Winning for the Right Reasons: Craig Dahl’s Recipe for Long-Term Success
by Rita Garwood July/August 2015
In an achievement unmatched by most equipment finance executives, Craig R. Dahl has been appointed president of TCF Financial Corporation. In this exclusive Monitor interview, Dahl shares the keys to TCF’s success: engaged leadership, strong risk management, a rigorous control process, as well as recruiting — and retaining — a winning team.
If there’s one thing Craig Dahl knows, it’s how to win. He led TCF Equipment Finance through both the dotcom bubble and the Great Recession to achieve its 15th birthday last year. Now, in an achievement unmatched by most equipment finance executives, he has been appointed president of TCF Financial Corporation, a move that expands his responsibilities from overseeing the bank’s lending businesses to include retail banking and information technology.
Dahl began his career in equipment finance in 1991 when Wells Fargo predecessor Norwest consolidated asset-based lending and leasing back in to its bank group. Dahl became the CAO for Norwest Equipment Finance, before becoming national sales manager.
In 1999, he began a new adventure. “I started TCF Equipment Finance, so I was employee No. 1,” he recalls. “There wasn’t anyone else doing general equipment finance when I came here. I saw others leave Norwest and attempt to start leasing companies for banks and none of them succeeded, so the fact that we made it to 15 years was quite an accomplishment.”
Two mentors stand out for Dahl during his career. “I reported to Lynn Nagorske for my first nine years with TCF,” he says. “What I learned from him was hard work Two mentors stand out for Dahl during his career. “I reported to Lynn Nagorske for my first nine years with TCF,” he says. “What I learned from him was hard work always pays off.” Dahl credits his management routine to the late Nagorske, former TCF president and CEO, who was very disciplined and focused. “Bill Cooper has been the most influential person of my career,” he says of TCF’s current CEO. “He also believes in routine but he has more intuition about the business and he is extremely creative. I think that really matches with what you need in the leasing business.”
Success Amid Recession
Dahl’s biggest accomplishment is his ability to lead through a storm. “As a manager you’re never really sure if you’re making the right decisions, because when the markets are good every decision looks good,” he explains. “But when markets tighten, all of a sudden you find out. How TCF performed in the leasing business through the financial crisis is something that we’re all very proud of.”
During the Great Recession, Dahl says TCF saw a slight increase in charge offs, which were all mostly worked out in a year’s time. “We grew significantly through portfolio acquisitions and company acquisitions during that time,” he continues, adding that TCF Equipment Finance did not have a single unprofitable month during the entire financial crisis. “Rather than retrenching, downsizing and exiting, we actually grew at an accelerated rate during that timeframe.”
So what’s his secret? Dahl points to three factors that lead to success in the equipment finance industry. First, he says CEOs must be very engaged in the business. Secondly, a company must ensure strong risk management throughout the enterprise, especially in leadership positions. Finally — and perhaps most important — is avoiding the temptation to ride a “hot market.”
The leasing industry has another bonus, according to Dahl. “When the syndication market works, we get the same financial information to make a decision that the original lender got, and a new credit decision is made,” he explains, noting that the distance between the borrower and the lender isn’t all that far when compared to buying scenarios based on rating alone, such as the synthetic mortgage securities that rocked the economy in 2008. “There really was no credit decision being made there based on the individual transaction side, and I think that’s the big difference.”
Dahl explains that TCF follows a rigorous “front end guidance process,” which entails examining expected transaction types, the level of associated risk and the anticipated transaction price. “We’re always willing to lose business to someone who wants to cut a corner; it’s just got to be embedded into your business model. The more you’ve thought ahead, the stronger your controls are. The more you’ve responded to the previous communications — or even criticisms of your business — shows that you’re paying attention.”
“TCF has a very disciplined segment approach,” Dahl says. “We have extremely limited exposure to oil and gas just because of the volatility. When we go through a hot streak, it’s very easy for lenders to charge into that market because there’s clearly a need for capital, but when you turn it around you’re not going to get repaid from idle assets either.” To demonstrate the outcome of this approach, Dahl notes that TCF did not exit any segments in equipment finance during the recession.
Investing in Talent
Another bragging right for Dahl is the fact that TCF did not lay off any employees during the Great Recession, but instead added staff over that time. “You can’t ever have enough talent,” Dahl explains, adding that he is fortunate to have a great management team. “You have to be willing to delegate. You have to trust others. I think our guys have clearly taken the reins and have continued that view as we’ve grown the businesses.”
As a result of this trust, TCF has experienced very little turnover at the executive level in its lending businesses. Dahl is particularly proud of building a bench of leaders who have gone on to broader roles within TCF. He points to TCF’s vice chairman Tom Jasper and CFO Mike Jones as well as TCF Equipment Finance executives Bill Henak, Brad Gunstad and Mark Nyquist as long-tenured leaders who have helped to grow the company. “It’s a real joy to work with these guys,” Dahl says. “We can finish each other’s sentences when we’re talking about business.”
“Going forward, it’s really making sure that we have the next generation of leaders,” Dahl says, adding that TCF’s ability to compete for talent is due to its strong focus on the talent management process. “This is really the beginning of the next generation, where we identify the next key leaders and make sure they’re getting development opportunities and the experience they need. We’ve been talking in the equipment finance business about the ‘greying of leasing’ for my entire career, and I think that there’s clearly an opportunity to bring some young talent inside the leasing business.”
“People like to win,” he continues. “I think the success we’ve had is part of the reason why we retain our employees. We’ve also created more leadership opportunities, and we were picked as one of the great places to work in the Twin Cities.” Dahl adds that TCF Equipment Finance employees know their efforts matter. “If you look at some of these other ‘megabanks’ the impact of the equipment finance business — no matter how big they are — dwarfs by scale of all the other businesses, but here it’s a pretty meaningful contribution. People like to work where their performance counts.”
This sentiment ties in with Dahl’s view on the divestiture of GE. “We’re not on a large enough scale to be a bidder for one of those businesses, but we can certainly be a home for a lot of the talent looking for a place with viable funding and that is ethical and wins for the right reasons.” Dahl says it will be interesting to see who will buy GE’s businesses, and who will end up with the talent.
Rebranding for the Road Ahead
Looking forward, Dahl is not fazed by the potential threat of unregulated independents and new entrants that are competing with bank lenders. “We’re in a period of extremely low interest rates, and have been, so there is a ton of liquidity out in the market,” he explains. “When the interest rate environment starts to change, there will be less access for some of these unregulated lenders. There are always people who are willing to cut a corner to win a deal, and that’s not how we want to compete. It’s up to us to make sure we can continue to adapt and work with customers that appreciate our approach.”
Dahl sees a sunny future for TCF as it undergoes a rebranding process that highlights the bank’s investment in customer experience while aligning the branding, advertising and approach of all TCF businesses. “We’ve been successful more independently within the company,” Dahl says of the leasing businesses. “But we’re much more powerful with all of our business aligned than individually.”
As the businesses align, Dahl anticipates more crossover. “I think over time you’ll see more of that,” he says, indicating that TCF’s equipment finance and inventory finance business already work hand-in-hand. “I think there’s an opportunity with our SBA initiative, inventory finance as well as auto finance with our car dealer customers.”
Dahl says the true measure of success comes back to the customers. “Having a new advertisement or a new billboard doesn’t mean anything if you’re not backing it up,” he explains. “A lot of people on our lending side count on TCF to come through based on financing their inventory, a critical piece of equipment or a commercial real estate project. We get feedback every day, while sometimes on the retail side, we only get to talk to a customer if there’s a problem.” Dahl explains that TCF employees have completed extensive training to meet the needs of customers, a process that Dahl expects will only bolster TCF’s winning streak.
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