Is there a shortage of manpower in the equipment finance industry today? It’s hard to say, given the confusing and complex landscape now facing the industry. Recent efforts by industry leadership to bring more young professionals into our industry seem well intentioned, but may be missing a more important and immediate issue:  How are we going to replace senior management and the highly-skilled seasoned professionals who are getting close to retirement?

I would suggest that the overall industry segment is shrinking due to slow growth in capital spending, more restrictive accounting and tax regulations, government compliance forcing competitors out of the industry and continued resistance from clients to push for aggressive financing solutions.

This slow growth combined with historically low interest rates is leading to constant pressure on headcount and cost controls, reduced budgets for training, raises, incentive compensation and other employee benefits. We have seen for some time, a greater reliance on hiring trained staff who are able to “hit the ground running” without the need for technical or professional training (rather than create training programs, just poach someone who is already trained). From my vantage point, it seems there is not enough succession planning or training of mid-to-senior level professionals going on. I would also suggest that industry turbulence, a growing predominant aversion to risk in both underwriting and seeking out new growth opportunities, stifling bureaucracy and moribund leadership is also contributing to a less than healthy work environment.

As a result, mature, seasoned and talented professionals are disproportionately leaving the industry to start new boutique finance enterprises, consulting businesses or move to other more promising industries and, of course, retire.

I think the industry’s growth (or lack thereof) and changes have created demographic issues resulting in key managers in highly-skilled and senior leadership positions who are in their 50s and 60s, and few companies in this industry appear to have a viable plan to replace them when they leave. This is due to the fact that in most enterprises, there is a large gap in the level of training and experience at the next level below. This trend looks likely to accelerate, causing a significant talent gap in key originations, risk, sales and senior leadership positions.

There are no easy solutions here! I would argue that the continued focus on getting more young people into the industry may not be the highest priority right now. In fact, based upon current industry conditions, it’s arguable that we now have too many people in this industry!

Look around the table at your next management meeting. What do you see? Do you have the bench strength to stay competitive and grow when key management retires or leaves? Maybe more focus needs to be on succession planning and training of the high potential professional talent in-house?

Enhanced retention strategies for senior staff also make great sense – it’s probably time to revisit those incentive compensation plans that many enterprises have continued to whittle away at over the past decade. Also, greater flexibility in work/life balance policies (telecommuting, part-time or even shared professional positions) create a real competitive advantage and will help to retain key talent. Simply poaching talent from competitors is not a healthy solution – it doesn’t benefit the industry nor is it a substitute for dynamic succession planning and a strong bench.

The failure to address these issues could sap the industry of the talent necessary to meet the challenges of financing U.S. corporate growth for the next decade and beyond. The equipment finance industry has been one of the great commercial finance success stories of the last 50 years; let’s not let it slip into obscurity and become merely a niche finance source for America’s businesses!