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The Imperfect Storm – Today’s Forecast is Sunny With a Chance of Lift Out

July 10, 2013, 07:00 AM

Leaders in the leasing and commercial finance industry, watch your talent! The sunny skies of today could be the calm before the storm.

Not only are companies hiring once again at a more active pace, new entrants with billion dollar aspirations are creating a new version of leasing’s musical chairs, except in this version, when the music stops, there are more empty chairs, instead of fewer. Are you playing offense, taking talent to meet volume and growth needs, or are you playing defense, protecting key employees from the tempting sounds of new offers to change the landscape, earn more and be more challenged?

Where Are We Really?

What is happening in North America is almost the reverse of the perfect storm of years past. At the foundation of the storm are the core players, who generally are seeking growth from their leasing platforms. With the GDP and durable goods orders not providing enough new equipment sales volume to feed the need, poaching talent and starting new segments are strategies many established players are deploying. But wait, we have a batch of hungry new players entering the US market as well. In 2012, Signature Bank, a $16 Billion asset bank, hired a senior leadership team from Capital One’s Leasing and Finance Group and this business has big volume aspirations. They already have over 60 employees and a highly successful first-year ramp up. Capital One, responding to the team moving to Signature Bank, reacted by hiring a new leader from SunTrust Bank. Over the following months, Capital One hired 13 people away from SunTrust’s leasing and commercial finance business. SunTrust, now left with empty seats in the game of reverse musical chairs, must counter with hiring replacement talent from a competitor to address the void. After they address the void, a new hole will exist somewhere as the imperfect storm continues to rumble across the industry.

If the banks playing “musical chairs” are not enough, it gets better. Three new major entrants have also joined the fray seeking the “billion dollar holy grail” of volume in the U.S. markets. Scottrade, a little known bank to the lending world, decided to deploy their $14 billion in deposits to achieve greater returns and hired Fred Van Etten to be their CEO to build a sizable scaled leasing and commercial finance organization. BBVA Compass, one of the world’s top 20 global banks as well as a player with a sizable global leasing presence, decided it was time to put down stakes in the United States where their presence was minimal and will open for business this year, seeking again disruptive billion dollar volume figures to drive their global strategy. An experienced market disrupter, Steve Hudson of Newcourt fame, is back in the game with Element Financial, and has entered the market through the acquisition of CoActiv Capital. Their future plans surely call for supersized ambitions once again.

Who else is causing waves in the imperfect storm? We can start with CIT’s much ballyhooed repayment of expensive debt and refocused efforts to grow, and grow, and grow in new segments as well as returning to some of the old core market niches they vacated in past years. 

Private equity is another factor impacting the imperfect storm. Seeing the lack of independents in the market, private equity money has fueled several growing independents with the hypothesis that if you build it, the banks fighting for organic growth will surely buy it. Some examples include Tom Depping’s Ascentium rise in the small-ticket space on the wings of Paul Allen’s Vulcan fund investment, as well as other niche players like Marlin Leasing co-founder, Gary Shivers launch of Navitas and CI Partners purchase of Total Fleet Solutions. The rise and return of the independent may create courage for other entrepreneurial leaders to leave the comforts of the mother ship to hang a shingle and give it a go, hoping to catch the big wave of “volume fever” that is expected to hit its peak within 18-24 months.

So, there is no doubt, the imperfect storm has hit the mainland and while it’s sunny with a bright forecast for some, pain and talent disruption is being felt in various pockets through the changing of the guard in leadership, team lift outs for business development, and general churning of sales talent.

Even if it’s sunny now, how do you handle the potential trade winds of this season? Here are a few suggestions that might be worth considering.

Reset Cash Compensation Plans

What worked in 2009 and 2010 may not work again in 2013 and beyond. Leaders have been willing to share the financial frugality during tough times but now expect a return. Some companies seem to be doing this but others are stuck in the time warp and P&L joys of reduced labor costs. This frugality could be opening up risk of loss. Review sales compensation against the market, not against internal benchmarks, to insure you are not out of the market and at risk of losing volume over misaligned sales compensation.

Long Term Incentives

What was once a staple in the industry for senior leaders and key employees has gone away in past years. Market conditions the past few years dictated that stock option plans and restricted stock grants be curtailed and/or eliminated. It used to be to recruit a GE Capital executive in the good old days required dealing with hundreds of thousands of dollars of stock leave-behinds. This created a strong retention tool and barrier to hire the GE Capital talent that only the brave and aggressive would tackle.

We are hearing now of leading companies reinstating long term restricted stock plans and using three and four year vesting of grants to build a moat around key talent. Other companies are taking part of annual bonus payouts and deferring these into stock with forward vesting. While these leaders can still be poached, the price to play the game has risen for the acquiring company. Much like a poison pill for companies, top leaders and key producers should have some personal poison pill to prevent lift out without pain for the suitor.

Show Appreciation in Other Ways

Gone are the corporate boondoggles with great award trips on exotic islands at five star resorts. In their place, talent got a local meeting at a Comfort Inn with a nice trophy for their efforts. Reminder: relationships matter. People stay with companies not because of loyalty to their “brand,” but rather because of loyalty to “people.” Loyalty is created through appreciation. Spending time together at such events and “engaging in old fashioned fun” doing business with people you like. That is how companies retain their talent. Maybe it’s time to make your key employees feel like it’s a fun place to be.

Playing Offense?

For most of the industry, playing offense was a natural part of their jobs before the financial crisis of 2008-2009 changed all of this. Just pull out your old playbook and try some of the time tested methods that still work today. Here are a few staples from the leadership playbook on growth:

  • It’s called recruiting for a reason: People don’t need your job anymore, they want a great opportunity and they want to feel “recruited.” If you think you are in charge of selection, you have the wrong people on your slate for a hire. Top talent is being wooed and recruited with passion, careful thought and personal involvement by leaders and boards.
  • You might need an extraction specialist: There’s nothing like a top recruiter to find you an opportunity to grow your new niche, add new motivated leaders or augment your sales team.
  • Get creative with how you position your company and opportunity: We have seen some great results when a company story is told right, the title of the position is thought through from a “how do we attract the best” perspective and compensation is realistic and considers the candidates perspective, not just the company’s “salary banding.”
  • Talent surcharge: Gone are the days of hiring someone for a lateral move for a “good opportunity.” Top players require 15-20% uplift in current compensation. A long-term piece can be part of the total uplift calculation and is back in vogue. Risk with hiring sales talent now shifts back to the companies, to true up current cash flow and insure talent does not step backwards in cash flow to step forward.
  • Spend time on talent: It’s time to change how you think about your time as a leader. Hiring and growing takes a commitment of time in interviewing, meeting and nurturing relationships with the talent you would like on your team. It takes a long-term view to win.

As we close out 2013 and enter 2014, talent matters. It might be time to reset your view on retaining and attracting talent to compete in the coming years. While the forecast calls for sunshine, we also see storms and rain in other parts of the country, so watch your talent to prevent an unexpected lift out.


Larry Hartmann
Chief Executive Officer | ZRG Partners, Inc.
Larry Hartmann is the CEO of ZRG Partners, a global executive recruiting firm focused in the equipment finance and business lending sectors. Prior to joining ZRG Partners, Larry founded and ran a successful healthcare finance company that was an INC. 500 growth firm, that later went public on the NASDAQ and was ultimately sold to American Express. In addition to his duties with ZRG Partners, Larry is also an active consultant and board member with experience serving on public company boards, private equity backed boards, in academia and in the not for profit sectors. For more about Larry, visit or email Larry at
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