Equipment Financing Firms Must Change or Face Prolonged Hiring Struggles

by Jim Merrilees Nov/Dec 2022
In this Q&A, Jim Merrilees, the new vice chairman of The Alta Group, shares best practices for firms as they navigate a difficult hiring environment and strategies for longevity amid fluctuating market forces.

Jim Merrilees,
Vice Chairman,
The Alta Group

The Alta Group’s new vice chairman, Jim Merrilees, has noticed a major trend during his first six months consulting in the equipment finance industry: an inability or reluctance of many firms to innovate to attract talent during the current labor shortage or automate processes that free up time for employees currently feeling strain. To help firms reduce such reluctance, Merrilees spoke with Monitor about how firms should be navigating the current labor environment.

You’ve heard from clients that they’re having difficulty hiring. Who are they looking for and what skills do they need in employees?

Jim Merrilees: That really depends on the size of the company we’re talking about. A lot of smaller to medium-sized companies are looking for salespeople or people who can find them transactions. That’s an essential need. But larger firms are seeking senior credit executives as well as marketing executives.

Building out a C-suite, though, should be essential for businesses of all sizes. Think about it, you need to be ready for someone to step into roles as your executives retire or move within the industry. It’s good practice to identify people within your organization who can move up and provide them with support. Finding the right people and providing them with the right training at all levels should be the priority. Here’s an example: Fundamentals, such as understanding pricing and the contents of lease and loan documents, should be required for most everyone regardless of department.

Larger transactions require detailed financial analysis and good credit people need to be developed in-house or searched for. Having access to good legal advice is also critical. Smaller companies don’t have access to in-house council, but the industry has many individuals to monitor current regulations and future changes to the rules. Outsourcing specific functions is another option.

Why is finding the right people so hard at the moment, particularly in our industry? Is this stemming from the COVID-19 pandemic or are companies failing to reflect the values of the next generation?

Merrilees: It’s a generational thing, and it was already happening before the pandemic, but the pandemic certainly accelerated the rate of change in our workforce. People were already starting to think about lifestyle — life/work balance, home affordability, access to culture. Hiring remote employees allows people to take all these factors into consideration, but it also allows you to hire anyone worldwide and subvert some of these hiring difficulties. It’ll open your company up to new ideas that we need today to be successful too.

Remote hiring also opens you up to a more diverse applicant pool. I’ve read so many articles about diversity, equity and inclusion, but you have to put the action behind the words. One meeting on the subject doesn’t mean you’ll attract a staff of people with different perspectives — and we need to attract as many people as we can and support them. You need results to demonstrate commitment to future applicants. The new generations don’t think the same way. They realize that time spent commuting is not productive. These are the people who will introduce you to new markets and have the energy to come up with creative solutions that will keep you competitive long term.

Why is it your position that the focus should shift to finding ways to modernize processes to reduce the need for human intervention?

Merrilees: This doesn’t mean everything should be standardized. Human beings are more innovative than machines, so we should use machines to our benefit. It’s as simple as this: more technology, more time to hire. But don’t let technology make you lazy. I’m a big advocate of automating processes wisely so time can be spent on human resources — finding the right people and training them well. There’s no reason leasing and financing companies should not be at the forefront of technology. It’s all in the service of making your human interactions more valuable. If you’re busy running around performing basic processes, it takes away your time to be human. It takes away your time to train. And if you’re taking twice the time to perform a basic function as your competitor, that’s bad.

What are some processes that could be automated or outsourced?

Merrilees: Imaging and artificial intelligence are the next big leaps in technology, and we should be looking to that. Predictive models run with reliable data. This is one area we should already be working on. If these models can do a better job of forecasting, it frees up your employees’ time to do things like going out and finding business. Sometimes people don’t want to spend money on third-party services, but then you need to be able to develop data models in-house. Ask yourself, can I do this cheaper than an expert? Many times, the answer is no. Areas for possible automation are in the back-office processes. For example, asset evaluation or insurance can be done by companies that can complete tasks faster because it’s all they do.

Here’s another example: vehicle titles. You could do that all in-house or have another company do it for you. Are you really that good at it? Do you need two people doing this full time, or should you hire salespeople instead?

Could you briefly explain, based on your experience, a time when industry conditions were similarly challenging?

Merrilees: First, let’s talk about how innovation drove people to be their most productive selves in the late 1980s and early 1990s. While I was at Colonial Pacific, my team and I introduced credit scoring automation with Fair Isaac (now FICO) and we were early, innovative adopters of online leasing applications. That meant people had more time to originate business and that we were faster and better organized than our competitors.

But in terms of challenging moments, the mortgage crisis of 2007 and 2008 is the big one that comes to mind. It was a time when bad habits took over and really showed the need to have well-trained people. People were thrown into finance with little training and poor practices were allowed to fester with little oversight. There is so much more opportunity to develop and invest in people [now], and we can invest in our people when back-office processes are done right by automating them or relying on experts.

What’s going to happen to companies that can’t change?

Merrilees: Think about this at the succession level. Run your business every day like you’re going to sell it. Let’s say at some point you’ll want to transition the business or sell it — and you will. If your internal processes are antiquated and if you seem inefficient, your business will lose value. But at the very basic level, some businesses that can’t change won’t be as profitable and won’t share in the growth of our industry. Furthermore, people tend to stick around in our industry. You can observe recently how companies leave the business, or perhaps that they simply merge. There are many new company names and more diversity; however, many people stay their whole career. This makes a good blend of experience and the next generation coming in with a different view. Good listening skills have never been more important. The message is: Learn from the past, don’t live in it.

How can businesses stay on the cutting edge of trends — like hiring and technology — as they emerge?

Merrilees: We all need to participate in our associations. One of the keys to staying relevant is participating in panel discussions or industry committees and being willing to share with others in the industry. Another is being open-minded enough to spot a great idea or partner at industry events when presented with them. The firms that are active in their associations have better access to hiring events on campuses and through professional organizations, including the Equipment Leasing and Finance Association, the National Equipment Finance Association and the American Association of Commercial Finance Brokers. They are the ones already investing in diverse hiring and finding innovative ways to use software that frees up their people’s creativity. I think those that stay involved have less difficulty.

Are people seeking advisors to help them address the challenge of hiring well or to find a way to reduce headcount by innovating?

Merrilees: Yes, absolutely. At Alta, we have these conversations regularly, and I begin to approach this issue in four ways:

  1. Are you using technology to your advantage?
  2. Are you exploring third-party operations, especially software and technology that can make you more efficient?
  3. Are you participating in associations?
  4. If you’re doing the first three steps right, then what can you do to enhance your outreach for the best talent and support them?

Jim Merrilees is vice chairman of The Alta Group. In collaboration with the advisory’s practice leaders, Merrilees advises on ways clients can enhance operational efficiency in their organizations and add value in equipment finance markets.

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