Jeff Judy

Jeff's Thoughts -January 2 , 2013

Hire Experience? Grow Your Own? Both?

The Wall Street Journal ran an article on November 26, 2012, titled "Lending Skills in Demand." The gist of the article was that experienced commercial bankers are being heavily recruited (and well paid), particularly by community banks and smaller institutions who want to increase lending to local business markets.

The emphasis was on highly experienced commercial bankers. One source was quoted as saying, "Candidates with the full range of skills are 'as rare as a dinosaur'". And certainly, every bank would love to be able to drop a new employee into a job and have that person perform brilliantly from day one.

But experience is a two-edged sword, and I wonder especially whether some banks in smaller communities may end up paying (financially) for experience, only to end up paying (in expensive outcomes) for that experience.

In other words, if you hire someone who already has 15 or 20 years' experience in commercial banking, you may be able to skip a lot of basic training. But don't be surprised if you find yourself in "back to basics" mode a year or two later.

As you know, I spend an enormous amount of time in the classroom. For sure, a good portion of that is training individuals new to the banking field, learning basics skills, concepts and processes to, in effect, make it safe for their employers to deploy them on the front lines. After all, knowing how their bank does things, not only their process and procedures, but their standards and values, is the first line of defense in credit risk management.

But you might not realize how much time I spend in "back to basics" training, particularly for individual banks. The issue is that an institution slowly recognizes that not all their credit staff are using the same guidelines, taking the same approaches to analysis and underwriting and even marketing their services. The culture has gotten a bit loose, and the solution is to go over the basic skills and principles­ to make sure standards and practices are consistent throughout credit operations.

Your bank has a unique approach to credit. Yes, the basics are the basics. But the decisions your management team makes about preferred types of customers, about underwriting criteria, about structuring options are the things that distinguish you from other institutions and that hopefully give you a competitive advantage.

So the question is, what is the best way for your bank to expand your credit staff and reinforce those strategic decisions? Do you pay more for a more experienced employee, saving some money with lower initial training needs? That works well when you back it up with ongoing communication that continually reinforces the culture.

Or do you pay less up front, add a less experienced banker to your staff, but invest some of those savings into the training that will groom the new employee in the unique aspects of the way you do business?

And, especially in some of the smaller communities, are you better off bringing in experienced staff from other locations, or growing your own commercial bankers from people who are already a part of your community?

There are no right answers to these questions that apply to every institution. The important thing is to ask the questions.

As the economy improves and your commercial lending opportunities grow, you will want to add staff. But don't just do what "everyone else" is doing.

Look carefully at your needs, your market, your strategies, your culture. And then make an explicit decision about how much knowledge and skill you want to hire, and how much you want to develop.