or when you took an overzealous risk position.” Kelly faced one of his biggest challenges when he was with GE Capital and learned the company was for sale. To calm long-time customers and employees, he learned to demonstrate and encourage a positive mental attitude. “Direct, open communications about what I did and didn’t know were important. In the end, we found a great home with Wells Fargo, and it turned out well for both employees and customers.”
“The financial crisis was humbling for me,” Warner says. “It made me realize you have to be discrete and smart about your investments and understand that things work in cycles. Not every investment that looks good today will look good three years from now. The downturn taught us the importance of understanding longer-term risks.”
For Stephenson, the downturn gave his company the opportunity to validate its entire business model and focus on what was and wasn’t working. “Although we had to make some difficult choices in areas like credit acceptance and pricing, we stood by our vendor partners and tried to find ways to improve our programs and weather the storm. The crisis forced us to critically evaluate every process and aspect of our business to find out if there were better, more effective or more efficient alternatives.”
“The best way to deal with adversity is to prepare for it ahead of time,” Rothman says. “The best time to prepare for a down cycle is during an up cycle. A lot of companies lose sight of that.”
“I don’t think you can become a seasoned manager without making some mistakes along the way, but you have to learn from them,” Depping says. “Your team needs to fully understand how and why you got into that problem, and everyone needs to be part of the solution. As the CEO, you have to step up and take the blame, but it’s critical that everyone on your team understands what went wrong and why you are not going to do it again.”
Keeping Pace with the Digital Age
When it comes to getting in front of the digital revolution, Warner regrets that the financial services industry, outside of the consumer space, has been a slow adopter. “Consumers can check their balances, complete transactions and interact electronically on their mobile devices and desktops. They want a similar experience at the commercial level. We need to close that gap. Providing more ways for interaction and self-service through technology will be a foundational part of our road map over the next three years.”
“We use machine learning and artificial intelligence in our credit-scoring process,” Depping says. “To increase repeat business, we’re going through our database to determine the propensity to do additional transactions. We are almost done putting in a new back and front-end system for managing client relations. Our technology is a great resource to help us meet our initiatives, and our new contact management platform will push us to the forefront over the next five years.”
“About a year and a half ago, I challenged the organization to ‘put DLL out of business,’” says Stephenson, whose plan was to disrupt the company before someone else did. “We created three ‘innovation hubs’ in Las Vegas, Dallas and Jacksonville. We are filling those hubs with smart, talented people who don’t have experience in the leasing environment. They come in without notions of how things should be or have always been done. They learn the business tasks to see the process, but they are totally free to find a new way to approach the ‘how.’ Some exciting things are coming out of this.”
“We spend a tremendous amount of time talking with customers about their needs and where they think their market is going,” Kelly says. “We then weave in a technology strategy that will enable them to do business in a more efficient, productive manner that helps them grow. We have an internal project we call Project Smiles. It is the next evolution of smart technology designed to deliver an integrated, 24/7 solution that will ultimately put smiles on the faces of our partners, customers and employees. It will be technology that works for everyone on a mobile device in the time and place they need it, anywhere in the world.”
“We are in the midst of a fairly substantial digital transformation initiative,” Rothman says. “Our objective, at least in the early stages, is to refine the customer and partner experience. We have found that customers and partners want to do business with us today in the same way they do business themselves. If you don’t focus on the management of change, and you just transform your IT platform, you haven’t done anything. You can’t relate to the customers and partners, because their businesses are changing.”
“At face value, the economy is strong,” Stephenson says. “GDP is projected to exceed 4%, and unemployment is at historically low levels. Business investment is up, and wage growth is starting to pick up. Interest rates are bound to go up, and that will slow things down slightly, but I feel good about 2019, especially if the infrastructure bill gets pushed through in the next two years. That will have a tremendous positive impact on the U.S. economy.”
“Growth will depend on what market segments you’re in, because different market segments do not grow at the same rate,” Warner says. “Some will be hit harder during a recession, and others will grow faster during an expansion. If you’re heavily invested in oil, gas, coal and commodities, you probably won’t see as much growth as companies invested in healthcare.”
“I think the biggest influencer for manufacturer and dealer growth is interest rates,” Kelly says. “Money is our cost, so that’s our raw material. In a rising interest rate environment, our cost of raw materials is going up. How the industry manages that will determine much of the productivity their manufacturer partners have.”
“Small business drives 50% of the GDP and represents 50% of the U.S. payroll,” Depping says. “If they’re doing well, the economy tends to do well, and that should bode well for the larger ticket lenders, too. Numerous surveys show that small business confidence is at a record high, so that tells me there’s going to be robust demand for equipment financing and expansion by small businesses. Most small businesses are doing well, so credit quality should also be decent.”
“Our hardware sales are growing, and our equipment on the edge is growing,” Rothman says. “I think that’s commonplace throughout the tech industry. Usage and payment models are propagating all over the world as customers realize they want to use, but not own, information technologies. That growth and those payment usage models are noteworthy. When we first started talking about payment models four years ago, it was 1% to 2% of our business, and now it is appreciably higher.”
When asked about the biggest challenges facing the industry, Stephenson points to technology, along with keeping a close eye on the continued evolution of buyer behavior that is placing value on having just-in-time access to an asset and not paying to let it sit idle. “This behavioral shift will impact the financial services sector as more pay-as-you-go concepts are demanded by customers. Instead of fixed term customers will look for consumption-based models such as pay-for-use, pay-by-the-hour, pay-by-the-project, pay-by-the-CT scan or cost-per-copy.”
“This changes the dynamic of what is financeable and who will finance it,” Warner adds. “The companies that provide the services — the cloud companies and the data farms — become the acquirers of the equipment, and that’s a different type of customer for us.”
Depping says technology will drive everything, and machine learning and artificial intelligence will be key. “The millennials will be the ones buying everything. They will move into bigger and bigger roles in our economy. If we want to be ready for the future, we need them in our industry.”
“Capital is plentiful, and things look good from a risk standpoint,” Kelly says. “This can allow people to forget the need to maintain a disciplined approach to pricing and risk strategies. Leaders need to show the discipline necessary to avoid taking random risks and continue to take calculated risks while still allowing our manufacturers partners and dealers to grow.”
“Companies need agility and flexibility, so they can respond to disruption,” Rothman says. “For us, that will mean different risk models, pricing and economics associated with our business. Because we don’t yet know exactly what will change, we have to learn about this as we go along and deal with the ambiguity in the meantime.
“Good leaders deal with ambiguity, but nobody likes it. You have to have patience to let things play out and see what works for you and what doesn’t. There is no question, however, that the management of risk, which has been a traditional strength in our industry, looks different than it did five years ago.”
While outsourcing is often more associated with call centers in the common imagination, a surprising number of equipment lessors also use third-party service providers to augment their financing business. Ron Meyer from Linedata recently had the opportunity to speak to equipment finance professionals about how and why they outsource, examining the way this could influence the future of the industry.