Succession Planning – or Lack Thereof = Risk!

By Emma Hart

Risk mitigation in our industry is, quite rightly, primarily associated with monitoring and managing the portfolio trends and statistics, system and cyber security concerns and satisfying the bank and stakeholder requirements for financial ratios.

All of these are important for business growth, prosperity and sustainability; however, a major risk that is often overlooked, until a crisis occurs, is the risk of not having anyone who can step in and lead at a moment’s notice.

I don’t mind admitting succession planning has not been a forte of mine, and I have a few true stories to share of my ten years in the U.S., which include attempting, failing, learning and implementing. As an “aging” business owner, and Chief Risk Officer no less, I take this issue seriously. In any event, we must be ready to ensure business continuity, continued growth and ongoing confidence from our stakeholders, and the risk of not doing so is a disservice to our loyal workforce.

All too often succession planning is addressed only when change is imminent, or as a reactive solution to a staff departure. The urgency to make an immediate decision, in fact, elevates the risk and there is an increased danger of selecting the “best available” candidate at that time.

We all know that planning early and developing talent within the organization is the key to succession planning, but be prepared – it may not work the first time. A few years ago, I, along with four of my colleagues, across the North America businesses were identified as future leaders and enrolled in a global leadership program. International travel to attend global seminars, coaching, mentoring and presenting ensued – and within two years of being identified, all five candidates had left the company!  The company did indeed identify future leaders, but we all now lead our own businesses. The talent-retention strategy on this occasion had failed. This can be attributed to many individual reasons, but it indicates that retention leading to succession planning is not as easy as identifying and developing existing talent. Business and individual goals also need to be somewhat aligned. I don’t recall anyone asking what my personal goals were.

Younger workers (aka Millennials) are becoming a driving force within our businesses. However, they are reinventing the conventional notion of building a career. They don’t get excited at the prospect of 15-20 years of hard work with one company to get to that top job. This generation has different goals, outlooks and expectations. They view job-hopping as rounding one’s experience with a variety of organizations.

However, clearly, they are the future leaders, and we need to retain and train the talented ones giving them an acceptable (to them) yet realistic and achievable career path. Should we worry about investing time and energy into developing them to enable them to move on with those skills for a better offer? If we don’t invest time and energy, we can be sure to lose them.

At a previous company I had identified a “rising star.” I could even envisage this team member running a company. On behalf of the Company, I agreed to help finance/sponsor a part-time MBA program at a prestigious school in order to demonstrate our commitment to him/her as a future leader within the organization. As is par for the course with MBA programs, and no doubt to justify the fees and success rate of the program, the school created rounds of interviews and networking opportunities, designed to entice the scholars and external employers. Wait, we were financing this MBA with the goal of retaining talent, not for them to be enticed away from us by “sexy” investment banking opportunities with six-figure salary headlines. You may guess how that worked out.

There is an obvious risk in not planning for succession for sure, but also a less obvious risk in doing so sometimes.

That said, developing leaders takes place over years, and investing time and energy in developing people is never a waste, even if you ultimately don’t retain them. Recognizing that people have and want their own life experiences, and they don’t all have to match our expectations or even ambitions for them, is fine.

We have a young team of people in the main, and we are taking this issue of succession planning seriously. Developing and retaining talent is key. This doesn’t mean you have to have a 100% success rate. We provide development opportunities to our staff, who attend training inside and outside of the industry. We also hold a bi-weekly training sessions for an hour or so, where a wide range of topics are covered, such as accounting, HR, benefits, legal documents, UCC filings, fraud, collection calls, etc. The training is open to anyone who wants to attend, so a Data Processor can learn more about UCC filings and a Collateral Analyst can learn about Cash Flow Statements, if they desire. This is about sharing knowledge within the business and across the business, cross training and ensuring that all areas of the business are accessible to everyone. Young people, particularly, are keen to learn about the business as a whole, and don’t want to be siloed into a role/department. They want a more rounded experience.

Another area we focus on with succession planning, development and talent retention in mind, is coaching. All of our staff members have access to an external “coach” and participate in an individual monthly call. The coach helps the individual to set out their career and life objectives, and set a realistic timeframe to achieve their goals. They help identify what will get them to the next level/step. The individual is encouraged to take ownership of their own development, and identify any pertinent training courses that could help them achieve their career goals. The coach also guides the individual through integration into the workplace, by listening and discussing any issues that they may be having with the generational dynamic.

As part of the coaching program, we all took part in an HBDI (Herrmann Brain Dominance Instrument) assessment to help us understand our own natural behavioral tendencies, the team dynamic, and ensure people are in roles where they can be successful. The easiest first step to talent retention is to make sure you don’t set people up to fail. This is not always obvious, especially if they interview well for a role that they, in fact, have no natural tendencies to perform well in.

At our recent annual sales conference, our entire workforce was included in some breakout sessions to discuss business objectives. It was an extremely beneficial and enlightening experience. Inclusion in major business direction initiatives helps to get buy-in from all levels, and the most important thing is that we learn  from everyone’s experiences. Every team member has something unique to offer. They need to be valued and we need their value.

Our industry is populated by a myriad of very experienced individuals, many of whom measure their experience in decades rather than years. However, as our industry demographic ages and the “old guard” retires and heads off into the sunset, there is a clear need to replace them with new, emerging talent.

Factoring and ABL still play no part in a finance or accounting degree. The old adage of people “fall into factoring” remains true. How do we make this industry exciting to universities so that graduates are aware of the industry and a career in it? How do we educate the educators? As an industry, we need to become an attractive destination to attract and retain the younger generation, offering opportunities for growth, rapid advancement, exposure to all areas of the business, and, most importantly, aligning out mutual objectives.

As asset-based lenders and factors, we encounter entrepreneurs at all stages of their company life cycle, helping businesses grow, managing good and bad situations. Coming into the industry with new perspectives, new technological advances and fresh ideas must be exciting. We must keep it exciting, by creating an environment in which newcomers feel they can learn and develop.  Environments where individuals can feel included, important, valued and where as a business we ensure this important area, succession planning, which cannot be made overnight is made steadily and continuously over years.

Emma Hart – Chief Operating Officer, Sallyport Commercial Finance, LLC

Emma was previously the EVP of Operations with Bibby Financial Services (CA), Inc from 2008 to 2014, where she managed a portfolio of clients across many industry sectors, and a staff of operations, risk and underwriting personnel.

Prior to joining Bibby, Emma spent 20 years with Lloyds TSB Commercial Finance in the UK. In operational and risk roles, she spent the initial 10 years within the factoring division, in portfolio and staff management, where she also set up and launched LTSB’s first online offering, and the second 10 years in the ABL division, as a Client Manager, where she managed a portfolio of high risk and turnaround ABL clients.