As you read this, the churn is happening. Baby boomers like myself, aged 57 to 75, are retiring and Generation X and millennials are stepping up into leadership positions. By 2028, Gen Xers will outnumber baby boomers, and by 2025, millennials will make up 75% of the global workforce, according to research by Purdue University.¹

This is happening in every industry and we in the equipment leasing and finance world can benefit from thinking critically about leadership and succession planning at this juncture. Much attention is also being given to the value of diversity in management.

In any leadership transfer, stakeholders worry profits will suffer from the outward face of the institution changing, but people and profits go hand-in-hand. If you don’t take care of your people and meet their needs, you won’t grow profit. In the coming year, more than $1.8 trillion is expected to be spent on goods or investment in equipment finance, the Equipment Leasing and Finance Association reported earlier this year.² Our $1 trillion industry is a significant portion of the U.S. economy and new leaders will assume critical roles.

So, you may be asking, how can your business remain stable through such a time of transition, and how can you as a leader help to cultivate the next generation of leaders and a smooth leadership succession?

Leadership

Times of challenge, like the ongoing COVID-19 pandemic, are when leaders are made. Or, as history shows, these times can expose a leader’s failings. Everyone is watching and judging every step a leader makes. If they see a leader committed to employees, they will feel more comfortable and secure in their role. Competent leaders set an example by being more selfless. People notice when leaders put themselves last. Leadership theory also suggests, in the long run, an organization in which the leader puts themselves first will fail. Eventually, a poor leader will self-destruct.

And, it should be noted, good leaders let others take responsibility as much as possible, even in times of crisis. In challenging times, everyone must step up and play a role. A good leader knows how to delegate and trust others.

New generations bring fresh perspectives. When the pandemic hit and employees began working remotely, younger generations adapted readily. And every day they bring energy and ambition to the workplace, remote or otherwise. Good leaders need to step back, tap into the “NextGen” energy and give them opportunities to learn and even fail.

Mentoring

In that vein, it is much easier to rein someone in than to push their instincts for initiative. One criticism of the next generation is they think they should have it all today. That’s not necessarily a bad thing. Their ambitions should be encouraged and harnessed.

A competitive and independent spirit is something to be fostered, but all must also learn to be part of a team. Encouraging collaboration and working well in teams creates an authentic bond. How leaders treat others is revealing. Do they give others the spotlight or does it always have to be on them? Strong leadership is selfless.

For example, going around a conference room — or the Zoom call — and inviting others to express themselves creates a sense of belonging and contributes to loyalty. This also allows good ideas to flow, as more introverted team members are included. Shy employees do not lack leadership qualities, they simply need a collaborative environment that supports their style.

Most people think about mentoring as a one-on-one activity. But effective mentoring often occurs in teams. A good leader is not going to have one successor but will mentor a leadership team that will assume power.

Succession planning

Any well run organization should have a succession plan well before it is actually ready for the leadership change. Following these five steps will ensure a more successful turnover that won’t affect employees — or profits — negatively. When choosing the next generation of leaders, consider individuals who are committed to something bigger than themselves, hold close the values of honesty and integrity and have a strategic perspective. A leader must think strategically. They must always be thinking about what a company could be facing six months, or a year, from now. In other words, you’re looking for someone who, like you, can plan for change.

Five Steps to Effectively Plan for Succession

1. Form a Team: A succession plan isn’t about who is the next boss. Instead, the focus should be identifying the next cohesive team of leaders. Choosing that team is a question of who can carry out the plan together, since no one person can successfully run a company on their own. Understanding the different styles and personalities and how they connect and complement each other will help that team work together better. A leader can still be introverted and be successful — it’s all about the trust and belief people have in what you’re telling them. Just as important is keeping this team together during a transition. Insecure leaders bring in their own team instead of earning the trust and commitment of the existing employees. Initially, be committed to make it work with existing senior staff, if possible. This will show continuity and promote employee confidence during management succession. Management team changes, if necessary, can be made after the employee group grows accustomed to the new leaders.

2. Introduce New Leaders: A company needs to see new faces more often, especially when a leader plans to step down. Putting other people in charge of meetings and the outward facing tasks that employees witness will instill confidence in the transition. Typically, the leader is the one out in front. If there’s a succession plan and effective turnover, that leader needs to start giving up roles ahead of time.

3. Step In and Step Out: Give the successor or succession team a task and give them the room to complete it on their own. They need opportunities to build leadership skills without your input. Ask them to provide updates, and if they need guidance, step in and give advice, then step out again and let them continue their leadership journey. Stepping out is critically important!

4. Hire a Leadership Coach: A coach can help a leader understand the nature of their team and how they can most effectively work together. This outside perspective can be even more important during a time of transition. In my experience, a leadership coach helps a team get to know the personality types present and how to best leverage them. They also can help execute a succession plan and prepare the team for a change in leadership.

5. Put the Plan in Writing: You never know what could happen, as the current pandemic has taught us. When leading a banking institution, which is so highly regulated, the regulators expect planning for any inevitability. Having a written plan also makes it easier for someone to execute. It also ensures a leader is considering the next generation of senior staff and preparing to mentor them.

Most importantly, leaders must be willing and ready to step away. It’s not easy, but it’s essential to ensuring the next generation’s readiness to lead. You never know what’s ahead. It could be another pandemic, a surprise death, a downturn or a simple retirement. Whatever the future challenge may be, leaders must see beyond themselves and put the goodwill of their team and the company first.

¹ “Generational Differences in the Workplace,” Purdue University.
² “Equipment Leasing and Finance Association Announces Top 10 Equipment Acquisition Trends for 2021,” Equipment Leasing and Finance Association, Jan. 25, 2021 [Press Release].

Paul J. Menzel is a vice chairman of The Alta Group. He has deep knowledge of the independent and bank small-ticket leasing sectors and is a proponent of life-long learning and leadership development. Menzel spent decades managing small-ticket leasing portfolio operations in Santa Barbara, CA, starting his career in 1975 with Puritan Leasing Company. He led this entity through three subsequent acquisitions. Last year, Menzel retired from his position as CEO of Financial Pacific Leasing, an Umpqua Bank company, after successfully implementing a succession plan. He is a past ELFA board member and chaired the association’s code of fair business practices and small-ticket business council committees.